There has been a lot of attention from both politicians and the media regarding the escalating tensions of the United States and Iran. It’s a tit-for-tat. Each side moderately strikes and then the other side strikes back, perhaps just a little bit more provocative than previously. So, you may be wondering, who wins in this situation? Well it’s not Iran, whose economy has the potential to be paralysed by the re-implementation of sanctions. And it certainly isn’t the United States, whose encouragement of a hostile Iran has further ostracised both friends and foes.
Well the answer is China.
But first, let’s step back a moment. To understand how China is the winner here, we must first understand the turbulent Iranian-American relationship. Iran’s place in modern politics has a rocky history and has been dictated by its strained and often provocative relationship with the United States. Iran began to fall into the western orb of influence after WWII when Middle Eastern oil became a key component driving regional and international interests. American and British government forces then engineered a coup to solidify power for the Shah, a pro-West and secular Iranian Monarch in 1953. However, this American influence came to an end during the 1979 Islamic Revolution which saw the Shah overthrown and the implementation of a clerical regime.
As a result of an increasingly concerning nuclear program, the US-led international action in implementing harsh economic sanctions throughout the 1990s and 2000s. These sanctions proved paralysing for Iran, a state reliant on oil exports to leverage their economy. Tensions reached peak levels in 2002 when President George W. Bush labelled Iran as one of the three states in the “axis of evil.” Bush singled out Iran’s sponsorship of terrorism and pursuit of nuclear weaponry as a means to validate international sanctions. Toying with the United States, Iran continued to enrich uranium throughout the next decade to levels in contravention of international law on nuclear weapons.
In 2015, under the Obama administration, the United States, along with the other permanent members of the United Nations Security Council and Germany (often referred to as the P5+1) reached a landmark deal known as the Joint Comprehensive Plan of Action (JCPOA). Economic sanctions that had been crippling the Iranian economy were lifted in 2016, after the International Atomic Energy Agency (the United Nations’ nuclear watchdog) confirmed that Iran had scaled back its nuclear activity.
So, what’s happening now?
Trump decided to withdraw the United States from the JCPOA in May 2018 and impose economic sanctions on Iran in what he has called a “maximum pressure” campaign. These sanctions however, have had serious ramifications for Iran’s national economy, leaving the Iranian people desolate and a government looking to retaliate. American sanctions on Iran, coupled with a Sino-American trade war has effectively further alienated China and Iran, two American adversaries. This current hostile environment provides both China and Iran with the opportunity to capitalise upon a mutually beneficial relationship and challenge American domination. Recent Sino-Iranian cooperation has seen an increase in bilateral trade, investment and military cooperation.
But how is China a winner due to the current tensions?
The main reason a Sino-Iranian relationship serves China so well is China has all the power. As a result of decades of sanctions from Western nations, Iran has long sought to further its relationships with other economic powerhouses, such as India, Russia and of course, China. Despite ideological differences, Iran is dependent upon maintain trading relations with the rising economic power of China. China is Iran’s largest trading partner, supplying and consuming more than 30% of Iranian imports and exports. This number is only expected to grow with American tariffs on both states. Meanwhile, Iran represents only 1% of China’s international trade. Iran needs China, but to China, Iran is replaceable. And these current tensions have increased the scope for closer Chinese-Iranian ties, and further trade and economic deals.
Also, Iran, facing international exclusion has willingly opened its doors to Chinese investments and the strings that come attached to such investments. China has strategically built its relationship with Iran for many years, to the point that Iran is increasingly dependent upon China. This is not just with regard to trade, but also investment. Chinese companies have invested US$5 billion in developing gas refinery and oil infrastructure, expanding highways and upgrading metro systems in the last ten years alone. CITIC Group, a Chinese state-owned investment bank and the Chinese Development Bank have collectively promised Iran US$25 billion in a credit line. In isolating Iran from foreign investment, the United States has created the perfect opportunity for China to move in and reap all the economic and political benefits. Iran is a strategic location in its Belt and Road initiative to Europe. One day, China will come knocking on Iran’s door seeking repayment.
What about military intervention?
The rising tensions between the United States and Iran create big gains for China’s military; but maybe not in the way you were thinking. China does sell arms and military equipment to Iran, so with an increasingly hostile America, Iran is likely to expand its military capabilities and therefore spend more money. This means big dollars for China. But, the biggest win for the Chinese military is actually a focus of the American military elsewhere. While the United States was involved in a decade of wars in Afghanistan and Iraq, China was able to quietly able to expand its military capabilities and grow to the military superpower we know it to be today. However, since Obama’s Pivot to Asia in 2012, the Pacific, and China in particular, has been the focus of the United States’ military attention. The escalation of tensions on the Iranian peninsula have realigned American interests back to the Middle East. A United States focused on Iran is a United States that isn’t focused on China. And that serves China very well.
And then what about American allies?
By abandoning the deal, the Trump administration has fractured the Western alliance between the United States and its European allies. Britain, France and Germany have so far resisted calls from President Trump to support him in applying “maximum pressure” on Iran. Trump’s campaign has increased tensions with America’s closest friends and has effectively pushed them closer to the Chinese position. As Iran announces it is set to reach the cap on uranium enrichment, Trump has alienated his allies.
At this stage, the sanctions on Iran are only unilateral. The EU, in particular the UK, Germany and France, are vocal supporters of the JCPOA, so an American withdrawal merely brings Europe closer to China. Suddenly, China is the only remaining superpower supporting the deal. China appears to be rational. The United States appears to be reckless. Therefore, this provides China with greater influence over both American friends, and foes.
In the event that the EU follows the American lead and also imposes sanctions on Iran, that will still work out well for China. China will have greater access to Iranian oil, and at an even cheaper price. How convenient for China.
It’s clear that the United States is losing a lot here. These losses are China’s gain. And in the words of the Iranian foreign ministry, “this is a dangerous game” to play.
