October 05, 2018
With the sanctions knot being drawn ever tighter, it appears likely that Iran will slip deeper into the arms of China, which is already its biggest trade partner.
Chinese goods have been flooding markets in Iran while Chinese businessmen fly in eager for deals as Western business interests flee.
That doesn’t mean China offers a safe haven to Iran without conditions. Beijing will try to extract the maximum benefit, analysts tell The Associated Press, and there is growing concern in Iran that China may take advantage of Iran.
Iran “has had to rely on China to offset the Western-induced isolation, predominantly championed by the United States,” said Arianne Tabatabai, an associate political scientist at the RAND Corp. who recently co-authored a book exploring Iran’s ties with China and Russia. “I think that what we’re going to see is the return of a quasi-monopoly of key sectors of the Iranian economy by the Chinese.”
Trade and ties between China and Iran date back centuries to the ancient Silk Road caravan routes that brought textiles to Europe. Modern relations began under Mohammad Reza Shah in 1971 after the Americans recognized Beijing’s Communist government.
For China, Iran for years served as a crucial gas pump for its rapid economic growth.
Now with President Donald Trump’s decision to pull America from the nuclear accord, Iranians likely see China as one of the few avenues remaining open to them.
“China is a vast economy and has enough middle-sized companies that don’t have a lot of exposure to the US that Iran is going to be able to continue large quantities of trade there, assuming the Chinese government lets that happen and wants that to happen,” said Peter Harrell, a fellow at the Washington-based Center for a New American Security and a former US diplomat who worked on Iranian sanctions issues with Beijing.
First among China’s wants likely is Iran’s energy supplies as other US allies cut off their purchases. Nearly a quarter of all of Iran’s oil exports went to China in 2017, according to the Energy Information Administration, making it the Islamic Republic’s biggest single market. While oil imports from Iran have dropped some 20 percent between May and August, “China will keep any reductions to a minimal level,” the Eurasia Group has said.
After French oil major Total SA pulled out of a $5 billion, 20-year agreement to develop the Iran’s massive South Pars offshore natural gasfield, growing rumors circulated that China would take over the concession. So far, however, it has remained silent.
“China is really going to be the major savior of Iran because even though other countries say they’re not going to comply with US sanctions — India for example — when push comes to shove, they can’t afford to risk their relationship with the United States,” Tabatabai said.
But already, there are rumblings of concern among the Iranian public.
At Tehran’s Grand Bazaar, most acknowledge Chinese goods are substandard to the ones sold by Western firms and remember how they flooded the market when nuclear sanctions bit into the country in years passed. Fishermen along Iran’s southern coast already complain about Chinese firms gaining access to their fishing grounds.
Analysts expect Beijing also will ring major discounts from Tehran for buying whatever crude it otherwise can’t sell after the November deadline.
China “will want to articulate the moral high ground” by mentioning the US backed out of the nuclear deal, but business will come first, Harrell said. China remains both Iran’s top import and export market.
“One thing I’m sure China is doing with the sanctions is leaning on Iran to get oil price concessions,” Harrell said.
The one thing China, the world’s top oil importer, does not want to see happen is any military action driving up the price of crude oil.
When Iranian President Rohani made veiled threats about Iran’s ability to close the Strait of Hormuz, the Chinese immediately reached out to the Iranian government to express concern.
“If Iran does something stupid that sends global crude oil prices from $73 to $100 a barrel, China is actually the biggest loser by the move by far,” Harrell said. “They have a very strong interest in stability, particularly in the Middle East.”