Today, Iran is in a severe economic crisis. The Iranian government's revenues are heavily dependent on oil exports, so oil sanctions have hit Iran's economy extremely. Among the international allies of this regime, China is the largest alliance that continues to buy Iranian oil.
“Unilateral U.S. sanctions, all of which have deeply affected Iran’s shipping, energy industry, and its financial system. However, 2011 legislation by the U.S. Congress targeting Iran’s Central Bank has inflicted the greatest damage on Iran’s economy. Any foreign company or country that deals with the Iranian Central Bank, which serves as a clearinghouse for Iran’s oil sales, could be barred from the
U.S. financial system” (Harold and Nader 9). As a result, Iran lost many of its major oil customers. “For now, it looks like India, Japan, South Korea and Turkey will hold off from buying Iranian oil. These countries—with China—had been the main sources of Iran’s foreign exchange” (Prashad). Given that the oil sector accounts for 70 percent of Iran's revenue, it can be assumed that stopping the purchase of oil by the mentioned countries will severely destroy the country's foreign exchange reserves (Prashad). “To date, China has been reluctant to support meaningful sanctions against Iran, in large part because of the broad and deep partnership that the two countries have developed over the past three decades” (Harold and Nader 1).
As the main customer of Iranian crude, “China imported around 29.3 million tons or about 585,400 barrels per day (bpd) from Iran, equivalent to 6 percent of China’s total oil imports” (qtd. in Gao). Therefore, “For the Iranian regime, no country in the world is as important in ensuring its survival and helping to insulate it from international pressure as the People’s Republic of China” (Harold and Nader 1). In addition to economic relations, China-Iran cooperation includes arms sales, defense cooperation, and a geostrategic balance of the United States. "Despite its drive for independence from foreign control, Iran has become heavily reliant on China economically, diplomatically, and to some extent, militarily" (Harold and Nader 1).
China was the main contributor to Iran during the 8-year-long war of Iran and Iraq. In 1987, a year before the end of the war, China provided 70% of Iran's weapon (Pargoo). China also “has played a significant role in Iran’s nuclear programme. In the 1980s, China helped build a research reactor and four small research reactors in Isfahan”. Reports indicate that a number of Chinese companies are still helping Iran's nuclear program (Joshi). Therefore, As long as the Iranian regime maintains a strong backing like China, it insists on maintaining a nuclear program, and as a result, sanctions will tighten and the economic situation in Iran will not change. In fact, altering China’s relative dependence on Iran can be achieved through building a global coalition, improving relations between China and the United States, sanctioning Chinese firms and encouraging other oil exporters to China instead of Iran.
In order to clearly understand that Iran's economic fate depends on China's relationship, we need to perceive the reasons behind this deep two-way partnership. The first major factor is China's attempt to ignore US sanctions and continue to buy Iranian oil because Iran's oil is cheap and it has good quality so it is preferred by Chinese refineries (Prashad). According to Reuters, Iran's oil supply, with the highest rebate in more than a decade was launched in November compared with the Saudis, when US sanctions against Iran began. Iran's crude oil price is about $1.25 per barrel lower than Saudi Arabia's average (Tan). Clyde Russell, one of the columnists of Reuters wrote, “The barrels replacing Iran’s oil come at higher prices that hurt the profits of refiners across Asia” (qtd.in Paraskova). As Prashad claims, “China imported around 800,000 bpd of crude from Iran in April—the highest amount that Iran’s top oil customer purchased since August last year—as Chinese refiners rushed to buy Iranian oil ahead of the expiry of the US” (Asia’s Refining). In a similar sense, Harold and Nader state that, “China’s need for energy is one of the most important factors shaping Chinese-Iranian relations. Ever since China’s rapid economic growth began in the early 1990s, the Chinese leadership’s goal has been to secure the energy needed to fuel China’s economy. For Beijing, investing in Iran’s energy sector appears to represent the promise of a secure oil supply for years to come” (Harold and Nader 17, 19). As a result, China will never lose cheap and quality Iranian oil.
Another important reason for dependency is that Iran is still a growing market for Chinese goods. According to Middle East Institute,” China currently exports a wide range of products to Iran, including machinery, electrical and electronic equipment, vehicles, and lighting. That said, its exports to Iran are not about to jump from $24 billion to several hundred billion in ten years, particularly given the fact that Chinese exports worldwide are in decline”. Moreover,” during the sanctions period, in the absence of rivals, Chinese groups doing business with Iran charged higher prices and were slow to deliver” (Scott). In addition, China's investment in Iran has “led to profitable contracts for the three largest national oil companies in China (China National Petroleum Corporation, Sinopec and the National Iranian Oil Caspian Corporation)” (Harold and Nader 17, 19). According to Harold and Nader, China's trade and investment in Iran have expanded since 2007; China is currently the number one investor in Iran (Harold and Nader 5). Therefore, it is good to see how much this coexistence is crucial for China's production cycle.
