Questions arise over China’s agreement with Iran

Analysts say economic value to Beijing of Israel, Gulf countries could play role in way agreement with Tehran pans out

China's Foreign Minister Wang Yi shakes hands with Iran's Foreign Minister Mohammad Javad Zarif during a meeting at the Diaoyutai state guest house in Beijing, China December 31, 2019. (photo credit: REUTERS)
China's Foreign Minister Wang Yi shakes hands with Iran's Foreign Minister Mohammad Javad Zarif during a meeting at the Diaoyutai state guest house in Beijing, China December 31, 2019.
(photo credit: REUTERS)
A Sino-Iranian axis is unlikely to develop at the expense of China’s substantial business dealings in the Middle East despite much ink spilled over the leaked draft of a 25-year strategic agreement between the two countries, analysts tell The Media Line.
On July 11, The New York Times published an 18-page document leaked by sources in Tehran that includes plans for billions of dollars in Chinese investments in infrastructure, technology and other sectors of the Iranian economy in exchange for substantially discounted Iranian oil.
There is also reportedly a military component to the deal, with a focus on counterterrorism.
Karen E. Young, a resident scholar at the American Enterprise Institute in Washington, says the published version is more a memorandum of understanding than an actual commercial deal. She calls it a continuation of the Comprehensive Strategic Partnership (CSP) agreement publicly announced by Chinese President Xi Jinping and Iranian President Hassan Rouhani during the former’s state visit to Tehran in 2016.
Young is also skeptical that the CSP will lead to a new economic and military alliance between the two nations.
“Given recent declining interest from China in buying Iranian oil because of US sanctions and, frankly, plenty of other suppliers, there is little reason to see why China would deepen its presence or commitment in Iran, either commercially in energy and infrastructure, or in potential arms sales,” Young told The Media Line.
China is the world’s top crude-oil importer, hitting a record high in June of 53.18 million tons, an increase of 34.41% over the same month in 2019, according to data compiled by China’s General Administration of Customs.
Saudi Arabia is China’s top supplier, at 8.88 million tons in June, an increase of 15% over June 2019. Other Persian Gulf countries supplying oil to China include Oman, Kuwait and the United Arab Emirates.
China is also heavily invested in the Arab Middle East and North Africa, with total investments and contracts during the course of 2019 at $17.34 billion, according to the American Enterprise Institute’s China Global Investment Tracker. Chinese investments and contracts for the year 2019 in Saudi Arabia totaled $5.5 billion, and in the UAE $4.32 billion.
These Middle Eastern countries have adversarial relationships with Iran and see the Islamic Republic as a threat to regional stability. This is a reason, according to analysts, to doubt that a major relationship will develop between China and Iran, as it is in China’s interest to maintain a perception of neutrality.
“China’s incentive is stay on good terms with everybody in the Middle East, to fund or set up or improve port infrastructure, and now more and more [to] have the Middle East be the site of its telecommunications infrastructure, [a] Digital Silk Road,” Howard J. Shatz, a senior economist at the Arlington, Virginia-based RAND Corporation, told The Media Line.
China also does not want to alienate Israel, according to Shatz, because of increasing technological cooperation between the two countries. However, many have expressed concerns about China controlling any sort of hi-tech infrastructure in Israel.
The Chinese company Shanghai International Port Group (SIPG) signed a deal to operate the Port of Haifa for 25 years starting in 2021 despite US handwringing. In May, the local firm IDE Technologies outbid Chinese company Hutchison Water for a $1.5 billion contract to build the world’s largest desalination plant, Sorek 2, south of Tel Aviv. That move came amid pressure from US Secretary of State Mike Pompeo, although analysts say the decision was unrelated.
Jacob Nagel, a retired Israeli brigadier general and former acting head of the country’s National Security Council, is one of those with serious concerns.
“I don’t care if the Chinese buy Ahava Dead Sea minerals for your face [sold to Chinese investors in 2016 for $77 million] … but I don’t want to see them in Tel Aviv close to our very important infrastructure and communications. I don’t want to see them control water, electricity, transportation [or] traffic lights,” said Nagel, now a visiting professor at the Technion Faculty of Aerospace Engineering and a senior visiting fellow at the Foundation for Defense of Democracies.
“When it comes to hi-tech, this is where I worry about it,” Nagel added.
Could a combined pushback from the US, Israel, Saudi Arabia and the UAE scuttle a potential deal between China and Iran?
John Calabrese, director of the Middle East-Asia Project at the Washington-based Middle East Institute, told The Media Line that while there were reasons for skepticism about the deal going through, the outcome of such multi-national pressure remains unknown.
“China might find it difficult to justify or withstand pressure from Israel, Saudi Arabia and the UAE – all of which will lobby hard to dilute, slow down, offset or somehow subvert the deal,” Calabrese said.
Analysts say that China traditionally has taken a cautious approach to business dealings with other countries to maintain good relations, a foreign policy strategy that could come into play in any deal with Iran.
“Gulf Arab states remain safer commercial partners than Iran, and China is not going to relinquish its influence in the Arab Gulf region just to throw Iran an economic lifeboat,” Robert Mogielnicki, a resident scholar at the Arab Gulf States Institute in Washington, told The Media Line.
“This will continue to be the case whether or not President Trump is re-elected in November,” he stated. “If President Trump loses, though, the risks of greater commercial engagement with Iran may well decrease.”
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