A flourishing entente

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China-Iran strategic relations have increased tremendously over last few years

China’s association with the Middle East has generally been viewed in terms of energy. The region plays a very significant role in quenching China’s enormous thirst for oil and gas. The stunning rise of China as a global player within a short span of time has led it to think beyond Southeast Asia and widen its horizons. Today, China’s presence at the global stage is acknowledged by the West and this was seen when China played an intrinsic role, along with the West, in signing the nuclear deal with Iran.

While China is trying to make inroads into the Middle East, its relation with Iran is visibly prospering. Since the 1979 Islamic Revolution, China has been one of the key backers of Iran and has had a considerable amount of influence on the Islamic Republic. The China-Iran relations have soared in recent times and three major events are testament to this. 1) the nuclear deal between the P5+1 and Iran, 2) China’s growing interest in the Azadegan oilfield in Iran and 3) the launching of a train service from Yiwu in China to Tehran.

On 14 July 2015, the P5+1 signed the Joint Comprehensive Plan of Action (JCPOA) with Iran. Popularly known as the Iran nuclear deal, the JCPOA was hailed as a milestone in Iran’s relation with the West, especially the US. The deal would not have been achieved without the intrinsic role played by China. The deal, which will remove the sanctions placed on Iran, comes as a welcome change for China as it will open new avenues for cooperation between the two countries. Beijing imports a large chunk of its crude oil imports from Tehran and the deal will give new incentives for cooperating in the energy sector. In 2014, the contract between Iran and China to develop the South Azadegan oilfield was cancelled mainly due to pressures arising from the sanctions. The nuclear deal in 2015 was quickly succeeded by contract between the two countries in which China would develop the North Azadegan oilfield.

According to the Energy Information Agency (EIA), China is the second largest oil consumer behind the US and it became the largest energy consumer in 2011. Also in 2014, China’s oil consumption was 43 per cent of the overall global oil consumption. In 2010, 14 million passenger cars and 4.4 million commercial vehicles were produced in China and this rate of production has only increased each year. As the rate of production increases there is a steady rise the rate of energy consumption too. This is where Iran plays a major role.

According to British Petroleum, 2014 saw an additional 2.6 per cent growth in China’s energy consumption. In 2014 more than 50 per cent of China’s crude consumption was from the Middle East and Iran accounted for 9 per cent of the Chinese demand. The Kingdom of Saudi Arabia accounted for 16 per cent of China’s oil consumption but thanks to the Kingdom’s alliance with the West; China would look forward to establishing strong ties with Iran and the oil consumption from Iran is set to increase after the nuclear deal. Strategically, Iran holds a lot of significance. Iran has the fourth largest oil reserves in the world and in 2014, produced 3.4 million barrels of petroleum and other liquids per day, according to EIA statistics.

In August 2015, a month after the nuclear deal was signed China and Iran talked about the possibility of Chinese control of the North Azadegan oilfield in exchange for 24 J10 Chengdu fighter jets. The 350 square mile oilfield which produces around 40,000 barrels per day would be controlled by China National Petroleum Corporation (CNPC) from the National Iranian Oil Company (NIOC). In December the same year, CNPC started the development of the second phase of the oilfield.

The Azadegan oilfield not only gives a boost to China’s gargantuan energy demands but also acts as a strategic pivot for China’s entry into the Middle East. If China aspires to be a blue-water navy in the near future, it should secure its interests in the Gulf of Aden, Strait of Hormuz and also to an extent the Mediterranean. The Gulf of Aden, which is the hotbed of piracy, especially towards the Somalian coast is very strategic area. China has naval bases in Yemen and Oman and Chinese fleets are already accompanying oil tankers headed to China. Regarding the Strait of Hormuz, the Azadegan oil field is located near the Iraqi and Kuwaiti borders and is not far from the coastline. The upcoming years could tell if fortune favours the Chinese, because the Strait of Hormuz is the probably the most strategic location in West Asia because all oil from the Persian Gulf goes through Hormuz. Any vessel that passes through Hormuz will have to go through the territorial waters of Oman and Iran, while the Islamic Republic has the option of causing a major disruption in global trade and commerce by closing down the strait. China already has a naval base in Oman and if it can exert influence on Iran during a time of crisis, then China will hold all the major cards against major rivals.

