Next phase of China-Iran ties depends on nuclear talks

In a highly symbolic move, the Iranian Council of Ministers recently approved the opening of a Chinese consulate at Bandar Abbas, Iran’s main trading port and the capital of the coastal province of Hormozgan. While Tehran currently has three consulates in China, this will be the first for Beijing in Iran.

This development is likely linked to the 25-year strategic pact Iran signed with China in March 2021. The agreement — which includes economic, military and security cooperation — brings Tehran into Beijing’s megaproject, the Belt and Road Initiative (BRI). While the agreement was signed nearly a year ago, it started the “implementation stage” earlier this month.

Concluding detailed discussions with his Chinese counterpart, Wang Yi, just a few days after the consulate was approved, Hossein Amir-Abdollahian stated that the implementation of the Sino-Iran long-term partnership has now begun, adding that the Chinese consulate in Bandar Abbas would boost bilateral trade relations.

Pointing out a flaw in this statement, Sina Toossi, a senior research analyst at the National Iranian American Council in Washington, told Al-Monitor, “While Iran’s Foreign Minister Amir-Abdollahian has said the much-hyped 25-year partnership agreement is entering its implementation phase, the agreement has yet to be approved by Iran’s parliament. Its successful implementation hedges on the Vienna negotiations succeeding, which China also wants to succeed and has its own concerns about the proliferation risk of Iran’s nuclear program.”

Though no major BRI activity has been seen in Iran since the inking of the 25-year pact, the opening of this consulate is a significant development. 

Discussing the importance of its location with Al-Monitor, a European diplomat posted in Islamabad told Al-Monitor on condition of anonymity, “The choice of Bandar Abbas is significant indeed as it is the most important transportation hub in a strategic area. Concerning the 25-year strategic partnership, it is indeed an important political message from Tehran to the West.”

Highlighting Sino-Iran ties, he said, “China has always been a strategic partner for Tehran — particularly as a buyer of its crude oil and for its investments. Also, Beijing needs Iran to promote BRI and its geopolitical interests while both countries need each other to contain US pressure in the region.”

However, Washington’s economic sanctions on Tehran in the aftermath of the 2015 nuclear deal known formally as the Joint Comprehensive Plan of Action (JCPOA) made it difficult for Beijing to launch any BRI projects worth mentioning in Iran. The Vienna talks being held to revive the JCPOA are lingering on, and at times it seems the patience of the Western lobby is wearing thin.

On the other hand, Tehran has been stressing since November of last year that the sanctions should be lifted “instantly” and without delay. For the first time since 2018, Iran even showed willingness for direct talks with Washington. Amir-Abdollahian said, “If we reach a point in the negotiations whereby a good agreement requires dialogue with the US, we will not ignore it.”

The fact remains that, though Beijing and Iran have a long-term strategic and economic partnership, a lot depends on whether the JCPOA talks end on a positive note. Ostensibly, Beijing might even use its influence as a strategic partner to bring Tehran into the nuclear deal to get the hindrance of sanctions removed.

Explaining the importance of reviving the JCPOA, Toossi said, “Iran is currently pursuing deeper relations with all the major global power blocs, meaning China, India, Russia and the West (minus the United States). The lynchpin to Iran realizing the full benefits of these relationships is the successful restoration of the Iran nuclear deal and the sanctions relief it entails.”

If the Vienna talks collapse, he warned that “secondary US sanctions will remain on Iran and UN sanctions may be imposed as well. Iranian officials speak about not tying their economic policies to the fate of the nuclear negotiations, but the fact is that Iran will not be able to deepen ties with its neighbors and global powers such as China, India and Russia if US secondary sanctions are not lifted.”

Notwithstanding the sanctions, this new consulate can bring some benefits for China.

First, it will facilitate operations for Chinese companies working in the Chabahar Free Trade and Industrial Zone. There are future plans to set up joint industrial parks at Jask and Makran, so a gradual rise is expected in the number of Chinese nationals living at Kerman, Sirjan, Rafsanjan and Bandar Abbas.

Second, Beijing will have better access to important locations like Chabahar port, Jask port, Kish Island and Qeshm Island, all located in the south of Iran.

The consulate would be useful in building more trade links as — notwithstanding “maximum pressure” sanctions — China has remained Iran’s top trading partner with the value of non-oil trade exchanges in March 2020-March 2021 at $18.715 billion. Meanwhile, investment is set to grow in the oil and gas, infrastructure and petrochemical fields.

Third, in the long run the Bandar Abbas port can help Beijing complete its network of BRI projects in the region.

According to Mohammed-Hossein Malaek, a former Iranian envoy to Beijing, the opening of the consulate is “a calculated move” as China wishes to lead in developing the Makran region, the coastal strip along Iran’s Sistan-Baluchestan province and Pakistan’s Baluchistan where “Beijing already has a 40-year, multibillion-dollar agreement to develop Gwadar port.”

Hypothetically, if China can develop both Gwadar and Bandar-Abbas, a “trade and energy corridor stretching from the Persian Gulf across Pakistan into Western Xinjiang” can also emerge. In any case, the new consulate will be a useful acquisition for Beijing.

However, simply “heading East” may not be practical for Iran.

Debating whether leaning toward China is preferable for Tehran, the European diplomat observed, “The Iranian business community is aware that Iran needs technologies in specific fields — for example, LNG. In some areas, only a few countries in the West can provide the high technology needed to develop certain segments of the huge Iranian energy market. The decision-makers close to Khamenei (in most cases business people themselves) are perfectly aware of that.”

In his assessment, “There is no doubt that the prevalent approach of the overall Iranian system remains Western-oriented. However, this approach can change, perhaps definitely, in case the tension with the US will increase due to the failure of the nuclear talks.”

Even in Toossi’s opinion, “If the JCPOA is restored, Iran will also be far better positioned to develop balanced, competitive foreign relations with the major global powers. Iran has grown more dependent on its economic relationship with China because of US sanctions. However, Iranian officials such as Ali Shamkhani, the secretary of the Supreme National Security Council, talk about the need for Iran to secure balanced, competitive foreign relations where Iran can derive maximum benefit.”