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 The Iran-China agreement’s impact on the regional and global economy 

China has signed a 25-year partnership agreement with the Iranian regime to enhance comprehensive cooperation in the economy, military, security and health sectors. This agreement encompasses a significant geopolitical shift not only for the countries involved, but also for the wider region because China will become a new power competing with Western economic power in the MENA region through absolute control of Iranian energy, which is almost exclusively located in the Ahwaz region

Over the past few years, China has tried, through its ‘Belt and Road Initiative’ (BRI), to enter new markets for its products, so the partnership with Iran offers a suitable opportunity for China to join the Middle East markets more broadly in order to obtain energy at low prices. In return, China will provide Iran’s regime with sufficient military and security technology to undermine the region’s security and stability. 

Neither the regimes in Beijing or Tehran have released any of the full details of the agreement, but according to credible leaks, the agreement includes plans for China to invest $400 billion in various Iranian economic sectors (an average of $16 billion annually across the agreement’s 25-year span), including energy and infrastructure. Iranian media reported that about $280 billions of China’s investments will be invested in the oil, gas and petrochemical sectors, while  $120 billion will be invested in the infrastructure sector. The sources added that a large part of these funds will be poured into Iran in the first five years. The agreement also includes facilitating the access of Chinese investments to the mining sector due to the Iranian regime’s lack of technological expertise to exploit the country’s deep mines. The agreement will significantly expand the Chinese presence in Iran in banking, communications, ports, railways and dozens of other projects.

The comprehensive agreement between Iran and China also has major regional implications since both China’s and Iran’s leadership have major regional and international ambitions, and each also seeks to confront the United States and its European allies in the Middle East. China aims to control the Middle East markets, specifically the Arab Gulf, by controlling the Iranian economy, such as energy, ports and petrochemicals. 

China already has a growing influence in East Asia and East Africa, as it challenges US interests. Therefore, China believes that through Iran, it can open a battlefield against America and Europe in the Middle East in order to compete with the West and Arab markets in the region.

 

Impact on regional markets 

 

Iran also occupies an important geopolitical and strategic position as a component of China’s ‘Belt and Road Initiative’, linking Asia with Europe and the Middle East. Just as Ahwaz occupies a sensitive geographical position connecting the three continents, so Iran has signed an agreement with China to provide the Chinese regime with the Ahwazi people’s wealth, capabilities, and land. 

There is no doubt that this agreement will boost Iran’s role in destabilising regional security by giving Iran an excellent opportunity to obtain massive funds. China will also be able to use this to connect to regional and trans-regional infrastructure under its ‘Belt and Road Initiative’, including connectivity to port and rail networks. According to numerous reports, Iran’s regime has obtained promises from Beijing to develop the internal railway network, develop the Makran coast (part of Baluchistan) on the Sea of Oman, develop the Ahwazi port of Jask, and build accessible trade areas in Abadan and Qais (Kish) Island in the Arabian Gulf (both are part of Ahwaz).

The agreement will contribute to transforming Iran into a regional centre on the ‘Belt and Road Initiative’ route, guaranteeing substantial economic gains for Iran’s regime at a stage when the Iranian economy is suffering from structural crises due to US sanctions, as well as other strategic gains for Tehran such as enabling its ability to continue its policy of interfering in the affairs of regional countries by supporting terrorism. It is clear, therefore, that deepening Iran’s economic connection with Chinese infrastructure projects to connect China with regional countries would bolster Chinese interests in defending Iran against US policies.

There is no doubt that the agreement between Iran and China strengthens the Iranian regime’s regional influence and strengthens Iran’s hand to destabilise Western interests in the region by targeting military bases and economic companies. China also views Iran as an excellent strategic partner to weaken Western economic projects in the Middle East by building an unstable environment for Western investments, as can already be seen in Iraq, Syria, Lebanon and Yemen.  

Chinese economic targets in the Middle East include oil, gas, petrochemicals and minerals, with Beijing believing that access to marine resources offers another opportunity to dominate the Middle East economy. Thus, China seeks to build a military base in Jask to protect its economic investments in the region, and enable it to link all Chinese investments in the Arab Gulf region together.

