On 3 April 2015 an outline agreement on the future of Iran’s nuclear program was reached, running over the self-imposed 31 March deadline. When the leaders did emerge, they did so with an understanding that there would be a reduction in the number of Iran’s operating centrifuges, changes to its nuclear facilities and much more rigorous monitoring mechanisms in exchange for lifting sanctions on the Iranian regime.
While this is quite clearly an enormous step for Iran and the future of Iran-US relations, many other players both in the region and beyond have been affected as well. Politically and economically, there are significant consequences for Russia and China, both part of the P5+1 negotiating team that configured the nuclear framework. Both Russia and China were insistent on sanctions being dropped immediately or ‘snap-back’ while America advocated a more gradual removal of sanctions.
China, as of February 2014, was Iran’s largest trade partner with non-oil trade of $13 billion between April 2013 and February 2014. However, China may have jumped the gun with accusations that they participated in a plot to smuggle sanctioned oil out of Iran with some reports suggesting that they imported upto $13 billion of oil.
China had almost exclusive use of Iran’s cheap oil exports before the deal and have already looked into expanding economic engagement even before the finalisation of a deal due on June 30th. Iran has sent a group of officials to China seeking increased investment and oil exports. Two state-owned Chinese oil companies (Sinopec and China National Petroleum Company) had made investments totalling $4 billion in Iran prior to the 2012 sanctions. The ultimate goal of these projects in the Peace Pipeline that will flow from Iran to China through Pakistan, which is a part of the ‘One Belt, One Road’ plan advocated by President Xi Jinping in 2013 to promote China’s economic footprint and boost its industrial exports.
Iran was one of the first companies to join China’s Asian Infrastructure Investment Bank. Perhaps most interestingly, on April 15th 2015, Iran announced that China had agreed to build five new nuclear plants (specifically light water reactors) in the country for civilian purposes, which are permissible under the current agreements.
Given China and Iran’s increasing trade partnership, there are two key questions to answer. Firstly, will China respect the sanctions regime should Iran and the USA fail to reach an accord on June 30th? Secondly, more broadly, what will be the long term impact of Chinese influence in the region?
Some have argued that China would not abandon investment plans should the deals fall through citing that China could point out that sanctions were not an effective tool for seeking change in Iran’s nuclear regime and therefore do not deserve to be respected. While others argue that China’s adherence only to the letter of Resolution 1929, which contains ‘no explicity restrictions on energy investment or trade’ have rendered sanctions weaker than intended forcing the P5+1 to seek an alternative.
On China’s long term influence, there is really no precedent for China’s power in this region. However their deep ties with Africa and general Chinese foreign policy provide some indication that China is mostly interested in the economic benefits from increased ties (at least in the short to medium term). China and Iran do have some regions where they have competing interests such as Central Asia, the Persian Gulf and Latin America and may lead to some interesting power dynamics in the future.
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