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Foreign Policy

Iran as a Wedge Between Beijing and Washington

Jul 15, 2019

While overshadowed by US-China trade negotiations at the G-20 summit in Osaka, Japan and President Trump’s symbolic step across the demilitarized zone (DMZ) into North Korea, global reactions to US-Iranian conflict continue to suggest two realities – an active and determined China, and an unpredictable and unilateral US will broker Iran's fate. Second, reevaluation of the US role in the Strait of Hormuz complicates domestic, regional, and global politics as actors within the US, Europe, and across the globe, leverage lack of consensus on Iran to pursue individual interests.

Further disruption to China’s energy relationships with the Middle East or destabilization of the region as a result of US military activity would damage China’s global ambitions through the Belt and Road Initiative (BRI). If both Beijing and Tehran care about energy outflows, how can Iran thwart President Trump’s ambitions to bring Iranian oil exports to zero? So far, Iran is selling oil with Malaysia through the Straits of Malacca, where satellite imagery reveals that Iran engages in ship-to-ship oil transfers to Chinese crude carriers. A Reuters report concluded that Iran exported nearly 300,000 barrels of oil during the first three weeks of June. In addition to the transfers, Tehran stockpiles crude on floating tankers near ports for potential buyers, which explains low exports and high sales. In a recent New York Times opinion piece, Robert D. Kaplan, managing director at Eurasia Group, accurately emphasized that “This Isn't  About Iran. It's About China.” In other words, ‘This Isn’t About Tehran and Washington, It’s About Waning US Hegemony.’

The Strait of Hormuz provides access to half of the world’s proven oil reserves and connects the Persian Gulf to the Gulf of Oman. As Kaplan correctly notes, not only does the Gulf of Oman separate Iran and Oman, but also Oman and Pakistan. At Gwadar in southwest Pakistan, China constructed an advanced container port designed to link roads, railways, and pipelines to China. Also, Gwadar serves as a sentry position from which China can monitor shipping through the Strait of Hormuz. Beijing is also considering the construction of a naval base. In addition to recent shale gas developments, the Gulf of Oman links the Middle East, the Indian subcontinent, and East Asia in the more significant framework BRI.

Increased tensions between Washington and Iran only further push Tehran toward Beijing. As a ‘pragmatic balancer’ on the global stage, China will undoubtedly consider how it can maximize its relationship with Iran in its opposition to US global hegemony. The fact that China actively sidesteps or ignores US sanctions toward Iran indicates that the US regional role is diminishing and that Beijing is assuming an active role in courting Washington’s adversaries.

With respect to the current trade truce between Beijing and Washington, the trade war benefits Iran, as it requires China to diversify trade toward Iran in exchange for energy. China is Iran’s top trading partner and oil export destination. Up until recent US restrictions, 9 to 11 percent of China’s oil requirements came from Iran through cash or barter agreements. Over the last ten years, Chinese firms invested over $5 billion in Iranian gas refinement and oil infrastructure. In addition to expanding highways, metro systems, and petrochemical companies, Chinese state-owned investment firm, CITIC Group, extended a $10 billion credit line in 2018. During the same year, China Development Bank pledged an additional $15 billion. Trade volume between China and Iran grew from $1.6 billion in the 1980s to $15 billion in 2007, and some $45 billion from 2014 to 2015. However, in 2018, it was only valued at $33.39 billion.

The Trump administration’s demand for Iran is apparent – choose between an economy integrated into the global system and a nuclear program. While the Obama administration allowed for a mix, Trump’s ‘maximum pressure’ approach hopes to strangle Tehran’s economy until there is no choice but to abandon nuclear ambitions. The reevaluation of Washington’s role in such an energy-important region increases the stakes for other global powers to pursue national interests. The inherent instability of waning US hegemony in places like the South China Sea, Syria, and more recently, the Strait of Hormuz, complicates and fractionalizes political consensus across a variety of stakeholders in the domestic, regional, and international spaces.

First, on a domestic level, US politics are divided on the topic of Iran. Some Democrats, including significant presidential candidates, present scenarios in which the White House is impatient, untethered, and aggressive, while Iran is misunderstood and under pressure. However, many on the left fail to note that the world has changed since Obama, and it is not obvious that Trump ever really wanted war or direct conflict. Trump’s recent decision to not respond militarily to the downing of an unmanned US drone by Iranian forces received praise and criticism within both political parties. Predictably, Democrats hope to preserve the Obama-era Iran nuclear deal while Republicans, on average, vehemently oppose it. While the left-right divisions seem foreseeable, they function within the context of significant international change in which China, along with Iran, challenge the US in the Strait of Hormuz. US adversaries abroad note these divisions within the American political space and leverage them in public relations campaigns.

Second, the Iran crisis further disrupts transatlantic cooperation. In the European Union, politicians agreed on INSTEX, a financial mechanism to bypass US sanctions against Iran, for which China also expressed interest. European representatives from Britain, France, and Germany wish to normalize trade relations with Iran and reduce the impact of US sanctions. Iran uses Europe to pressure Washington and create a fissure between traditional allies, and is so far, reasonably successful. Overall, Europe plays a central role in any chance signatories of JCPOA have in saving the agreement. While the Iran topic further divides Europe with the Trump administration, Iran suggests that current efforts for Europe to provide economic assistance to Tehran are insufficient.

Third,  Iranian-US conflict illustrates that the US must accept an active China as Beijing continues to ignore Washington’s sanctions. Chinese disregard for US sanctions delegitimizes Washington’s unilateral approaches. Note that in the context of JCPOA, Washington withdrew from the legal framework of the previous deal, while China, Iran, and the other signatories, seek to preserve it. Trump’s withdrawal from the agreement further indicates that the US is abandoning the previous rules-based international order, while its adversaries protect it to complement their interests. President Xi reacted similarly to Trump’s withdrawal from the Paris Agreement, symbolically demonstrating greater advocacy for environmentalism than that of the United States.

In Mosaic Magazine, Michael Doran, argued that Ali Khamenei uses the fear of European elites and American democrats to present Trump as ‘an agent of chaos’ on the international stage. In 2017, President Xi declared at the World Economic Forum that “we should adhere to multilateralism to uphold the authority and efficacy of multilateral institutions …we should honor promises and abide by rules.” This same sentiment emanates from China and Iran today, which suggest that the US is abandoning the rules-based systems of the past.

As a result, the Trump administration is very much alone in its unilateral action to apply maximum pressure and withdraw from JCPOA. President Trump must convince US allies of his positions toward Iran, or risk granting China additional influence. In its pursuit of the preservation of its energy-related export waivers, implementation of sanction relief, and general isolation of the Trump administration, Iran leverages disagreements between Beijing, Washington, Europe, and the US electorate, to present Trump as an erratic rogue actor while China and Iran seek to preserve a familiar status quo. 

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