Further, China’s deep concerns about the role of the United States in the global strategic area can be another important element to continue to support China from Iran. Because China counts on Iranian power in a military confrontation in the region. As Harold and Nader state, “China is anxious about the U.S. ability to dominate strategic global regions and/or choke off China’s energy supplies in a potential military conflict, such as might break out over Taiwan. Thus, a strong economic, diplomatic, and military partnership with the Islamic Republic helps China offset U.S. power in the Middle East” (Harold and Nader 2). From the perspective of Chinese analysts, “there is strategic value in helping Iran develop enough military capabilities to counter U.S. dominance of the Persian Gulf”. The Chinese also believe, “the Persian Gulf is not fully and securely within the U.S. orbit as long as the Islamic Republic opposes the U.S. presence in the region” (Harold and Nader 18). In addition, the Iranian regime is very disturbed by the American military presence in the Persian Gulf, because it considers its full legal control in the Gulf. Since US dominance and presence in the Gulf region in many ways endangers the interests of China strategically so military support from Iran in the Persian Gulf is important to China.
In this way, the scope of cooperation between China and the Islamic Republic of Iran to achieve a successful strategy towards the United States requires both sides. Up to now, China's policies have been blocking international efforts to halt the nuclear program of the Iranian regime. On the other hand, China is afraid of harming its relationship with the United States and its international reputation. Protecting a wild, repressive and terrorism's supportive regime threatens China's reputation (Harold and Nader 2). Therefore, as a vigilant actor, China is pushing for a balance between the United States and the international community on the one hand and the Iranian regime on the other in favor of its own interests.
Additionally, Iran-China Beltway could be another decisive factor in the proximity of the two countries. “The Belt and Road Initiative (BRI), also known as the One Belt and One Road Initiative (OBOR), is a development strategy proposed by Chinese Government that focuses on connectivity and cooperation between Eurasian countries” (One Belt). The goal is to develop economic cooperation between China and countries and regions, and to provide food and promote economic development in the railway sector. Iran is important for China to achieve this goal because of its presence on the lines of West Asia and North Africa (One Belt). According to Prashad, the vital location of Iran along the belt line and the Chinese road is very important. “Chaos in Iran or a government in Tehran that is pliant to the United States would be unacceptable to Beijing. Roads, trains and pipelines—the infrastructure of the Belt and Road Initiative—are to run from the Chinese territory through Central Asia into Iran and then outward toward West Asia and—via Turkey—into Europe. Iran’s centrality to this project should not be underestimated” (Prashad). For that reason, Iran, as the main ally on this new Silk Road, can determine China's long-term goals.
China's support for Iran's military arena is the third major issue that should be concerning. In addition to providing military hardware in the eight-year war between Iran and Iraq, China continues to help the Iranian regime in the development of long-range missiles after international sanctions. As Harold and Nader state, “China played a crucial role in starting up Iran’s indigenous military-industrial sector, greatly helping Iran’s military modernization efforts. Chinese design and technology can be seen in many Iranian missile series, from the short-range Oghab and Nazeat missiles to the long-range Shahab 3. In addition, Iran has developed its own relatively sophisticated ant ship cruise missiles with Chinese help” (7). Reports indicate that China's military sales to Iran were directly and indirectly through other countries, such as North Korea. It is noteworthy that arms transfers as well as information technology remain secretly under development. Analysts estimate the value of this transfer from around $4 billion to $10 billion (Harold and Nader 7). According to the Chinese regime's military support system, the Iranian regime has the potential of sea power to put pressure on the United States to confront any military conflict in the future.
We must also know that China has made significant contributions to the development of Iran's nuclear program.” For example, from 1985 to 1996, China provided Iran with various types of critical nuclear technology and machinery and helped to acquire others, assisted Iran in uranium exploration and mining, and helped Iran master the uses of lasers for uranium enrichment” (Harold and Nader 9). In particular, Chinese engineers and technicians have played an important role in training Iran's nuclear engineers in the establishment of the Research Center for Nuclear Research in Isfahan, which has been recognized as the main focal point for the development of Iran's nuclear program (Harold and Nader 8). According to some Chinese political elites, “China has both provided material and diplomatic support to the Iranian nuclear program” (Harold and Nader 9). As Harold and Nader claim, “A functioning nuclear weapons capability could allow Iran to significantly affect the balance of power in the Persian Gulf by potentially neutralizing the U.S. conventional military superiority, dissuading the Gulf Cooperation Council (GCC) from hosting U.S. forces, and potentially establishing Iran as the “hegemon” of the Persian Gulf” (Harold and Nader 9). Overall, it is important to study the factors affecting the strength of China-Iran relationship, given its impact on the entire world.
