Iran pays price for Chinese support
By Richard Javad Heydarian
During the 1979 Iranian revolution, the main battle cry of millions of protesters against the Pahlavi regime was a fiercely nationalistic chant, "Neither East nor West; only the Islamic Republic". It's a strong and unequivocal statement of self-determination and national independence, capturing one of the founding principles of the Islamic Republic of Iran (IRI).
From its very inception, the IRI has relied on its burgeoning ties with Eastern powers as well as other non-aligned nations to secure a measure of domestic prosperity as well as international life. This increasing trend in Iranian foreign policy, the so-called "look East policy", has further accelerated in the past decade or so. There are two major reasons for this: (1) Growing Iran-West estrangement in light of heightening tensions over Tehran's
nuclear program; and (2) a gradual but noticeable shift in the global poles of power, especially towards emerging powers in Asia.
As a result, Iran has witnessed a marked acceleration of its economic and diplomatic ties with emerging powers such as Brazil, Turkey, and India. However, it is particularly China - given its global influence and vast pool of technological, financial, and military resources - that has emerged as Iran's most important external partner. China's increasing centrality to Iran has been most prominent during the administration of President Mahmoud Ahmadinejad (2005-2013).
By 2007, China became Iran's top trading partner.
Recognizing Beijing's rising profile in international affairs and growing reliance on hydrocarbon imports to feed its booming economy, President Ahmadinejad has - especially in the early years of his office - found a perfect opportunity to contain the negative effects of his confrontational policy towards the West by tilting into China's orbit. This stands in contrast to preceding administrations of Seyyed Mohammad Khatami and Akbar Hashemi Rafsanjani, who prioritized the revitalizing of ties with industrial Europe.
In recent decades, Iran has astutely played into China's growing interest in (1) ensuring secure and affordable supply of energy and (2) building a strategic counterweight to the United States' hegemony in the Persian Gulf. For Beijing, Iran perfectly fits the bill, since it is both a major global energy producer as well as a pivotal revisionist power in the Middle East.
In this sense, Sino-Iranian cooperation has been founded upon an almost perfect convergence in bilateral interests, underpinning a period of booming trade, investment, and politico-military relations in recent years.
However, in recent months, the two countries have experienced a "cooling off" period, moving in different strategic directions. Iran is struggling to cope with debilitating Western sanctions and avoiding direct confrontation with the West, while China is dealing with an economic downturn, heightened tensions over its territorial claims in adjacent waters, and growing social unrest amid a sensitive leadership transition.
The idea of a Sino-Iranian alliance to counter Western hegemony in the far corners of the Asian continent has somehow lost its appeal and earlier momentum.
This may explain why an increasingly frustrated Iran is showing serious interest in reviving ties with the West, including the US, to contain the impact of the nuclear crisis. Perhaps,
Tehran is beginning to recognize the increasing fragility of its "look East" policy.
The perfect couple
Iran and China are often portrayed as natural allies, with some Western commentators even suggesting that the two countries - together with Russia - serve as pillars of a global anti-Western axis. Even the US defense establishment reflects such mentality, as clearly reflected in the 2012 US Defense Strategic Review, whereby Iran and china are specifically identified as "principle challengers" to America's global leadership in the 21st century.
Ideologically, both countries are revisionist powers that have constantly derided - and sought to undermine - an essentially US-led order in two of the world's most important regions: namely, the Persian Gulf (where almost a third of global seaborne oil is transported) and the Pacific basin (the world's new center of geo-strategic and economic gravity).
Both also share similar challenges in their respective regions. While Iran is bent on defending its nuclear program and protecting its territorial claims in the Persian Gulf against an essentially US-led coalition of Arab monarchies, China is waging its own war of attrition in an attempt to defend its territorial claims in the South China Sea and East China Sea amid America's pivot - supported by regional treaty allies such as Japan, Philippines, and Australia - to the Western Pacific theatre. In this sense, the two states have found themselves surrounded by a "string of pearls", composed of the US and its regional allies.
Above all, what has made the idea of an Sino-Iranian partnership most desirable is their perfectly complementary economic profiles. Sitting on top of one of the world's richest reservoir of both oil (4th largest) and natural gas (2nd largest), Iran is a perfect candidate for China's growing energy needs.
China's greatest "Persian prize" lies in Iran's colossal South Pars Complex, where the world's largest reservoir of natural gas has remained relatively untapped. With limited capital and industrial capacity, Iran has relied on a cocktail of European and Asian energy companies to develop its energy reserves. However, recent years have witnessed growing divestments by European companies due to growing tensions over Iran's nuclear program, leaving Tehran ever more dependent on the likes of China, which has rapidly advanced in upstream technology.
