The outbreak of the Islamic Revolution in Iran in 1979 marked the beginning of a new era in Tehran’s foreign policy. Committed to the promise of a revolutionary foreign policy based on Islamic principles of just peace, Iran’s new rulers chose a foreign policy of “neither East nor West.” This policy, however, ran into immediate trouble when Tehran faced the specter of war with arch-enemy Iraq. Baghdad, with the help of conservative Arab monarchies and financed by Saudi money, imposed a war of aggression on Tehran.
This episode has left a deep scar on Iran’s strategic psyche, and Tehran has learned a geopolitical lesson: surrounded by your enemies, you must have friends in the world to ensure your survival and security. And the centrality of this search for friends is evident in recent developments in Beijing’s relations with Tehran.
Long before China’s emergence as an influential global player, Tehran intensified efforts to strengthen economic, diplomatic and military ties with Beijing. During the Iran-Iraq War, China was vital to Iran’s war effort. It was the only arms supplier willing to supply Tehran with arms and military equipment. When the war ended, “China played a central role in the country’s post-conflict reconstruction efforts, particularly in Iran’s infrastructure projects and supply of consumer goods.”
Beijing continues to be involved in building Iran’s infrastructure, including electricity, dams, cement plants, steel mills, shipbuilding, highways and airports. Defense cooperation, including arms and technology trade and joint military exercises, has become an increasingly important part of Iran’s relations with China in the Persian Gulf. China is effectively shielding Iran from full diplomatic isolation and providing it with political support, defense assistance and economic aid, undermining Western efforts to pressure Tehran to comply with its demands.
In view of American sanctions, the state-owned Chinese investment arm CITIC Group set up a credit line of 10 billion US dollars for Iran. In 2017, China-Iran trade exceeded $37 billion, with annual growth of 19 percent. Following the US withdrawal from the Iran nuclear deal in 2019, Beijing remains determined to improve its trade and investment ties with Tehran.
Beyond these diplomatic offers, China has increased its military involvement in the Middle East. The Chinese Navy has made efforts to demonstrate its presence near strategic chokepoints such as the Strait of Hormuz, the Bab el-Mandeb Strait and the Suez Canal. In June 2017, China and Iran conducted a joint naval exercise on the edge of the Strait of Hormuz. Building on port visits and exercises and utilizing the dual-use infrastructure created through its regional investments. Beijing views Tehran as “a country with world-class natural resources, abundant human capital, and a hungry and relatively untapped market.”
The key elements of the vision for Iran-China cooperation were laid out during President Xi’s state visit to Tehran in January 2016. The two states agreed to expand trade to $600 billion over 10 years while building stronger cooperation as part of a 25-year plan. Besides trade, China is a leading investor in the Iranian market. About 100 major Chinese companies are investing in Iran’s key economic sectors, particularly energy and transportation. For example, the China National Nuclear Corporation is redesigning Iran’s Arak IR-40 heavy water reactor to meet non-proliferation requirements under the 2015 Iran nuclear deal.
The Chinese government has provided a $10 billion loan to Chinese companies to build dams, power generators and other infrastructure in Iran, such as the recent “installation of a railway link between Bayannur in China’s Inner Mongolia region and Tehran.” Other transportation projects include building or financing rail lines to the eastern city of Mashhad and the port of Bushehr on the Persian Gulf. China also wants to help speed up the construction of a port in Chabahar on the Gulf of Oman, a project originally intended to work with India.” Another prominent example is Tehran’s five metro lines, all of which Chinese companies are built. The wagons will be built by an Iranian-Chinese joint venture, the Tehran Wagon Manufacturing Company.
Chinese energy companies have become major oil and gas developers in Iran, which has both the second largest gas reserves (after Russia) and one of the largest conventional crude oil reserves in the world. According to Iran’s Petroleum Ministry, in August China “re-involved” in three major energy projects in Iran: the South Pars gas field, the world’s largest and shared with Qatar; the Yadavaran oil field on the border with Iraq; and the development of the Jask oil terminal, which lies east of the Strait of Hormuz. “Undoubtedly, China has benefited economically from the absence of Western energy companies in Iran due to US pressure. Even as Iran-China relations accelerated rapidly in the 2000s, as China overtook Germany as Iran’s largest trading partner, Beijing was still paying close attention to Washington’s sensitivities toward Tehran.”
That China has ties with every single state in the Middle East — including Iranian rivals Israel and Saudi Arabia — is a complicating factor, especially when the burgeoning ties between Tehran and Beijing are viewed negatively by other GCC Arab states.
From Beijing’s perspective, the near-term implications of Washington’s exit from the 2015 nuclear deal are double-edged. Due to the global impact of renewed US sanctions, Iranians will have less money to buy Chinese goods and there is a risk that the withdrawal could prompt Iran to restart its nuclear program, as Tehran is doing now. The multiple rounds of Vienna talks on JCPOA remain deadlocked, and there seems to be some hope of a breakthrough to resolve the issue. However, given the poor state of Iran’s economy, there is an obvious need for more credit and investment from China, and Beijing will likely be willing to offer ongoing discounts to Chinese purchases of Iranian oil.
Beijing and Tehran recently struck a major deal. It was agreed to bring their bilateral relations to the level of a strategic partnership. The 25-year strategic partnership Beijing and Tehran signed in March 2021 brings great benefits to Beijing and Tehran. The $400 billion deal would see China investing in multiple sectors of Iran’s economy, from finance to infrastructure. It would also result in both powers forging closer military ties.
By building ties with Iran, China is strengthening its foothold in the Middle East, undermining US influence and securing access to Iran’s oil and other vital commodities. For its part, Iran will receive billions of dollars in Chinese energy and infrastructure investments, undermining the effectiveness of US sanctions against the Iranian regime.
How long would this partnership last between a theocratic regime and China as a responsible state that benefits from the existing order? Will Tehran show signs of moderation and become a normal state? Scientific opinion is divided on this subject. Scholars who have advocated moderation have pointed to the tremendous costs the Iranian people have suffered since 1979, and those who have advocated the status quo point to the benefits that accrue to those in command . As Karim Sajjadpur recently argued, the “ultimate decision will be made by the Iranian people.”
The author is a political scientist and defense analyst