China has a goal of expanding into three geographical locations through the agreement with Iran: expansion towards other Middle Eastern countries, including Iraq and Syria, through Iran’s influence in those countries; linking East Asia such as Pakistan and Burma with East Africa like Djibouti, and complete domination of the economy of the Gulf states by undermining the role of US and European economies. Hence, Iran will play an essential role in providing a military base for China to protect its investments, just as Iran seeks to threaten Westerns’ interests in the Gulf states through its proxies.

 

Impact on the global economy 

 

In general, China seeks to threaten the influential European and American economic role in West Asia and Africa by controlling the entire Middle East and North Africa region (MENA) and controlling the global economy by influencing the Arab Gulf region.

The strategic partnership between Iran and China will also affect the economic competition between the great powers such as the United States and China. Their rivalry in various fields has intensified to the point that many observers argue that the world is entering a new “cold war“, with the new deal giving China another important asset to challenge the US and European economic might.

China has already made significant investments in Afghanistan, Turkey, Pakistan and the Arab Gulf states, with Beijing believing that linking these countries to others on the route of its Belt and Road Initiative (BRI) would further protect Chinese investments. Thus, through the agreement with Iran, China seeks to fully control Iran and the Middle East and to connect all of these countries in the BRI. Wishing to further strengthen its influence, China has also intervened politically in some countries in order to secure its investments, through projects such as building a military base in Djibouti, playing an active security role in Burma, and an effective economic role in Pakistan and Afghanistan. Beijing supports its diplomatic ventures with more trade and investment in several countries. Hence, the deal with Iran will advance the Chinese policy as all the countries involved share a border.

The foothold provided through its investments in Iran and a strategic location in Djibouti, and access to the Arabian Gulf port will be of great strategic importance to China. To safeguard this, China seeks to build a military site in the Strait of Hormuz to monitor US bases and Western investments in the region. Thus, after completing its domination of the Middle East, China will expand to other regions to intensify its stranglehold on the American economy. 

The BRI is simply an update on the longstanding Chinese strategy that has been in place for years based on gaining access to the largest possible number of seaports globally, whether through obtaining military concessions (such as the Chinese military base in Djibouti) or economic and commercial concessions. In this regard, China relies on signing as many agreements as possible. The duration of the Chinese contract agreements at these ports ranges from 10 to 99 years. Therefore, China controls, through agreements, a number of ports worldwide, such as Gwadar (Pakistan), Kyaukpyu (Myanmar), Obock (Djibouti) and Hambantota (Sri Lanka). The port of Jask in Ahwaz and the port of Chabahar in Baluchistan also will be under the control of China through the new agreement with the Iranian regime. 

In this sense, China’s access to Iranian ports has become an essential link within this strategy, as the agreement includes ensuring China’s access to Iranian ports, especially the Ahwazi port of Jask near the Strait of Hormuz on the Arabian Gulf. In addition to the strategic importance of the Chinese presence in Jask to protect the flow of Iranian oil through the Strait of Hormuz, it carries additional importance in terms of its proximity to the headquarters of the American fleet in the Gulf.

 

Conclusion 

 

In conclusion, it should be emphasised that Chinese-Iranian cooperation constitutes a strategic threat to regional countries, and to the US and Europe, with Iran becoming the gateway for China to consolidate its influence in the Middle East. The Iran-China deal will also strengthen Iran’s hand in regional power dynamics, with Tehran seeing itself as a pivotal power through its funding from China.

The ongoing partnership with China means continued selling of oil at low prices to the Chinese, with both sides benefiting from this deal. For China, this offers it a primary constant source of cheap oil (although Iran provides a small portion of China’s total oil imports), and a large overseas market for Chinese goods, both of which represent real progress toward achieving the ‘Belt and Road Initiative’.

Iran is located at the centre of the countries that China wants to connect with each other, meaning that through its effective economic, political and security control of Iran, China can expand rapidly and significantly in the Middle East. China also wants, through Iranian influence, to expand to other countries such as Iraq, Syria and Yemen. This means that through Iran, China can link and extend its economic and political impact from East Asia to East Africa. Also, through its hegemony over the Arab Gulf economy, China can diminish the American role. China also aims to control world economies by reducing the economic role of the United States and Europe, not only in the Middle East, but globally.

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