Iran makes hard turn East as fate of nuclear deal dims

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As the fate of the 2015 nuclear deal hangs in a balance, and with Europe wavering in doing business with Iran due to the return of US sanctions, Tehran is making a hard turn East to boost its economy, and counter mounting pressure from Western powers.

On Friday, Iranian President Hassan Rouhani heads to China for an economic and security summit in the coastal city of Qingdao, where he is expected to hold talks with Chinese President Xi Jinping on bilateral relations, and the future of the nuclear deal.

Amid rising anti-Iran sentiments from the West, analysts said, the meeting between Rouhani and Xi presents an opportunity for Tehran to further cement its economic and political ties with Beijing, and for China to reinforce its growing geopolitical influence in the region.

China’s foreign policy mouthpiece, Global Times, reported on Wednesday that Rouhani’s visit will see Iran’s “comprehensive strategic” relationship with China “upgraded to a new level”.

“Unlike the US, China will not break its promise and will ensure that China-Iran relations won’t be affected,” Hua Liming, China’s former ambassador to Iran, told the state-owned publication.

For Iran, a country that prides itself as “Neither Western nor Eastern”, US President Donald Trump’s decision to spurn the nuclear agreement, meant readjusting its policy to tilt ever closer to the East.

“Iran has had to – borrowing the phrase – ‘grin and bear it’ since late 2017, once it was certain that Trump would violate the deal,” Sumitha Narayanan Kutty, a foreign policy and defence expert at Singapore’s S. Rajaratnam School of International Studies (RSIS), told Al Jazeera.

For the moment, it seems, Trump’s decision “is indeed pushing Iran Eastward”, added Ali Noorani, an Iranian journalist based in Tokyo, Japan.

‘Looking East’

Recent developments point to an increasing reliance of Iran on China, the anchor of its “Looking East” policy.

When the French energy giant, Total, said in May that it is likely to pull out of a joint gas project in Iran because of the “very slim” chance it could get a US waiver on sanctions, China stepped in.

China’s state-owned petroleum company, CNPC, announced it is willing to takeover the majority stake of the project from Total. Tehran also told Total that it has 60 days to secure an exemption, otherwise the contract goes to China.

In 2017, when two European companies backed out from bidding on a project to provide new cranes at the southeastern Iranian port of Chabahar, a Shanghai-based supplier cornered the contract.

WATCH: What are the ramifications of US exiting Iran nuclear deal? (25:00)

Maziar Motamedi, a journalist at the Tehran-based Financial Tribune, said that China has become Iran’s “biggest alternative” for the many European deals that may become “endangered” as a result of the snapping back of US sanctions in the coming months.

“Iran is negotiating with Chinese companies in wide-ranging deals from insurance to building train wagons at the moment,” Motamedi told Al Jazeera.

But China’s years of presence in Iran proved that it is not just an alternative, or the partner of “last resort”, said Kutty of RSIS at Singapore’s Nanyang Technological University.

Rather, China was the only one “willing to further investment or trade when times were tough”, she said.

This was particularly “visible” when both the United States and Europe isolated Iran in the period leading to the signing of the 2015 nuclear deal, she added.

China was the only one ‘willing to further investment or trade when times were tough’

Kutty of RSIS at Singapore’s Nanyang Technological University

‘Doing business’ 

For the last three decades, China has been pouring billions in aid and investments in Iran – including in the construction of the Iranian capital’s underground railway network – winning goodwill from Tehran.

Since the signing of the 2015 nuclear deal, relations have advanced even further with China’s Xi visiting Iran in January 2016 and pledging to increase China-Iran trade to $600bn by 2025.

In 2017, China’s investment arm CITIC Group extended a $10bn line of credit to Tehran, with additional $15bn in pledges from China Development Bank.

WATCH: US pullout from Iran deal: Who will pay the economic price? (25:00)

Current fiscal year figures ending in March 20, showed Iran’s total trade with China at $37bn, including $22.28bn in non-oil products. Around the same period, Iran’s oil export to China amounted to at least $11bn. Today, China is Iran’s largest import and export market.

On Monday, Chinese Foreign Ministry spokesman Hua Chunying dismissed reports that businesses are retreating from Iran, saying Beijing and Tehran “maintain normal economic and trade ties”, and will continue to cooperate “on the basis of not violating our international obligations”.

And in an indirect dig to the US, Hua said China “opposes one country imposing unilateral sanctions on others in accordance with its domestic laws”.

What also helps China’s presence in Iran is that there are more Chinese companies that do not have business interests with the United States, Kutty of RSIS said.

“They can today insulate themselves better from [US] sanctions.”

[Iran] can today insulate themselves better from [US] sanctions

Kutty  at Singapore’s Nanyang Technological University

Still, Kutty said Iran does not want to be so “heavily reliant” on any one partner, thus it is also maintaining ties with its other Eastern neighbour, India, seen as a regional rival of China.

“Iranian officials were keen that India work on developing its southeastern port of Chabahar, and the connecting rail route to Afghanistan – all part of the trilateral Afghanistan-India-Iran transit initiative,” Kutty said.

She said Iranians are also “wary of the Chinese way of doing business”, one reason why the Rouhani administration waited for New Delhi to come on board for the port project at Chabahar.

For India, its position towards Iran is dictated by its own strategic interests: energy and connectivity, Kutty said. India needs Iran’s oil, as well as access to Afghanistan without going through Pakistan.

Meanwhile, Noorani, the Tokyo-based Iranian journalist, said “there would not have been a need for the nuclear deal in the first place” if China could give Iran all that it wanted.

“Even if it could, Iran wants to have the freedom of choice,” Noorani said, echoing popular a sentiment among ordinary Iranians of their country’s “independent” foreign policy.

Noorani added that if President Rouhani can succeed in limiting the potential financial losses for Iran, amid US withdrawal from the nuclear deal, then that would help him maintain a grip of the country, despite growing domestic discontent.

He said that will give the public assurance “that they don’t need to worry about the nuclear deal falling apart”.

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