Middle East | For economic revival, Iran will do a balancing act between East and West

For economic revival, Iran will do a balancing act between East and West

March 8, 2016 10:16 AM (UTC+8)

 

Amid conflicting claims about Iran’s foreign policy approach in the post-sanctions scenario, it has become evident that ‘economic pragmatism’ has attracted overwhelming attention of Iran’s policy makers.

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Regardless of Iran’s direct involvement in Syria, its policy makers seem to be equally mindful of the need to re-establish the country’s economy that had been shattered due to various Western-imposed embargoes. For them, economic revival stands out as the basic guiding principle, shaping Iran’s relations with the East and the West in the current scenario and further enabling it to translate economic relations for attaining the strategic objectives.

While Iran and Europe widely differ on conflict-resolution in Syria, Tehran’s attempts at re-capturing its erstwhile space in the European market tell a different story. The root of this rapidly emerging economic relations with Europe, however, lies not in the Mid-Eastern conflict but in the negotiations regarding Iran’s nuclear program, eventually culminating in the nuclear deal.

That is to say Iran’s out-reach to Europe and Europe’s ‘excitement’ over not only having cheaper oil from Iran but also access to its huge market are a continuation of the same momentum that both actors had managed to develop during the nuclear talks. Hence, Iran’s decision to trade in euro rather than in US dollar.

Although Iran had been advocating oil trade in euro instead of dollar for quite some time, the country’s decision came at a time when it was on the verge of re-capturing the European market that it had lost to Saudi Arabia and other countries in the wake of economic sanctions. Therefore, this decision has both economic and strategic underpinnings.

Switching oil sales to euros makes perfect ‘economic sense’ not only because Europe is now one of Iran’s biggest trading partners but also because many European companies are rushing to Iran for business opportunities. It would ease  pressure on Iran for having enough dollars in foreign exchange and also benefit Europe in terms of making easy payments to Iran.

While Iran is, by making such arrangements, certainly developing strong economic relations with Europe, it cannot be concluded that it is rooted in a possible strategic shift towards the West; for, this is how Iran is dealing with the East too.

The East is equally significant for Iran and the extent of this significance was evident during Chinese President Xi Jinping’s historic visit to post-sanctions Iran, when the two countries signed major trade agreements including bringing Iran fully into the emerging strategic New Economic Silk Road and Maritime Road blueprint.

The two countries at that meeting, in addition to formal agreement on Iran’s participation in the New Silk Road, announced plans to increase bilateral trade in the coming ten years to at least $600 billion annually. Already more than one third of Iran’s foreign trade is with China, which, before sanctions, was Iran’s major oil customer.

China and Iran are clearly extending their historical relations, and nowhere is this more evident than in the plan to link Iran’s rail network to that of Central Asia, and eventually to China. On February 6, Iranian President Hassan Rouhani announced that the government has plans to construct a rail link of some 900 miles length across mountainous terrain to link the Shi’ite holy cities of Mashhad in Iran and Karbala in Iraq. The proposed railway link is to bring the Iranian rail infrastructure closer to the Turkmenistan border.

On the other hand, the rail plan of China’s ‘Silk Road’ will go from the Xinjiang Province city of Kashgar, the westernmost city in China, located near the border with Tajikistan and Kyrgyzstan. It will go to Afghanistan’s Herat, then through Kyrgyzstan and Tajikistan, finally connecting with Iran’s rail network.

Iran’s engagement with China and the eagerness its leadership has shown in this regard are highly symbolic of its historical ‘good’ relations with China. But its current significance lies not in the history of their relations but in allowing Iran to balance its position between the West and the East.

It may be correct to state that Iran would maintain its tilt towards the East. But it cannot be said that Iran would not cultivate its relations with the West due to this tilt. As a matter of fact, it is this very tilt towards the East that is indirectly enabling Iran to re-cultivate its relations with the West.

For instance, one among the many agreements signed between China and Iran is about extension of China’s ‘Silk Road’ to Europe through Iran. According to the President of the Islamic Republic of Iran Railways Mohsen Pourseyyed Aghaei, “On the basis of defined plans, the Silk Road rail-road will be linked to Europe which means the Port of Shanghai in China will be connected to Europe through Iran.”

Iran, as such, is clearly benefiting from China’s own reach to Europe, especially the way it is using this situation to its own advantage. However, the tricky situation and the one that keeps hanging in the air is the Syrian question and the way Iran has been backing Assad, who happens to be Europe’s ‘enemy.’

However, regardless of the largely believed assumption that Europe is ‘wooing’ Iran to extract some concessions from it with regard to conflict resolution in Syria, it cannot be gainsaid that Iran does need access to the European market. Future co-operation between them regarding resolution of the conflict in Syria can be possible.

On the contrary, Iran may find it useful to utilize the fresh economic deals as a launching pad to re-invigorate its diplomatic standing in the continent as a means to influence, if not altogether determine, Europe’s own approach to the Middle East.

While Iran already has Russia’s and China’s support in Syria, the West continues to challenge Iran’s position. Hence it is important for Iran to re-engage Europe first economically and then politically. Iran’s promise of providing oil to Europe at competitive price as compared with Saudi Arabia signifies how Iran is using its fresh economic ties for achieving larger strategic objectives in the Middle East.

Salman Rafi Sheikh is a freelance journalist and research analyst of international relations and Pakistan affairs. His area of interest is South and West Asian politics, the foreign policies of major powers, and Pakistani politics. He can be reached at salmansheikh.ss11.sr@gmail.com

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