The New Geopolitics of Energy
As the Trump administration works out the specifics of its strategy to contain Iran, China is looking for ways to bring Iran into the global system. After the recent party congress, which cemented President Xi Jinping’s grip on power, those efforts will likely take the form of the completion of his most ambitious foreign policy plan, the One Belt, One Road (OBOR) initiative, of which Tehran will be one of the key beneficiaries. Beijing has said that OBOR is needed to create the infrastructure to encourage trade, but the initiative is about much more. It is also a way to build political confidence among participating states. And it seems to be working in Iran. There, OBOR is seen as a project that will make Iran an indispensable partner not only for China but also for India, Russia, and the states of Central Asia.
Xi’s plan, launched in 2013, was warmly welcomed by Tehran from the outset. The project, a $1 trillion, 10- to 15-year plan to link China with world markets through an extensive set of land and maritime trade routes across Eurasia, puts Iran in the center of China’s global plans.
Two factors make Iran such a central player: its inescapable geography and its utility as a relatively stable security partner in an otherwise tumultuous Middle East. Iran’s geographic location makes it the only viable land bridge from the Persian Gulf to the landlocked Central Asian states (a market of about 65 million people) and the three states of the Caucasus (Armenia, Azerbaijan, and Georgia). China is committed to becoming the predominant economic and political power in these areas.
At the moment, the Central Asians have three outlets to world markets: east via China, south via Iran, and west via Russia. The successful implementation of OBOR gives China de facto control over two of the three outlets. Already, Kazakhstan is leading the pack among the five Central Asian states in linking up to Iran. In December 2014, Kazakhstan, together with Iran and Turkmenistan, inaugurated a 575-mile rail line between the three countries. Further, throughout the nuclear negotiations between Iran and the West, Kazakh President Nursultan Nazarbayev acted as a mediator between the two sides. Meanwhile, in February 2016, the first rail cargo from China arrived in Iran via the Kazakhstan-Turkmenistan-Iran rail link.
At the same time, OBOR presents some uncertainties for the Iranians. One of Iran’s biggest infrastructure projects in the last decade has been the development of the Chabahar deep-water port on its Indian Ocean shore. This project has been much delayed but remains a critical option for a more commercially viable outlet to the Central Asian states and Afghanistan. It is not an overstatement to say that the Iranians want to turn the port into a rival of Dubai, even if such a scenario is unlikely in the foreseeable future. Yet, in the meantime, China has invested heavily in a competing project in the port of Gwadar in nearby Pakistan.
To complicate matters further, China’s major rival, India, is among the foreign states most engaged as a partner of Iran in Chabahar’s development. Japan, too, has been mentioned by Iranian sources as a potential investor in Chabahar. Japan is said to be interested in the development of the port for the same reasons as China: to strengthen ties to the 80-million-strong Iranian market while also turning Iranian territory into a conduit to the Central Asian markets.
Beijing looks at Iran and Central Asia not only through an economic lens but also through a security one. Adjacent to its relatively underdeveloped western regions, Beijing considers Central Asia an exposed underbelly that needs to be closely integrated into China’s economic and political sphere.
The Central Asian governments have been more or less willing partners. China has already replaced Russia as the region’s biggest trading partner. Cooperation is now expected to consolidate around security questions. Institutional infrastructure is already in place to facilitate such cooperation, most notably the Shanghai Cooperation Organization (SCO).
Both the Chinese and the Central Asian leadership consider Iran an inevitable security partner. This is due not only to its geography but also to the perception that Iran is a non-threat when it comes to one key issue: the export of radical Islam to their backyards. Despite Tehran’s commitment to its Islamist ideology, the Central Asian and Chinese governments believe Iran has largely ceased efforts to export its political message to its northern neighbors. Instead, Tehran’s efforts to export its brand of Islamism have been aimed at the Arab world—and particularly Arab Shia minority communities. Meanwhile, as a Shia-majority nation, Iran’s Islamist message was always going to have limited appeal in the Sunni-majority Central Asian states or among China’s Muslim minority. In contrast, China and the Central Asian states have historically feared the role of Sunni-majority states in spreading radical religious doctrine.
China believes it could provide the partnership Iran currently lacks.
In turn, despite huge volumes of trade, China cooperates very little with the Arab states of the Gulf in the security realm. Only recently did Saudi Arabia and China hold their first talks about counterterrorism. In contrast, China has had a series of security and defense talks with Iran, and Chinese-Iranian military ties run deep, dating back to the early 1980s.
Despite years of contentious relations with Western states, Iran is seen by China as an enduring and powerful nation-state in the Middle East that is nonetheless left out of any regional economic and security alliances. China believes it could provide the partnership Iran currently lacks.
That said, China still has its suspicions about Iran. Take China’s recent posture toward the long-time Iranian bid to join the SCO as a full member of that organization. Russia is widely believed to favor an Iranian accession to the multilateral collective body, which is led by Moscow and Beijing. However, the Iranians are not sure about Beijing’s openness to this idea. The SCO has repeatedly declined to begin accession talks with Tehran, much to Iran’s disappointment.