Beijing has also been active in Iran's expansive and relatively sophisticated infrastructure sector, with Chinese companies often dominating major transport and construction projects in places such as Tehran, the Middle East's second-largest city. Eyeing Iran's large consumer class, Chinese producers have also capitalized on relatively loose trading conditions under the populist Ahmadinejad administration, which has been responsible for a period of relatively strong rial and low tariff rates.
As a result, bilateral trade has had double-digit growth rates in recent years, hovering above US$30 billion, while Chinese investment pledges to Iran are said to have ranged between $40 billion and $100 billion.
Most crucially, China has also served as a key source of advanced (military-civilian) technology for Iran. In the 1990s, China helped Iran with the construction of a nuclear research facility in Isfahan. In the 2000s, China provided Iran with necessary technology, training, and know-how in critical areas of ballistic and satellite technology - the backbone of Iran's non-nuclear deterrence.
In the eyes of Iran's leadership, China's breakneck pace of technological and economic growth has made it an increasingly tempting alternative to Western nations, which have served as agents of modernization for much of Iran's recent history. This partly explains Iran's confidence in the sustainability of its highly assertive stance on the nuclear issue and defiant posture towards the West, especially under Ahmadinejad's watch.
In Tehran's estimation, the costs of taking on the West could be perfectly compensated by a booming relationship with emerging powers such as China. The Iranians have also been emboldened by China's repeated vetoes of proposed punitive UN Security Council measures against Iran's nuclear program. Impressed by China, Iranian leaders have even contemplated the implementation of a "Chinese model", founded on a delicate balance between dynamic economic change and fairly static politics.
A reality check
What interrupted an almost perfect picture of booming Sino-Iranian partnership is the successful attempt of the Barack Obama administration to isolate Iran, accomplished through a vigorous regime of transatlantic sanctions.
The year 2012 has proven to be a critical juncture in Sino-Iranian relations, testing the limits of bilateral ties. Starting in June 2011,
China began to diverge from its traditionally pro-Iranian stance by acquiescing to Western powers, which rejected a Turkish- and Brazilian-brokered "nuclear swap deal" in Tehran and imposed new sanctions on Iran. The Chinese also begun dilly-dallying on settling billions of dollars in oil payment to Iran, citing difficulties raised by international sanctions against Iran's financial sector. At this point, the stage was set for a cooling-off period.
When Western nations imposed debilitating sanctions in early 2012,
China resorted to a mere rhetorical condemnation, but its actions have grossly fallen short of Tehran's expectations. Not only has
China refused to substantially increase its oil imports to make up for the European Union oil embargo, wiping off about a third of Iran's oil exports, but it has also frozen most of its investment pledges in Iran's key energy projects.
Early this year, just when the EU sanctions kicked in,
China reduced its oil imports from Iran by almost 50%. China also dispatched a senior envoy to Persian Gulf monarchies to negotiate alternative sources of oil and sign long-term contracts, while cautioning Iran against any threat to freedom of navigation in the Strait of Hormuz - Iran's main strategic chip.
After months of haggling, the Chinese agreed to increase their imports, but not significantly higher than the average levels of preceding years.
By June, China again reduced its Iran crude imports, this time by 25%, to gain waivers of sanction exemptions from the US State Department.
Beijing leveraged its growing importance within Iran's narrowing trading circle by pushing for deeper discounts, greater barter deals, and flexible payment arrangements. Meanwhile, cheap and subsidized Chinese products have been squeezing Iran's domestic industries, which have struggled with a falling currency, lack of access to intermediate goods, and suffocating financial constraints due to recent Western sanctions. As a result, Iran has been finding it increasingly difficult to access foreign currency, sustain oil production levels (as exports fall), and feed the technological needs of Iranian producers.
Even on the nuclear issue, the Chinese have not only been reticent to stand firmly by Iran in face of growing external pressure, but they have also increasingly pressured Tehran to consider further transparency and flexibility in its nuclear posture.
In early June, Chinese President Hu Jintao told his Iranian counterpart, "China hopes the Iranian side can weigh up the situation, take a flexible and pragmatic approach, have serious talks with all six related nations [the permanent five members of the UN Security Council plus Germany], and enhance dialogues and co-operation with the International Atomic Energy Agency so as to ensure the tensions can be eased through negotiations."
Even with China undergoing a generational leadership transition this month, there are hardly any signs that Beijing will ever choose to shift its course of action towards Iran. Cognizant of its growing dependence on China, pragmatists and nationalists within Iran are beginning to realize the downside of their feisty approach towards the West.
This may explain Iran's expressed interest in bilateral talks with Washington to more definitively resolve the nuclear impasse. After all, Tehran's ultimate wish is independence, not jumping from one boat to another.
Richard Javad Heydarian is a foreign affairs analyst focusing on Iran and international security. He is the author of the upcoming book The Economics of the Arab Spring: How Globalization Failed the Arab World, Zed Books, 2013. He can be reached at
jrheydarian@gmail.com
Asia Times Online :: Iran pays price for Chinese support
