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
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