Why The Iran-China Oil Alliance Is So Important

Why The Iran-China Oil Alliance Is So Important

Via Defense and Foreign Affairs,

The steady rise in U.S. strategic competition with the People’s Republic of China (PRC) over trade and the South China Sea already has so many dimensions that it is sometimes easy to ignore shifts in the PRC’s behavior in other areas. On July 6, 2020, Iranian Foreign Minister Javad Zarif announced that Iran was negotiating an agreement with the PRC - with which it long has had trade and strategic links - which would now make the two countries the equivalent of strategic partners.

The PRC-Iran agreement could involve serious military ties and lead to major PRC defense sales to Iran, involve some $400 billion in PRC economic investment over 25 years, and lead to a major PRC role in modernizing Iranian railroads, ports, 5G Networks, and telecommunications generally. In return, the PRC would get discounted supplies of Iranian oil products and gas for the next 25 years.

The PRC would be able to make Iran part of its Belt and Road Initiative (BRI), and be able to establish free trade zones in Iran in Maku in the northwest, Abadan in Khuzestan Province near Iraq, and Qeshm island just inside the Persian Gulf near the Strait of Hormuz.

The agreement would give the PRC access to Jask, a major Iranian port outside the Strait of Hormuz. The PRC began developing its strategic position in the Persian Gulf region during the Iran-Iraq war as far back as 1980-1988. And the PRC presence in the Persian Gulf has only increased since that time.

Iranian-PRC trade and strategic linkages in many ways circumvent U.S. attempts to sanction the leadership of both states. At a time when both sanctioned states have come under great pressure, the new alliance, then, offers Beijing and Tehran some real respite and strategic resilience. Adding Russia into the mix only widens the trading zone of both states.

The real challenges, however, comes from whether the PRC economy can be sustained for the duration of the new accord, and whether an Indian military thrust to cut off the Pakistan corridor to the PRC will cause grave difficulties for Beijing.

But, certainly, the new deal with Iran is Beijing’s signal that it is planning for the day when the Pakistan corridor to the Indian Ocean may be lost to it.