A Break Down and Analysis of the Agreement:

In July 2020, China and Iran drafted an economic and security agreement allowing China to invest billions of dollars into several Iranian sectors – including military – while receiving discounted oil from the Islamic Republic for the next 25 years. The 18-page draft agreement obtained by a U.S. newspaper included the promotion of closer military cooperation via joint training and military exercises, military research and weapons development, and intelligence sharing.

Given the current geopolitical climate, such an agreement gives cause for concern. The agreement is not a new development, with its roots in a 2016 visit to Iran by Xi Jinping, and a November 2016 defense-military agreement signed by Beijing and Tehran. The latest proposal had not yet been submitted to the Iranian Parliament, according to the newspaper that obtained a copy of the draft.

The 2020 agreement comes at a time when the United States has applied pressure on both Iran and China for various offenses. Notably, in 2018, the United States pulled out of the Joint Comprehensive Plan of Action (JCPOA), the plan designed to ensure that Iran would not engage in nuclear weapon development, and re-imposing all sanctions that were lifted as a result of JCPOA. Additionally, the United States took unilateral action in January 2020 by killing a top Iranian general, Qasem Soleimani, who led the Quds Force and was allegedly responsible for many U.S. deaths through support to proxy groups in Iraq.

China has also been on the receiving end of U.S. ire over its practices. In May 2019, an Executive Order (EO) prohibited U.S. companies from purchasing foreign-made telecom equipment that potentially put U.S. national security at risk. While the EO covered all foreign-made products, there was little doubt that it was intended for Huawei, the Chinese company with questionable ties to the Chinese government (the EO was later amended to allow Huawei to participate in the development of 5G standards). China’s culpability in failing to contain and notify the world regarding COVID-19, its refusal to accept responsibility, and its misinformation campaign to push blame elsewhere has since further strained relations between the two countries.

Certainly, two of the United States’ most prominent adversaries engaged in deepening military cooperation is worrisome, at least on the surface. China supplied military equipment to Tehran during the Iran-Iraq war in the 1980s and has been a leading supplier of arms to Iran over the past decade. Ostensibly, the new agreement could potentially provide Iran advanced military technology, especially those Chinese military technologies developed to counter U.S. systems.

According to a recent Department of Defense report on Chinese military power, China’s military modernization includes producing the weapons and material to support its “Anti-Access, Area Denial” strategy designed to repel adversary forces encroaching from the Pacific Ocean. No doubt Tehran would find value in acquiring such equipment, and the possibility of receiving intelligence on U.S. military activities and capabilities further sweetens the pot.

However, despite all of its sensationalism, the partnership will likely not result in the type of collective security pact designed to counter U.S.-led diplomatic/economic activities against either country. As outlined above, both governments have their own reasons to push-back against the U.S., and certainly, on the surface, such an agreement can be interpreted as an attempt to oppose what both governments perceive as the U.S. desire to assert its influence outside its own geographic region. Historically, the China-Iran relationship has primarily been one of mutual economic and/or political benefit. China has long been and remains one of Iran’s primary trade partners and economic benefactors, especially to offset severe sanctions and has often come to Iran’s defense against the United States.

China’s Belt and Road Initiative’s path is through the Middle East which means that having a strategic partner in the region greatly assists the development of the initiative. Thus, the recent economic/military agreement can be viewed through a prism of the two countries continuing to build on a historically positive relationship. In this perspective, Iran becomes a useful pivot in a region where the United States has not maintained consistent policies or influence in recent years. The depth and strength of the Iran-China relationship will largely depend on the larger geopolitical climate between the world’s lone superpower (the United States) and one that strives to become one (China).

