Iran inks 25 year strategic deal with China as US softens nuclear deal stance

Iran has emerged from its Nowruz new year week boasting a 25-year-strategic deal with China that could potentially be worth hundreds of billions of dollars in investment and signs that the US is softening its stance on what it will require from Tehran in return for a revival of the 2015 nuclear deal that would reopen Western markets to the Iranians.

Chinese foreign minister Wang Yi was in the Iranian capital on March 27 to, along with Iranian counterpart Mohammad Javad Zarif, sign the strategic economic and security accord under which it is thought Iran would provide China with discounted crude oil supplies in return for investment. Details of the deal were not released but in July last year a draft of the sweeping agreement was widely obtained by media outlets. It showed that China might under the accord build up a major presence in Iranian banking, telecommunications, petrochemicals, ports and railways and dozens of other areas. However, it largely talked about cooperation. It stopped short of outlining investments.

“Two ancient Asian cultures, two partners in the sectors of trade, economy, politics, culture and security with a similar outlook and many mutual bilateral and multilateral interests will consider one another strategic partners,” the document reportedly stated in its opening sentence.

“Confronting the US”

“Iran and China both view this deal as a strategic partnership in not just expanding their own interests but confronting the US,” Ali Gholizadeh, an Iranian energy researcher at the University of Science and Technology of China in Hefei, told the New York Times after the draft was circulated to media, adding: “It is the first of its kind for Iran keen on having a world power as an ally.”

Whether most of the provisions described in the draft agreement actually see the light of day is still, however, moot. In talking to Iranians inside Iran, bne IntelliNews often picks up on resistance to the idea of Iran’s markets being opened up to substantially more cheap Chinese imports—given the damage that could do to Iranian industries—and of anxiety that Tehran could become too beholden to Beijing in its affairs.

Many Iranians, it is clear, would thus like to see Iran establish rewarding economic links with the West, alongside stronger—but not overwhelming—trade and investment channels with China.

When it comes to getting the nuclear deal between Iran and six major powers back on track, the prevailing assumption right now is that the US is sticking to the standpoint that it will not move to drop sanctions on Tehran and re-enter the accord until Iran returns to verified full compliance with its stipulations, while Iran is holding to the line that it will not establish that compliance until the US drops the sanctions.

But Reuters quoted an unnamed US official as saying on March 26 that who takes the first step is not an issue for the Biden administration.

“That’s not the issue, who goes first,” the official told Reuters on condition of anonymity, describing how the deal—also known as the JCPOA, which places curbs designed to ensure Iran’s nuclear development programme is kept civilian-only in return for providing Tehran with a shield against heavy sanctions—might be resurrected. “Like, we are going to go at 8, they are going to go at 10? Or they go at 8, we go at 10? That’s not the issue,” the official said. “The issue is do we agree on what steps are going to be taken mutually.”

Proponents of the nuclear deal would like to see it restored prior to Iran’s June presidential election which may strengthen the power that hardliners can exert in Iranian foreign policy and make a restoration of the agreement that much more difficult or even implausible.

“Absolutely not our position”

Talking up prospects for a route for both Iran and the US—which withdrew from the nuclear deal in May 2018 under former president Donald Trump—to sign up to restored full JCPOA participation and compliance, the official further told the news agency: “It is absolutely not our position that Iran has to come into full compliance before we do anything.

“As for, if we agree on mutual steps, like we’ll do X, they do Y, the issue of sequence will not be the issue. I don’t know who would go first. I mean we could—it could be simultaneous. There’s a thousand iterations but ... I can tell you now, if this breaks down, it’s not going to be because of that.”

Any failure to bring back the nuclear deal and subsequent attempt by China to vastly increase trade and investment with Iran might of course run into sanctions threats aimed at Beijing by Washington. But China has been lately running the gauntlet of US sanctions centred on Iran, reportedly importing great volumes of Iranian crude since Joe Biden arrived in the Oval Office.

During the last Persian year, which ended on March 20, Iran’s total trade volume amounted to $73bn, with China the top partner, according to Iranian customs data. Iran’s exports to China reached $8.9bn and imports from China stood at $9.7bn. These figures do not include substantial volumes of Chinese products reimported from other destinations.