Media Guide: Iran-China Relations One Year Later
/By AIC Senior Research Fellow Andrew Lumsden
In a move that made headlines around the world and triggered new debate on the future of the global geopolitical order, Saudi Arabia and Iran agreed to restore diplomatic relations, broken since 2016. The deal, brokered by China, has underscored Beijing’s growing influence in the Middle East and highlighted China’s apparently deepening relationship with Iran. In 2022, AIC discussed Iran and China’s ‘Comprehensive Strategic Agreement (CSP),’ which was signed the previous year but had only then formally come into force.
This Media Guide will explore how Sino-Iranian relations have changed in the year since the CSP and what the past year may suggest about the scope and durability of the new Sino-Iranian alliance.
Diplomacy and Geopolitics
Multinational Organizations
In the year since the formal implementation of the CSP, Iran and China have become closer diplomatically, and Beijing’s support has already opened up potential opportunities for Iran to engage economically and diplomatically at a higher level with its Asian neighbors, as well as other Global South economies.
As outlined in the CSP agreement, with Beijing’s backing, Iran was granted full membership in the Shanghai Cooperation Organization (SCO) in 2022, with formal ascension to take place in mid-2023. Formed in 2001, the SCO is an organization of eight Central Asian nations (China, Russia, Kazakhstan, Kyrgyzstan, Tajikistan, Uzbekistan, India and Pakistan) with the stated aims of promoting political, economic, trade and security cooperation between member states. Analysts have seen the SCO as a means by the group’s de facto leaders, China and Russia, to counterbalance U.S. and European influence.
Iran’s Foreign Minister, Hossein Amir-Abdollahian has hailed SCO membership as a “new stage” for Iran in “economic, commercial, transit and energy cooperation.” President Raisi in March 2023, said that the SCO, with its combined resources, can play a “significant role in effective confrontation with unilateralism.”
Chinese leader Xi Jinping has also expressed his support for Iran to join BRICS, an informal association of emergent economies formed in the early 2000s, specifically Brazil, Russia, India, China and South Africa. China has suggested, through these endorsements, as well as in its brokering of a Saudi-Iranian detente, that it is willing to leverage its influence to open up new diplomatic doors for a country long isolated from much of the international community. That said, the exact impact that SCO, and potentially BRICS, membership will have on Iran remains to be seen. Similarly, uncertainty remains regarding the durability of the Saudi-Iranian agreement and the extent to which Beijing intends to back Iran, particularly in matters where Tehran is in conflict with countries on generally positive terms with China such as Israel, Azerbaijan or the Persian Gulf monarchies.
Bilateral Diplomacy and State Visits
China and Iran’s CSP agreement calls for annual meetings between the two countries’ Foreign Ministers. So far, this has occurred. In 2022, Iran’s Foreign Minister had two in-person, bilateral meetings with his then Chinese counterpart Wang Yi, in addition to several phone conversations. China’s current Foreign Minister Qin Gang has met with his Iranian counterpart in one in-person, bilateral meeting so far in 2023. While Iranian and Chinese Foreign Ministers did meet frequently in the years before the CSP, these talks generally took place during or as part of larger multilateral summits such as the United Nations General Assembly.
According to accounts provided by China’s Foreign Ministry, bilateral meetings over the past two years have generally consisted of discussions on areas of potential future economic and security cooperation and re-affirmations of support for each others’ prime geopolitical positions, namely Iran’s condemnation of U.S. sanctions and Beijing’s ‘One-China’ principle.
In February 2023, Iranian President Ebrahim Raisi became the first Iranian leader in two decades to make a formal state visit to China, where he signed 20 agreements and memoranda of understanding with his Chinese counterpart, providing for Sino-Iranian cooperation in several fields including crisis management, tourism, information technology, intellectual property, agriculture and healthcare. Xi Jinping also vowed that Beijing will “unswervingly” maintain its friendship with Iran, “no matter how the international and regional situation changes.”
Xi also accepted an invitation from Raisi to visit Iran. No date for such a visit has been released, however, if it takes place, it would be his second visit to Iran and only the third by any Chinese Paramount Leader.