For China, military cooperation may not be so much about Chinese power projection as much as securing useful strategic allies. With Iran on its side, China has to rely less on U.S.-friendly Saudi Arabia to look out for its interests in the region. Additionally, China does not need to expand its formal military presence in the region outside of its base in Djibouti. The lack of armed forces in the Middle East allows Beijing to pursue its global aspirations under its “peaceful rise” campaign. The ability to act globally is a natural progression for China, as it has steadily tried to increase its global footprint through increasing non-military global engagement. Activities include supporting global humanitarian crisis response and pursuing economic interests in the Arctic.

While arms producers may sell their wares, they do not necessarily always sell their best or their most capable, and China is no exception. China is a pragmatic country, careful to walk a line to keep its options open in order to obtain maximum benefit. So, while the sale of military technologies to Iran opens up a market, it remains to be seen what exactly would be sold. Chances are that Beijing needs to realize a strategic benefit to selling their best equipment, lest it is used in activities that cause unfavorable international incidents where the technology could be linked back to Beijing.

Furthermore, even in this period of Sino-U.S. tension, China still recognizes the need to maintain serviceable relations with the U.S. for economic and security reasons. In the past, China has at times acquiesced to the U.S. when it has sought international assistance in applying pressure to Iran. For example, in October 2019, Beijing backed out of a major gas project in Iran during the period in which the United States tried to impose an oil embargo, soliciting the support of other nations in the process. This suggests that Beijing may prefer to make decisions based on long term strategic benefits rather than temporary tactical victories.

Certainly, Beijing feels confident amid the tensions to make such an agreement in blatant defiance of a well-known U.S. position when it comes to Iran, particularly as the U.S. presidential election draws closer. There might be a new president in the White House, if the current administration loses, who may be more “sympathetic” to Beijing’s interests. China is nothing if not patient, and right now, it does not see changing its behavior as an imperative.

What Does This Mean?

The U.S. has historically struggled with its Middle East policy based on the wide variety of actors and historical rifts that underpin many of the societies. However, even if China gains a deep foothold via its economic policies and desire to stay out of regional conflict, Beijing will have to contend with Russia – its erstwhile ally – for the region’s favor. Both Beijing and Moscow pursue similar strategies that try to keep good relations with all countries in order to maximize opportunities, but this will be a difficult balance to pull off, as the U.S. knows first-hand. Competing arms sales in Iran, if and how China and Russia are able to share that benefit, and if they share it, remains to be seen.

One area that could result in conflict is that the military portion of the recent draft agreement favors Iran more than it does China. While Beijing solidifies relations with a regional leader, it does not realize a military benefit. In December 2019, China, Iran, and Russia launched their first joint naval military drills in the Gulf of Oman, an exercise designed to “show” the growing closeness between the countries rather than achieve any substantial military objective. What’s more, there is some evidence to suggest that neither China nor Russia would come to Iran’s aid in a conflict, and would ultimately stand on the sideline, depending on the issue and the antagonist, further supporting the belief that such activities are more for appearance than function.

There is little doubt of the potential economic benefits both Beijing and Tehran may realize via the agreement, but what comes out of the military cooperation is less certain and will largely depend on what both countries want to achieve. And it is here where their interests may diverge.
Ultimately, the agreement may turn out to be more about strengthening a partnership than solidifying an alliance; more about sending a message to the United States than posing a serious threat. The global economic downturn, the persistence of COVID-19, Huawei, and the 5G issue, and continued tensions over intellectual property theft has forced China to seek the comfort of sympathetic governments. It is no surprise that Iran, which has benefited from China’s aid, has stepped up to that role.

In a recent meeting with business leaders, Xi Jinping reportedly said:

“While the green hills last, there will be wood to burn,” he said. “If we maintain our strategy … we will find opportunity in crisis and turbulence. The Chinese people will surely prevail over all difficulties and challenges ahead.”

Such a statement suggests that China will be content to sit and wait for the results of the U.S. presidential election before committing to any specific path. However, should the current Administration remain in the White House come November, Beijing will likely temper its defiant position and make enough concessions to show that it is a partner willing to work once more with the United States.