Indian Defence Review

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During the recent two-day visit to Tehran by Chinese foreign minister Wang Yi, Iran and China signed a 25-year agreement on March 27 that would chart the future course of the economic, political and trade relations of both countries. Titled ‘Comprehensive Strategic Partnership’, the agreement was reportedly in the making since Chinese President Xi Jinping visited Iran in 2016, whre he also agreed to hike China-Iran bilateral trade more than ten-fold to $600 billion over the next decade. Xi and Iranian President Hassan Rouhani had agreed then to establish a roadmap for reciprocal investments in the fields of transport, ports, energy, industry and services, with Iran’s supreme leader Ayatollah Ali Khamenei saying, “Iran’s government and people are striving, as they always have, to broaden relations with trustworthy, independent countries like China.”

Iran’s state television covered the signing ceremony of the Comprehensive Strategic Partnership between Wang Yi and Iranian foreign minister Mohammad Javad Zarif.  No official details of the agreement have been released but according to Iranian state media the deal covers a variety of economic activities from oil and mining to promoting industrial activity in Iran, as well as transportation and agricultural collaborations. However, according to the US media, China is to invest some $400 billion in Iran in exchange for oil as part of the deal, in addition to stepping up military cooperation with joint training, research and intelligence sharing.

Referring to the agreement in a televised interview, Iran’s foreign ministry spokesman Saeed Khatibzadeh said, “The document can elevate bilateral ties to a new strategic level. The deal focuses on boosting private-sector collaboration and the Islamic Republic’s role in Xi’s flagship infrastructure and investment program, the Belt and Road Initiative.” Coming on the 50th anniversary of the establishment of China-Iran diplomatic relations, the deal reportedly also supports tourism and cultural exchanges. A draft copy of the outlines of the accord that surfaced in media during July 2020 showed plans for long-term supply of Iranian crude to China as well as investment in oil, gas, petrochemical, renewable and nuclear energy infrastructure. But a controversy erupted over the proposed deal after former Iranian president Mahmoud Ahmadinejad charged that negotiations were being held without knowledge of the Iranian public. The foreign minister heckled in parliament assured lawmakers that details of the deal would be made public once finalized.

Iran’s closer integration with China was inevitable with the US under President Donald Trump pulling out from the Iran nuclear deal and imposing sweeping unilateral sanctions to blacklist and cripple the Iranian financial system. China is Iran’s leading trade partner and was one of the biggest buyers of Iranian oil before the US imposed sanctions. But according to traders and analysts, Iran’s oil exports to China have significantly increased in March 2021 despite US sanctions. Both Iran and China anyway are under different levels of US sanctions. For China, the deal is a major landmark in Xi’s Belt and Road Initiative. In February 2021, China donated 250,000 doses of its Sinopharm anti-Covid vaccine to Iran. It can be assumed that dealings under this 25-year pact will not be in dollars, giving a boost to the yen. There is a viewpoint that Iran may be giving up too much in its quest to boost ties with China but the counterview is that Iran had little options with crippling sanctions and an increasingly hostile West. Notably in 2001, Iran and Russia had signed a 10-year cooperation agreement, mainly in the nuclear field which was subsequently extended to 20 years.

To what extent US-Iran rapprochement will happen and whether US will rejoin the Iran Nuclear Deal or the JCPOA is an open ended question. Iran wanted the US to lift all sanctions to enable talks, whereas, US President Joe Biden has so far not lifted any sanctions, saying Iran must first act to fulfill commitments it scaled back in response to US sanctions. Biden wants to negotiate tougher conditions for an agreement with Iran, including by limiting its missile production and destabilizing activities in the region but Iran has ruled out such talks and demands the US first lift sanctions before it returns to compliance. US Secretary of State Antony Blinken has termed the China-Iran agreement the world’s greatest geopolitical test.

However on March 28, Iranian President Rouhani stated in a televised speech, “We’re ready for the lifting of sanctions if obstacles are removed, all or at least some sanctions can be lifted.” This indicates that part lifting of sanctions is acceptable to Iran. Apparently, it is now for the US to act further. But the China-Iran agreement will definitely lower America’s leverage over Iran. Also, while Biden is discussing the alternative to China’s BRI with UK and others, Xi Jinping has scored by drawing Iran closer into its strategic sphere. A Taliban takeover of Afghanistan post US troops exit will increase America’s headaches. Where Quad is conducting naval exercises, navies of China, Russia, Iran and Pakistan are conducting manoeuvres in proximity of the Persian Gulf.

India and Iran celebrated ‘Chabahar Day on March 4, 2021 with ministerial presence from India, Iran, Russia, Afghanistan, Armenia, Kazakhstan and Uzbekistan, on the sidelines on sidelines of the two-day Maritime India Summit-2021. The contract for Chabahar port project was signed between Iran and India on May 23, 2016 with a total value of US$ 85 million ‎for equipping, mechanizing and starting operations at the port under the first phase. However, its execution has been delayed due to US sanctions and availability of cranes and heavy equipment. Till January 31, 2021, about 123 vessels had berthed at the terminal and approximately 13,752 TEUs and 18 lakh tons of bulk/ general cargo had been handled there.

In January, India supplied a consignment of two mobile harbour cranes to the Chabahar port.  This was followed by a second shipment of equipment to Chabahar in March 2021. Iran’s state-run IRNA news agency reported on March 23 that two 100 ton cranes from India worth $7.5 million had arrived at the Shahid Beheshti port in the Chabahar complex. India is to ship two more cranes to Chabahar by June end.

Development of the Chabahar port will help in expanding India-Iran relations boosting maritime trade between both the countries. If the US-Iran differences get resolved and sanctions on Iran are lifted, India can resume imports of oil from Iran. As and when Chabahar Port is linked to the   7,200 km long International North-South Transport Corridor (INSTC), India’s trade with Central Asia and Russia too will expand.

The million dollar question is how will the increased Chinese influence in Iran play out for the region with the Biden administration having declared cold war on both China and Russia? Will this affect India-Iran relations since China has no intentions of resolving its border with India and will continue to strive to limit India within South Asia?