Trump’s short-sighted stance on Iran leaves door open for China

Trump’s short-sighted stance on Iran leaves door open for China

Earlier this month, President Trump refused to re-certify the JCPOA agreement with Iran. That same week, at the 19th Communist Party Congress in China, President Xi Jinping presented a vision of his country as a guardian of international order. Amid growing energy exports from Iran to China, this is not a battle that Trump can win.

Amid this year’s “negotiations” with a North Korean regime hellbent on achieving nuclear weapons delivery capability, the announcement that President Trump’s new Iran Strategy involved walking away from the Joint Comprehensive Plan of Action (JCPOA) should not have been a surprise. While Trump reluctantly re-certified the deal in April and July, he had previously labelled the JCPOA as “the worst deal ever”, and committed to dismantling the agreement if he were elected. However, despite this general negativity towards the deal, Secretary of State Rex Tillerson’s concession that Iran was in “technical compliance” with the JCPOA as late as this past September made it seem possible that the administration would preserve the deal.

Trump’s position on the Iran deal not only signals America’s exit from the international diplomatic arena in regards to Iranian nuclear development, it leaves a leadership vacuum that China’s President Xi is only too willing to fill. For all its failings, the JCPOA is a multilateral agreement born from mammoth diplomacy efforts, with the US, Russia, China, France, the UK and Germany putting aside their disparate security programmes in a bid to develop an agreement acceptable to all five permanent members of the UN Security Council and the EU. The US Congress now has less than sixty days to decide whether or not to reimpose sanctions on Iran, and Russia and China have made no secret of their desire for the deal to continue into 2018 and beyond.

Iranian President Hassan Rouhani and Chinese President Xi Jingping.

Iranian President Hassan Rouhani and Chinese President Xi Jingping.

The China-Iran “friendship”

The collapse of the JCPOA, and the possible return to sanctions, would inevitably lead to a deterioration of the economic and security situation on the ground in Iran – a disaster for Chinese oil imports and the future of major Chinese infrastructure investments within Iranian borders.

In recent years, China has become Iran’s leading trade partner due to its unrelenting appetite for oil and gas exports. In August, China imported 3.34 million tonnes of oil from Iran, the highest monthly transfer since 2006. Soon after the JCPOA was signed, China and Iran agreed to a 25-year plan to expand relations and boost trade tenfold to US$600 billion over the next decade, with Chinese companies financing major energy projects throughout the Islamic Republic, including huge oil fields in Yadavaran and North Azadegan. In July this year, state-owned China National Petroleum Corp adopted a 30 percent stake in a project to develop South Pars, the largest natural gas field globally. China has also signed a US$3 billion deal to upgrade Iranian oil refineries, including the century-old Abadan refinery.

Iran is slated to play a role in China’s “One Belt, One Road” Initiative. Beijing has provided US$1.6 billion of a total US$2.56 billion high-speed railway which is planned to run from Tehran to Mashhad in the east. The Export-Import Bank of China is said to have financed at least 26 projects in Iran to date, providing over US$8.5 billion in loans to build highways, develop mining projects and boosting steel production. According to Beijing’s vision, trains are set to run between the western Chinese region of Kashgar and Turkey’s Istanbul as early as 2020.

Officials negotiating over the Iranian Nuclear Program in 2015

Officials negotiating over the Iranian Nuclear Program in Switzerland in 2015.

Shifting European alliances

Given that European trade with Iran has increased 93% since the ratification of the deal, a unanimous European resistance to a return to sanctions may open the door to a closer relationship with China in a bid to preserve the deal. The German Foreign Minister Sigmar Gabriel has expressed concern over the possibility of military confrontation with Iran over the US pull-out, with his UK counterpart Boris Johnson calling the JCPOA a “crucial agreement” in neutralising Iranian nuclear threats. The French President Emmanuel Macron has also called on Trump to revise his decision to leave the deal.

With President Xi stating his desire to see China’s rise as a “builder of world peace”, China may provide a buffer to shield Iranian energy exports from substantial disturbance in the wake of Trump’s decision. Indeed, even if the US does receive backing from European leaders – which is unlikely – Trump’s machinations to increase pressure on Iran are short-sighted at best.

About Author

Joanna Eva

Joanna Eva is a London-based analyst and contributor with a range of clients in the risk consulting industry. She specializes in Asian political and economic analysis, having lived and travelled extensively in the region for close to a decade. She holds a Master of Law from the University of New South Wales and received her Bachelor of International Studies from the University of Sydney. She is proficient in English and Mandarin Chinese.