In order to resolve the issue effectively, certain measures need to be taken. The first recommendation is to weaken the relationship between China and Iran by creating a global coalition among partners. This global consensus will push China to impose sanctions on Iran. Steven Mnuchin, Speaker to the House Financial Services Committee stated, "that the Trump administration has the intent to enforce sanctions on Iran-related oil against everybody, including China”. Secretary of United State, “Mike Pompeo announced that he has held personal discussions with top officials from many of those countries, including China, to ensure that the U.S. economic sanctions work” (qtd. In Lavietes). However, historical experience shows that China will never be willing to cooperate against Iran in the implementation of sanctions. For instance, when reporters asked if China would work with US sanctions, spokesperson for China's foreign ministry, Lukong, answered, “China is always opposed to unilateral sanctions and long-arm jurisdiction” (qtd. In Lavietes). China has often preferred its commercial interests to cooperate with international peace (Lavietes).
Given China's interest in relation to Iran, any incentive that would separate Beijing from Tehran should be quite significant. Showing more acceptance of China's role in global affairs and understanding of national security interests, such as its position in the South China Sea, cooperation with Beijing on cross-border issues and so on can be among the options put forward in this global consensus (Harold and Nader 24, 25). As Harold and Nader claim, China's welcome to a greater role in international organizations and global affairs may persuade Beijing to stop its cooperation with Iran (25). On the other hand, a nuclear Iran and a supporter of terrorism is not accepted by the international community and threatens global peace. Generally, the creation of an international consensus among partners could push China to boycott Iran and, to some extent, prevent the Iranian regime from achieving a nuclear bomb.
The second crucial step in changing the relative dependence of China to Iran is improving the relationship between China and the United States and the greater cooperation between the two countries. The United States has repeatedly tried to improve its relations with China. “One reason is to weaken China-Iran relations. The United States has also tried to convey Iran's nuclear program as an issue of mutual concern, and argues that China's personal interest in stopping its cooperation with Iran is to reaffirm the importance of the sanctions regime” (Harold and Nader 24). However, since China supports the rule of Iran, it is unlikely that the United States can fundamentally change the interests of Iran or China.
According to Harold and Nader, “Washington’s leverage with Iran is fairly limited due to the lack of diplomatic and political ties. Increased U.S. pressure on Iran has the potential to drive Tehran further into Beijing’s arms. The United States has greater leverage over China and may have policy options that could convince Beijing to at least reduce its cooperation with and commitment to Iran” (Harold and Nader 25). Among the issues related to China in relation to the United States, US cooperation with Beijing on the Strait Crossing issues, and the provision of continuing or greater access to high-tech exports to the United States (Harold and Nader 26). Of course, the United States has been thinking of better cooperation with China for many years. “For example, in early 2005, Deputy Secretary of State Robert Zoellick gave a major policy speech seeking to reframe the U.S.-China relationship in which he stated that the United States welcomed China’s role as a “responsible stakeholder” explicitly tying U.S. assessments of the “seriousness of China’s commitment to nonproliferation” to its “actions on Iran’s nuclear program ” (qtd. In Harold and Nader 23, 24). The effort towards establishing this relationship is ongoing.
A number of analysts and observers have suggested that US policy over the past two years has shown Washington is beginning to "treat China as a friend" (qtd. In Harold and Nader 26). “Another inducement for China to reduce cooperation with Iran might be to liberalize U.S. trade restrictions on high-technology goods and defense articles. China would very much like to gain access to sensitive military and industrial technologies, which could help further its defense and economic modernization drive” (Harold and Nader 25). Yet there is always US concern that abolishing China's export defense technology constraints is heavily in favor of a country that typically by US analysts as the only potential competitor of "close counterparts" capable of one day of power US military, is known. “At present, Congress does not appear willing to lift such restrictions” (Harold and Nader 25). Analysts believe that, if the tensions between China and the United grow, stopping of the new investment, or a reduction in oil imports from Iran, could help Beijing to improve its relations with the United States.” While Beijing will not formally or fully support strong international sanctions on Iran, it could begin to downplay its relations in ways that are less visible and pose less risk to long-term Chinese-Iranian relations but nonetheless carry strategic implications ” (Harold and Nader 27). It’s obvious that improving China-US relations could be a major step toward China's relative separation from Iran.