The third important development in recent times was the Chinese proposal for the development of a high speed Silk Road railway connecting Urumqi in China to Tehran. The railway line would pass through Kazakhstan, Kyrgyztan, Uzbekistan and Turkmenistan. The first train arrived from Yiwu to Tehran in February this year and signalled the beginning of a new era in Sino-Iranian relations. The train took 14 days and over 10,000 kilometres to complete the journey and this journey comes at a time when China is backing Iran in almost every sphere. China and Iran agreed to increase trade to $600 billion in the next ten years, and Beijing is a strong supporter of Iran’s entry into the Shanghai Cooperation Organisation (SCO). Both countries also recently signed a 25 year strategic plan as a part of which, China is involved in setting up bridges and railways lines in Iran. On defense arena, China is providing the arms to the Iranian military and is assisting Iran in its nuclear programme.

This is just a small background of China’s engagement with Iran. Even though there are significant differences between both countries on a variety of issues, there is every sign that Beijing and Tehran will look forward to more cooperation in every field.

China’s growth has been rapid in recent times. One may look at China’s spectacular rise with much awe but for China the way ahead is much longer. Tackling the Middle East along this way remains a key challenge for China and Iran holds an important position here. Whether it is energy, security or politics; Iran remains a key to China’s global ambitions. It has signalled that the ‘China Rising’ phenomenon is not just limited to a certain time and space but this phenomenon is in reality spreading its wings and extending the dragon’s influence.

What does it mean for India?

The growing Chinese influence in the region has thrown a new set of challenges to India. Economics remain at the core of China-Iran relations and unfortunately India’s economic engagement with Iran is nowhere close to that of China. The increasing economic clout of China will in the coming years pave the way for more and more political engagement, a fact that doesn’t go in India’s favor.

Though India on its part has made every effort to maintain close relations with Iran, the truth remains that a lot more needs to be done to strengthen the ties. The work on the strategically important Chabahar port that India is helping to develop has met with numerous hurdles. The lack of enthusiasm on the Indian government’s part to speed up the process and a failure to iron out the irritants that have arisen due to certain clauses in the contract can greatly hamper bilateral ties. What India needs to do at this point is to take advantage of every opportunity that would enable deeper engagement between the two nations.

For this, India should take up the proposal of building over 500km rail link from Chabahar to Zahedan, capital of Sistan-Baluchistan province. This will give India access to the International North South Transport Corridor which includes some of the most economically important Central Asian Countries. The other possibility that India can explore would be of linking Chabhar to Delaram-Zanj road built by India in Afghanistan. It is in India’s foremost interests to engage strategically in regions where China has got stakes in.

Another area where the progress has been slow is that of the India-Iran gas pipeline. The proposed pipeline will connect the Iranian coast to the Indian Ocean via the Oman Sea and is expected to carry 31.5 million standard cubic metres gas per day. Taking into consideration the fact that China already has a naval base in Oman, any kind of access to the country will be beneficial to India in the long run.

Here the defining factor is the Strait of Hormuz. Being the only sea passage from the Persian Gulf, it is here that the risks are the greatest. According to a report released by Center for Strategic and International Studies, 17 million barrels pass through this strait of which more than 85 per cent goes to the Asian markets. This makes it evidently clear that any tension can collapse the economies of both China and India. The entry of Chinese navy in the Strait of Hormuz not only implies an increasingly warm relation between China and Iran but is also an indication of the uncertainty that India can face in the future. The only way ahead for India is to counter the Chinese influence in the region by deepening its ties with Iran in both economic and political spheres. The strategic importance of Iran makes it necessary for India to secure its interests at the earliest.

Andrew I. Pereira | The author is pursuing his Masters in International Relations at Jawaharlal Nehru University