Trade and Investment
China is Iran’s largest trading partner and has been for the past decade. Tehran and Beijing have made trade and commerce central pillars of the new ‘strategic partnership.’ In 2022, the overall value of bilateral trade between the two countries totaled some US$15.8 billion. Though it represents a slight 7% increase over the previous year, it should be noted that current China- Iran trade is still worth only about half its 2011-2016 average. More recent figures so far also fail to suggest a significant, impending expansion of China-Iran trade, with trade so far 17% below its value at this point in 2022.
China’s imports of Iranian oil on the other hand, have grown substantially in recent years. Despite U.S. sanctions, Beijing has been able to secretly import oil from Iran, with estimates of the volume of this trade having been generated via satellite imagery and human intelligence. China reportedly took in a record 1.3 million barrels per day (bpd) of Iranian oil in November 2022, up from about 600,000bpd the previous November. Though declining slightly since then, China appears to still be buying Iranian oil at a pace unseen since 2018. In February 2023, an estimated 1.2 million bpd of Iranian oil went to China.
Washington has responded by imposing sanctions on Chinese firms involved in this trade, one in 2019 and two in 2022. The U.S. however, claimed in 2022 that estimates about the scale of these secret Chinese imports have been “inflated.” Also, international shipping analysts report that Beijing is increasingly relying on Russia, itself under heavy sanctions and selling at discounted rates, to meet its oil needs at Iran’s expense.
Trade aside, China and Iran, both in the CSP and during President Raisi’s February visit to Beijing, have announced plans for Beijing to make major investments in Iran, including in the construction and upgrade of seaports, airports and high-speed rail links. Between 2021 and 2022, total foreign direct investment in Iran grew fivefold from about US$1.5 billion to US$5.9 billion.This increase however, is attributable primarily to Russia as opposed to China, which has only invested about US$185 million in Iran during this period.
Future Outlook
While China and Iran have certainly come closer in some respects since the CSP came into force last year, the extent to which Beijing remains committed to Tehran and intends to fully fulfill all its CSP pledges remains very much an open question.
Firstly, the China-mediated deal between Iran and Saudi Arabia does not necessarily entail the end of the two countries’ proxy war, which has existed since the 1980s. In fact, Saudi Arabia and Iran had previously severed and resumed diplomatic relations once before, between 1988 and 1991. Saudi-Iranian tensions, should they persist, will pose a problem for Beijing as it pursues closer relations with Saudi Arabia and other Middle Eastern powers. This was made apparent in December 2022, when Iran summoned the Chinese ambassador to register its “strong discontent” with Beijing’s joint statement made with Saudi Arabia and its Persian Gulf allies. The statement accused Iran of “destabilizing regional activities,” and “support for terrorist and sectarian groups.” It furthermore called for a “peaceful solution to the issue of the three islands,” a reference to three islands claimed by the United Arab Emirates but considered by Tehran to be “inseparable parts of the pure land of Iran.”
On the economic front, China still has not stepped up its trade with and investment in Iran as much as expected. This may in part be due to a general reluctance by Beijing to overtly defy U.S sanctions. Despite its stated opposition to Washington’s policies on Iran and its own poor relationship with the U.S, China and the U.S. conducted over US$600 billion worth of trade in 2022, a sum 40 times the value of its trade with Iran. The two countries are indisputably economically entwined.
Ali Fekri, Iran’s Deputy Finance Minister and head of the body in charge of managing foreign investments criticized China in a January 2023 interview with Iranian state media, saying that even though Beijing’s “capacity is higher,” it has not contributed nearly as much to Iran as countries like Russia and Turkey. Fekri also accuses Beijing of limiting investments to “small and medium projects,” which only relate to goods exported to China, and notes that he is “not personally satisfied with the situation.” President Raisi himself, in a statement shortly before his visit to Beijing said that on matters of trade and economics, Chinese-Iran cooperation has not been “to the desired extent.”
Meanwhile, for regional context, China has invested over US$5.5 billion in Saudi Arabia between 2021 and 2022, nearly 30 times as much as it did in Iran. China also invested about US$2 billion in Israel, Iran’s regional archenemy.
Beijing has demonstrated that while it is willing to aid Iran in some ways, it remains very much cognizant that other players in the Middle East may potentially help further its geopolitical aims without the need to navigate minefields of U.S. sanctions.
That said, if Beijing’s relationship with the U.S. continues to deteriorate and tensions between Iran and its regional rivals cool, there is ample room for this calculus to change.
