US Economic Sanctions are Pushing Iran into a Closer Relationship with Russia and China

The Trump Administration’s unilateral withdrawal from the unanimous United Nations Security Council Resolution 2231—the Joint Comprehensive Plan of Action (JCPOA), or the “Iran nuclear deal”—and the enactment of an unprecedented “maximum pressure” sanctions regime on the Islamic Republic, has amounted to a strategic-level strike on the economy of this

These severest of sanctions were intended to usher in a quick counterrevolution by more secular and relatively benign elements, or at least force the regime into more concessions in a revised nuclear deal, have instead been characterised by their unintended consequences. The sanctions have rapidly reversed the trends of Iranian political culture in favor of the Islamist hardliners, and otherwise forced Iran to become self-sufficient across all industries, including arms, and less reliant on oil rentier element of its economy—a transition that tends to stabilise a country.

But, that’s not all; reeling from what amounts to an economic blockade, Iranian foreign policy has shifted away from its traditional habitus of strategic isolation—the “neither East nor West” political predisposition established by the Islamic revolution’s founder, Ayatollah Khomeini. Necessity is the mother of all invention, and Iran has been forced to look to China and Russia for every national security need to avoid the impact of sanctions. China and Russia, ascendant in global geopolitics and locked in a reinvigorated cold war with the West, are in sort of the same boat. The main rivals of the US are cautiously weighing the costs of an informal economic and security bloc, in part to mitigate the impact of US sanctions and other economic pressures on them as well.

For China, this careful strategy is in part reflected in the “Comprehensive Strategic Partnership” intent signed upon Xi Jinping’s visit to Tehran in January 2016, shortly after the

implementation of the Iran nuclear deal.  But, to carefully balance its power projection strategies with everyone in the region without appearing to take sides, China inked this strategic partnership at the same time that it signed a similar strategic partnership agreement with Saudi Arabia in Riyadh.  Rather than something truly unique that signaled a strategic shift in China’s geopolitical power-balancing strategy, its joint strategy vision with Iran was simply a boilerplate framework that the People’s Republic typically uses to structure many of its bilateral relations. It includes political, economic, and military security agreements, along with the strategic aim of advancing the “multi-polarisation process of the international system,” which is code for rolling back US hegemony. China has not yet even acted upon its strategic partnership plan in Iran as it has for the Islamic Republic’s regional rivals who enjoy even closer military, political, and economic ties with Beijing, and more Chinese investment on a per-capita basis. China’s cautious investment approach with Iran, for example, leaves it in a distant third, behind the Beijing’s investment with its neighbors, the UAE ($6.23 billion) and Pakistan ($4.24 billion).

Notwithstanding China’s cautious strategy to play all sides to advance its regional rise, the lure of a closer partnership with hydrocarbon-rich Iran was spelled out in a detailed study of the merits of an overland energy pipeline from Iran through Pakistan. Written by Chinese scholars Fei-fei Guo, Cheng-feng Huang, and Xiao-ling Wu, the study concluded that “China urgently needs to open up new energy channels to reduce the reliance on the Malacca Strait,” a strategic logistics corridor easily denied in a conflict with either the US or India. But, China’s reluctance to push for Iranian membership in the Shanghai Cooperation Organisation (SCO) and China’s refusal thus far to implement the leaked draft strategic partnership with Iran, is pragmatic on two fronts:  First, the reluctance avoids souring its regional relations with the Eastward-turning and Iran arch-rival Saudi Arabia.  Second, the reluctance reflects Beijing’s apolitical, economically-safe, foreign policy culture that avoids inflaming tensions with the United States by blatantly violating the maximum pressure sanctions.  The far reach of the newest US sanctions in the construction, mining, manufacturing, and textile sectors established by Executive Order 13902has left Chinese investors wary of doing business with Iran, especially given that the People’s Republic signed the first phase of its trade deal with the US in January 2020.  That said, Middle East strategic analyst James Dorsey called our attention to a July 2020 op-ed in a Chinese Communist party newspaper written by Middle East scholar Fan Hongda that warned of a point in the deteriorating relations with the US that violating US sanctions against Iran would be viewed by China as a benefit outweighing the costs.  That possibility inched closer that same month when the US sanctioned eleven major Chinese corporations for alleged human rights violations.

But the near-term prospect of a formal Sino-Iranian strategic partnership aside, maximum pressure sanctions are helping China both economically and in the security arena.  Although the Chinese government officially reduced its purchases of Iranian oil to zero on 2020, it is still effectively defying US sanctions and purchasing Iranian oil via Malaysia.  China is doing this because it is receiving that oil from Iran at a discount of as much as 32 percent over what might be a promise of decades as a condition for defying the US over its sanctions on Iran’s oil. China’s interest in cornering the market on Iranian oil is part of its broader attempt to diversity its oil sources from the Persian Gulf, a volatile region which supplies half of its oil demand. The People’s Republic’s interest in Iranian oil despite the sanctions stems from its concern that the 2.16 barrels per day it imports from Saudi Arabia is a source that is in jeopardy if the US could pressure the Kingdom to cease its exports to China.