The SCO process has irked the Iranians so much that they are said to be reevaluating their membership bid. In fact, right after Iran’s membership bid failed, an array of Iranian semi-official sources questioned the utility of SCO membership. And yet, the political and symbolic value in Iran joining multilateral bodies such as the SCO cannot be taken lightly. Since the Islamic Republic came about in 1979, Iran has repeatedly failed to join any collective bodies that could facilitate diplomatic and economic engagements in any meaningful way. Tehran’s experience of costly economic isolation has only increased its appetite for integration.
Chinese investment is reason enough for Iran to welcome OBOR, but other domestic factors make it even more attractive. Iran’s hardline faction has long argued that Tehran should prioritize diplomatic and economic ties to states such as Russia and China over Western states.
This policy began as a motto in the 1990s and by the end of the Mahmoud Ahmadinejad presidency, it was a reality. By 2013, when Ahmadinejad left office, China represented about one-third of Iran’s total trade. Some of the same hardliners, particularly those found in the ranks of the Islamic Revolutionary Guard Corps (IRGC), continue to argue for closer ties to China. Even the moderate faction in President Hassan Rouhani’s government views China as an essential player that can complement Iran’s overall attempts to break its former international isolation.
In fact, Iranian-Chinese military-to-military ties have expanded noticeably since Rouhani came to office in 2013, especially following the 2015 nuclear deal. Former Defense Minister Hossein Dehqan first visited Beijing in May 2014 and signed an agreement on military cooperation. As recently as November 2016, Tehran and Beijing signed a deal to jointly combat terrorism. In June 2017, Chinese and Iranian naval vessels held joint military exercises in the Sea of Oman east to the Strait of Hormoz, involving about 700 naval forces from each country. These were some of the largest naval exercises Iran has conducted jointly with a foreign power in recent years. The Iranian side is careful not to present the latest military cooperation as targeting any third actor, such the United States or the Arab Gulf countries, however. Tehran knows full well that China will not want to engage on the side of Iran in Middle Eastern rivalries. Instead, the closer military ties are simply presented as a way of protecting the vast commercial trade the two states carry out each year.
Much of the vision for such cooperation was laid out in Xi’s January 2016 state visit to Tehran. The two states agreed to expand trade to $600 billion over a 10-year period while also building stronger cooperation as part of a 25-year plan.
As with Tehran’s ongoing discussions with the Russians, Iran is said to be weighing Chinese military access to Iran’s air and naval facilities. The two countries are in alignment on some key questions in the Middle East, including support for the regime of Bashar al-Assad in Syria. It would seem fully in line with both Iran’s and China’s international ambitions if Syria’s future reconstruction becomes an integral part of Beijing’s OBOR efforts in western Asia. After all, the core of OBOR is about Chinese-financed infrastructure projects such as roads, rail networks, and ports.
Alongside an expansion in military-to-military ties are close relations in the energy sector. In July 2017, the Iranian Oil Ministry and a consortium of French Total, China National Petroleum Corporation (CNPC), and a local Iranian energy firm won a 20-year, $4.8 billion contract to develop Iran’s South Pars, the world’s largest natural gas field. CNPC’s participation in the deal was no accident, given the company’s long history and deep interests in Iran. And since China remains Iran’s top energy customer, the decision by the Rouhani government to give a high stake to a Chinese firm is hardly surprising. Further pressure on the Rouhani government not to be too friendly to the West will inevitably make Chinese energy firms some of the biggest players in the country.
As U.S. President Donald Trump prepares for his Asia tour, he should remember that it is not only Putin’s Russia that is making greater inroads into the Middle East, likely at the expense of U.S. influence. China has a grand strategy of its own, and Beijing arguably has the better hand of cards. OBOR is without doubt a strong hint of what China has in mind. Beijing is deploying a combination of economic, military, and other instruments to extend its reach. It would be folly for U.S. policy-makers to dismiss OBOR as a hasty Chinese effort to find new markets for Beijing’s huge industrial excess production capacity. In its fullest application, OBOR, together with other Chinese efforts, such as the Asian Infrastructure Investment Bank (AIIB) and the New Silk Road Fund, demonstrates that Beijing is going after the U.S.-dominated global system of trade rules and investment practices.
Thanks to its adversarial relations with Washington, Tehran sees China’s OBOR as an opportunity for greater integration in western Asia. But Tehran should be careful not to misread China’s intentions. Beijing will try to avoid the many political pitfalls of the Middle East. It will continue to have close commercial and diplomatic ties with a long list of Iran’s rivals, from the Saudis to the Israelis. Still, China’s acceptance of Iran as an inevitably important component of its OBOR grand strategy is a golden opportunity for the Iranians. Since OBOR is one of President Xi’s signature foreign policy ambitions, he will most likely remain faithful to it while he is in office.