The third major measure towards unifying China to support sanctions against Iran is the punishment of Chinese companies investing in Iran and applying diplomatic pressure on China. “This would include sanctions against Chinese defense and energy firms conducting business with Iran. The United States has also threatened to sanction Chinese banks over their payments to insurance firms dealing with Iranian shipping” (Harold and Nader 26). According to Wu, “A Chinese trade organisation is working with Chinese firms to help them deal with the implications of the US sanctions on Iran” (Chinese firms). The United States has repeatedly stated that any company or person pursuing its business relationship with Iran penalized by sanctions, asset prohibition or even imprisonment (Wu). As Wu states, “Despite the warnings from Washington, Beijing said it would maintain normal trade ties with Iran, on the grounds that it opposed unilateral sanctions” (Chinese firms). Confirming that China continues to support Iran despite sanctions, an adviser to Beijing on Middle East issues said, Beijing should be able to find ways to circumvent the US sanctions and continue doing business with Iran.
Under US sanctions, “energy, cars, shipping, banking, insurance, gold and other precious metals, steel, aluminium and coal, were likely to be affected, either directly or indirectly, by the trade restrictions” (Wu). On the other hand, China could take action against US-based Chinese punishment “by reducing its cooperation on North Korea, cutting off military-military ties again, or attempting to punish U.S. firms operating in China. To mitigate these risks, the United States is sanctioning Chinese firms in a piecemeal fashion rather than moving quickly to punish a large number of firms at the same time ” (Harold and Nader 26). according to Harold and Nader, “because punitive measures against Chinese firms entail trade-offs for the broader U.S. Chinese relationship, any sanctions should be crafted in such a way as to preserve the possibility of inducing cooperation rather than encouraging confrontation” (Harold and Nader 25). In general, the diplomatic pressure on China and the imposition of sanctions on Chinese investor companies that try to circumvent sanctions against Iran can be one of the levers that will help China to get away from Iran.
Ultimately, encouraging energy producers other than Iran to increase petroleum exports to China could be the last recommendation to change China's relative dependence on Iran. Reducing Iran's oil production and exports after sanctions provided a space for decision-making to other members of OPEC and non-OPEC, in particular Russia. “This decision aimed to maintain market balance”. Following this, oil production in Russia and Saudi Arabia has increased in recent months (Iran oil). As Harold and Nader state, “the United States has also encouraged friendly oil-producing countries, such as Saudi Arabia, to export more oil to China in an effort to reduce the PRC’s dependence on Iranian oil” (Harold and Nader 26). Since Saudi Arabia is the world's first oil exporter, after Iran could be a good alternative to China.
While China is still opposed to Washington’s sanctions against Iran, it is forced to communicate with other energy producers, including Saudi Arabia, due to the decline in Iranian oil exports. For instance, “it is noteworthy that Saudi Aramco recently singed five new crude oil supply contracts with China to supply its new refinery capacity in 2019. This will significantly increase Saudi Arabia’s market share in China, reaching a total of about 1.6 mb/d. Saudi Arabia exported an average of about 1 mb/d of oil to China in first 10 months of 2018. This will increase Saudi Arabia’s market share in China by about 11 percent on 2017” (Iran oil). China is also seeking to increase its relationship with other energy producers.
Furthermore, “The sanctions have not only had a significant impact on Iran crude oil exports, but they have also had a negative impact on Iran’s petroleum product exports. This means that some Iranian refineries are unable to run at full capacity given their export limitations” (Harold and Nader 27). Consequently, China has no option to survive unless it comes into negotiations with other producers. According to Wang Lian, a professor of international relations at Peking University, “China has sought to diversify its global supply network over the past decade and has several alternatives” (qtd. In Wu ). Therefore, encouraging other energy producers to export more oil to China could be an effective step in reducing relative dependency of China to Iran.
In conclusion, the relationship between China and Iran can be examined from different angles but the main and basic aspect is the close economic relationship between this two countries. The Iranian regime needs China's support for economic survival, as well as China needs Iran to operate its economic cycle. This association has become relatively stable over the past three decades. The main link between the two countries is based on oil and gas, since Iran is the third largest oil exporter in the world and the most important oil import country in China. On the other hand, the Iranian regime's quest for nuclear weapons has long been a debate on the American table and the international community. Long negotiations with Iran over the abandonment of nuclear weapons in different periods did not work so Washington began to sanctions against Iran. China initially opposed sanctions against Iran and is still resisting because China prefer its economic benefits to global peace. Given the proximity of the historical of these two countries, it is not easy to separate China from Iran, but this dependency may be reduced .However, this is not a phenomenon that the United States can be handle alone. In addition to America's efforts to reduce this dependence of the entire international community, it must affect China. Since protecting a regime trying to make a nuclear weapon, it threatens global peace, so pressure on China to distance itself from Iran is an international imperative, in the hope of a world without fear of war and bloodshed.
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