China backs up an isolated Iran, but leaves the door ajar

Chinese leader Xí Jìnpíng 习近平 met with his Iranian counterpart Ebrahim Raisi in Beijing today, where Xi expressed China’s political and economic support for Iran, while calling for a revival of the Iran nuclear deal. The meeting marks Raisi’s first state visit to China since coming into power, and the first by an Iranian president in two decades.

China will “continue to constructively participate in the negotiations on resuming Iran’s nuclear agreement,” Xi said at the meeting (in Chinese), while urging for an “early and proper resolution” on the issue. He also said that China supports Iran in “safeguarding national sovereignty” and “resisting unilateralism and bullying.”

Xi’s comments echoed language used by Raisi yesterday, in which he hit out at unilateralism and “violent” measures such as “imposing unjust sanctions” in an editorial published in China’s state mouthpiece People’s Daily.

Reviving the Iran nuclear deal?

The Iran nuclear agreement, formally known as the Joint Comprehensive Plan of Action (JCPOA), is a 2015 accord signed between Iran and China, France, Germany, Russia, the U.K., The U.S. and the EU.

Under the deal, Iran agreed to dismantle much of its nuclear program in return for the lifting of international sanctions that were costing Iran billions. But the deal was put in jeopardy in 2018, when then-U.S. President Donald Trump backed out of the agreement and reimposed sanctions on Iran.

China has criticized Washington for its withdrawal, and has insisted that the United States should make the first move in reviving the pact.

Calls to revive the deal stuttered in Vienna last year. Iran’s current president, Ebrahim Raisi, has taken a more combative approach to the West than his predecessor Hassan Rouhani, who oversaw the signing of the initial deal.

China’s lifeline to sanction-hit Iran, and pressure from the U.S.

Hamstrung and isolated by U.S. sanctions, Iran has become increasingly reliant on China to keep its economy running. Both countries have also drawn closer under similar pressure from Western nations for their positions on Russia’s invasion of Ukraine.

“China is an indispensable lifeline for Iran. It is currently its largest trade partner, with official two-way trade valued at around $16 billion in 2022,” Tuvia Gering, a researcher with the Diane and Guilford Glazer Israel-China Policy Center at the Institute for National Security Studies (INSS) in Tel Aviv, told The China Project today.

Much of that increase in trade has come from China’s thirst for Iran’s energy exports. The two countries signed a 25-year cooperation agreement in March 2021 estimated to be worth billions, under which China is to invest in Iran’s petroleum sector in exchange for oil and petrochemical exports. But no tangible benefits have yet come out of that deal.

“The real money, however, goes unreported. China is a major consumer of Iran’s energy exports through a ‘ghost armada.’” The ships sail under false flags or [are] rerouted to dodge U.S. sanctions,” Gering added. “According to estimates from United Against Nuclear Iran (UANI), China has used these methods to avoid sanctions on its larger state-owned enterprises and banks on more than $47 billion in Iranian exports.”

The U.S. has put more pressure on China by imposing new sanctions on companies linked to Iranian oil exports last year, of which at least five were based in China. Last month, Robert Malley, the U.S. envoy for Iran, told Bloomberg that “China is the main destination of illicit exports by Iran” and talks to dissuade Beijing from such purchases will be “intensified.”

But while an isolated Iran may depend on China, China does not depend on Iran. “That sense of importance is not transferable to China, for which Iran is a rounding error. Although it’s not a ‘must have,’ it is unquestionably ‘nice to have,’” Gering told The China Project. “For one thing, China can obtain energy at discount prices, much in the same way it does now for energy coming from Russia. With the economy opening up in recent months following three years of COVID-19 restrictions, China could use Iranian exports to pick up the slack.”

Raisi also has sought to deepen ties with Russia and China. Xi and Raisi pledged to deepen ties when they met in-person for the first time on the sidelines of the Shanghai Cooperation Organisation (SCO) summit in Samarkand in September 2022. Iran also signed a memorandum of understanding to become a permanent member of the SCO, a group which also includes Russia.

China “zigzags” in the Gulf

But concerns are growing in Iran over China’s closer ties with rival Saudi Arabia, a relationship could cost Tehran significant leverage with one of its few remaining allies. Beijing has been careful to treat both sides equally, and has been actively emphasizing its neutral stance to avoid any rifts in the region.

“Prior to [Raisi’s] visit, Chinese officials made it clear in official statements that it was arranged on Xi’s invitation,” Gering told The China Project. “Iranian officials all the way up to Raisi have expressed envy of Saudi Arabia-China ties, following the grandeur, MoUs, and joint statements during Xi’s December visit. Meanwhile, the 25-year Comprehensive Cooperation Plan signed in March 2021 (which has its origins in Xi’s visit to Tehran in 2016) has nothing to show for.”

In December, a joint declaration signed between Xi and Gulf leaders in December drew anger from Tehran, though Iranian officials were also careful to voice their frustrations without alienating Beijing.

China “went out of its way to appease Iran in the weeks following the joint statements” between Xi and Gulf leaders, Gering told The China Project. “As an added bonus, official statements criticized the U.S. for the deadlock in the JCPOA and lauded Iran’s ‘sincere efforts.’ During this visit, China will add something even more tangible to the statements with MoUs and commitments.”

“This is how China rolls. This zigzagging between rival factions in the Middle East is a manifestation of its ‘positive’ and ‘balanced’ diplomacy,” Gering added. “According to China, it maintains friendly relations with everyone, focuses on positive aspects of cooperation, and creates inclusive multilateral frameworks and opportunities. Chinese officials and experts frequently add that their approach is in contrast to the U.S.’s, which employs unilateral sanctions, foments bloc confrontations, and instigates conflicts.”