The new Iran-China deal: Will the Middle East finally succumb to Chinese influence?

On 27 March, China and Iran signed a co-operation deal lasting 25 years designed to further increase Chinese regional influence through the Belt and Road Initiative. Totalling nearly $400 billion, China will invest in Iran’s energy and infrastructure sectors in return for a constant supply of low-cost oil.

The agreement between Beijing and Tehran has been viewed by the West as a combined battle to shift the foreign policy of Iran in favour of China amidst collapsing relations with the US, creating a new transition of power in the Middle East. Since the collapse of the USSR, China has shown the ability and the intention to dethrone the US as the global hegemon, and the last few years highlight that Beijing is actively pushing to surpass US military and economic power. In 30 years, China’s influence has expanded exponentially across the Indo-Pacific and Middle East, while US/NATO influence has stagnated. Iran has refused President Biden’s offer to resume negotiations after President Trump revoked the 2015 nuclear accord and re-imposed heavy sanctions; instead, Iran has turned its attention to Chinese influence to demand all sanctions be lifted on Iran.

Foreign Ministers Wang Yi and Mohammad Javad Zarif sign the 25 year cooperation in Tehran/Tasnin News Agency

From 2016 to 2017, the Iranian economy grew by 15%, and then fell by 13% between 2018 and 2019 under the sanctions – it is clear that US foreign relations in Iran have been soured by the unique international stratagem of the Trump administration, and the lapse in economic growth has meant Iran has turned to other global powers for economic development. For Iran, which has struggled to maintain oil exports since the sanctions, the deal means its greatest export now has a stable recipient, relieving its struggling economy and trade isolation. Furthermore, the promise of infrastructure development by China will allow for better domestic and international travel and connectivity in Iran, which has long been ravaged by internal instability and poor infrastructure. China will develop new railway and highway systems, new ports, and new airports in Iran, and given Iran’s equidistant geography between Europe and the Indo-Pacific, it could follow the route of the UAE in becoming a global trade and travel hub.

However, what is more worrying is the impact of Chinese soft power in the Middle East, and how this could catalyse a transition of the global power balance. Iran’s domestic development is, in itself, nothing to be worried about – a stable country in the Middle East is a rare occurrence. However, many analysts are worried that Chinese influence in Iran will develop to the point that, by 2050, Iran will become a de-facto, stable Chinese satellite state, with China milking Iranian oil for ludicrously cheap prices. Chinese foreign policy since 2013, when the Belt and Road Initiative was implemented, has been focused on improving development, trade, and investment of nearly 70 undeveloped and developing states, including in Jakarta and Nairobi.

Since 2016, China has moved its sights from the Indo-Pacific to the Middle East. It has focused not on political or social conditions for expanding its influence but rather a policy of mutual cooperation through development and trade that has usually favoured China. As long as a state is stable and willing to trade, China will dictate agreements in its favour given its immense soft power capabilities. With Chinese production and trade predicted to surpass the US by 2050, the single limiting factor for its expansion will be fuel – establishing stronger relations with oil-rich Middle Eastern states, whether that be Saudi Arabia, the UAE, or Iran, will be at the forefront of Chinese foreign policy, and this poses a huge threat to the Western Bloc.

As of 2021, Saudi Arabia, Sudan, Iraq, the UAE, Kuwait, Egypt, and Morocco have all signed lucrative trade-development agreements with China, while the US and NATO have struggled to maintain influence after the Arab Spring. The Arab Spring established a power vacuum in the region, and with continued instability across the MENA (Middle East and North Africa) region, China has free reign to swoop in and expand its influence. China viewed the Arab Spring and the resulting Middle Eastern instability with both suspicion and delight. On one hand, the acknowledgement of anti-authority protests and riots posed a threat to China’s autocratic regime, but on the other hand, it also provided a gateway to creating new economic ties with states experiencing civil wars, such as Syria, or had unstable governments, such as Egypt and Libya. The rise of more democratic, albeit weak, states in the Middle East as a result of the Arab Spring meant new governments could be formed independent of US influence, and with this new freedom came the ability for China to provide a greater degree of investment than would have otherwise been provided by the US or EU.

US Secretary of State Anthony Blinken and Western diplomats will have to formulate a new strategy to manage this new alliance/US State Department

From a US point of view, while the collapse of the nuclear deal under Trump’s administration hampered Chinese influence in the short term, these actions will ultimately backfire in the long term. Despite the continuing sanctions on Iran, Chinese oil purchases in March 2021 were the highest ever, and this increasing trend will continue. A positive feedback loop will be created. As other regional actors buck to Chinese influence, a domino effect of Chinese power over the Middle East will be created, posing a threat to Western global influence. China’s soft power over the Middle East has already taken affect as seen by the failing of Middle Eastern states to criticise China’s Hong Kong security law. Even among powerful Western states, Chinese power has limited the extent to which these states can effectively criticise China’s handling of the Uighurs. In October 2020, 39 countries condemned the Uighur situation at the UN, but it is clear this has had little impact on the willingness for China to continue its policies towards the minority group. What is more striking is how many Muslim Middle Eastern states support China’s Xinjiang policies – namely Egypt, Saudi Arabia, Morocco, Iran, and many others, illustrating the extent to which Chinese influence has already penetrated the Middle East.

The China-Iran agreement is not the end of Iran’s bilateral foreign policy (a policy whereby Iran chooses its foreign policies to align to either the West or China), however, and it is this fact that will test the ability of the Biden administration to maintain its power in the MENA region. Iran’s foreign policy has long been to play devil’s advocate in the Middle East. It does not want to take sides, but rather to benefit from the developing proxy conflict between the US and China by taking every deal it can get. The EU is still Iran’s largest trade partner, as the INSTEX deal means the two entities can bypass the US sanctions, but with the economy of the EU falling amidst the Covid-19 pandemic, this provides China the opportunity to shift Iranian attention to their imports.

Iran’s key trump card is broadly similar to many developing states in the world – it can use the fact that one global power is interested in influencing it to shift agreements with another rival global power in its favour. The Cold War is not dead, but thawing into a new form, where influence from global actors takes the form of economic development, rather than political coercion. The US has the upper hand on China in this regard, even after the COVID-19 pandemic, in that its economy is still greater than China’s. The US’ GDP currently sits at $20.49 trillion, compared to Chinas $13.4 trillion. Furthermore, while China maintains strong economic ties, it lacks in true political alliances. Its only true ally is currently North Korea, and while Russian public approval of Putin reached 65% in February 2021, indicating that his policies have been supported, it is clear he wants to distance himself (slowly) from China amidst tensions between China and the West. For many analysts, the US is in a race against time to use its economic power to expand its influence through soft power in the Middle East, before the global power transition from the US to China occurs.