China’s roll out of Xi Jinping’s$124 billion Belt and Road Initiative (BRI) for market and trade expansion is also forcing Beijing to break out of 15-year pattern of low-level foreign direct investments  in Iran—investments that have averaged only $1.8 billion annually with a high of a mere $3.23 billion in 2018.  The pressure of sanctions on Iran, combined with the lure of joining China’s BRI, have forced Iran to give Chinese investors otherwise unattainable investment deals across various industries. Consequently, China is planning vast investments in Iran’s hydrocarbon industry, highways, high-speed rail, ports,and power plants, as well as integrating Iran into its 5G internet network and its GPS system. All of that will serve as the infrastructure for the BRI. And, the kinds of investments that China is making in Iran are those that will remain safe even if Iran’s political-economy does not appreciably improve or even worsens; they are the same kind of BRI-related investments it makes in every weak country.

For Russia also, the US near-economic blockade on Iran is helpful on both the economic and security fronts. Expandingon the Iran-Russia joint commission began back in 2018, Russian Duma Chairman Vyacheslav Volodinled a senior parliamentary and governmental delegation to Iran in late January for this purpose of bringing Iran further into Russia’s Eurasian Economic Union. Iran seems to have agreed to be a  key link in Russia and India’s sea and rail system known as the International North-South Transport Corridor (INSTC)—an intermodal international system that links India by a short sea distance to Iran’s port in the Gulf of Oman through Azerbaijan and into Russia and onto Northern Europe. This economic trade infrastructure would parallel and compete with both Egypt’s Suez Canal and with China’s BRI, cutting distance from India to Europe by 40 percent and costs by 30 percent. Already, Russia is boosting its strong trade and broader economic cooperation with Iran across fifteen sectors. Russia’s planned investment in Iran includes ferries and other transportation projects linking the two countries, infrastructure linking domestic banking networks, promoting mutual tourism, and research and investment in various industries such as aerospace, health, nuclear and conventional energy, mining, and higher education.

Economic interdependence tends to bring countries with similar political cultures closer in the security arena, and there is evidence that the US maximum pressure sanctions are hastening some sort of security axis between these three prominent countries that the US views as its chief enemies.  As the first step towards such a security axis,  Russia, and China included Iran in small-scale symbolic joint naval exercises at the end of 2019.  Then, in September 2020, Russia and China invited Iran (along with Pakistan) to join the major Caucasus 2020 (Kavkaz 2020) military drills, involving 80,000 personnel.Iran and China’s nascent strategic partnership agreement includes intelligence sharing, joint training and exercises, and joint research and weapons development, evidenced by the Chinese assistance with Iran’s missile program.Iran and Russia’s budding strategic security relations seem less restricted. Before the recently expired Iran arms embargo, the Islamic Republic was already the third largest purchaser of Russian military equipment, after China and India.  According to the 2019 unclassified report by the US Defense Intelligence Agency, “Iran’s potential acquisitions after the lifting of UNSCR 2231 restrictions include Russian Su-30 fighters, Yak-130 trainers and T-90 MBTs.” To that end, in late August 2020, Iranian Defence Minister Amir Hatami’s attended Russia’s International Military and Technical Forum Army-2020 in the Patriot Park near Moscow. This followed a post by Tehran’s ambassador to Russia, Kazem Jalali, on his Telegram account that the military partnership between Russia and Iran is “growing by the day” and that “We will soon open a new chapter in the Russia-Iran military-technical partnership.”

But, like China’s apolitical broad-based investment strategy, both the Russia government and business executives have good reasons to limit their strategic partnership with Iran so as not to threaten their relations and economic ties with other bigger prizes in the region, such as Saudi Arabia and Israel, and so as not to come under US sanctions. For this reason, in 2019, Russia refused to sell Iran the same S-400 air defence system that it sold to Turkey, one of the most powerful members of NATO in Europe.

So, despite China’s and Russia’s reluctance to publicly embrace closer ties with Iran, what seems clear is that the maximum pressure sanctions are bringing the three primary antagonists of the US closer, and that the sanctions are already benefitting China and Russia in both the economic and in the security arenas.  Given their permanent status with veto power on the UN Security Council, this closer relationship will no doubt result in two vetoes of any US initiatives within the UN framework to restrict Iranian power going forward. In addition to these reliable vetoes at the UN, the growing special strategic relationship with China and or Russia will—if sanctions continue to push it this way—provide the Islamic Republic both political and military cover, intelligence, and funding for any future nuclear weapons program or its destabilizing foreign policy in Iraq, Syria and Lebanon.

Although it’s too late to reverse all of the unintended consequences of the shift in US policy toward Iran, a reduction in sanctions in exchange for a recommitment to the JCPOA could allow the Islamic Republic to reenact its strategic aversion to foreign entanglements with non-Islamic countries. Such a more geopolitically isolated Iran—with a new generation of more secular, globally connected youth and elite—would probably be far less of a threat than the one that is now pursuing a strategic alignment with the West’s other two primary rivals.

Source: moderndiplomacy.eu

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