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The Iran Nuclear Issue: Inconclusiveness and Implications for China-Iran Economic Cooperation

Jul 10 , 2015
  • Jin Liangxiang

    Senior Research Fellow, Shanghai Institute of Int'l Studies

The Iran nuclear negotiation bypassed another deadline on July 1. Observers are expecting high of a deal between Iran and p5+1 after another delay of a week. It is certainly reasonable after long patience for a deal. But the Iran nuclear issue, whether a deal is reachable or not, is actually a process not necessarily with a conclusion. The disputes have had huge negative impacts on China-Iran economic relations, but such effects will be weakened as Washington’s dominant economic role elapses.

The willingness and the resolve on both US and Iranian sides for reaching a deal should not be doubted. The single fact that John Kerry, Secretary of State of the most powerful global actor, and Mohammad Zarif, Foreign Minister of one of the most influential Middle East regional powers, stayed together in Lausanne from March 26 through April 2 for the framework agreement has sufficiently demonstrated such commitment. Foreign ministers of other parties joined in their efforts for almost the same length of time: they were also all in Switzerland for the same purpose from early July through another extension till July 7. Judging by the levels of the negotiators and the length of the time they spent in Switzerland, this should have a place in the history of international relations.

The current negotiation will produce either a diluted agreement with some of the thorny issues to be dropped for future negotiation or result in another extension. Neither side can accept a failed negotiation; on the other hand, the distance of the positions of US and Iran on removing sanctions and inspections on sensitive sites cannot be bridged easily.

Even if a comprehensive deal is reached, diluted or not, it does not mean a conclusion of the disputes. So long as the low level of trust exists, the US together with Gulf Arab states, Israel and even its European allies will still suspect that Iran will weaponize its nuclear program. Neither the US nor Iran will in the predictable future easily overcome the psychological barriers as a result of decades of hostilities. Questioning and counter-questioning will still be normal.


What’s more, the Iran nuclear issue will once again float above the water after 10, 15 or 20 years with the restrictions on Iran’s nuclear program to be removed. According to the parameters of the framework agreement published in the White House website after April 2, some of the restrictions are for 10 years, some for 15 years and others 20 years.

Nevertheless, a deal that may not completely satisfy either party should be good news. Such a deal will ease the tensions between US and Iran at least temporarily, and will even pave roads for further reconciliation between the two parties. It should not be expected that the two can resolve all problems overnight.

American and European analysts argue that China has been a beneficiary of the Iran nuclear issue, since China has gained business opportunities taking advantage of the absence of the West. But that is far from true. China’s business relations with Iran have actually been greatly undermined because of US unilateral sanctions since 2012 particularly.

Concerned about US sanctions, Chinese oil companies slowed down their pace of investment in Iran’s oil sector. China’s petroleum imports from Iran had been reduced from 600,000 barrels a day in 2011 to 400,000 barrels a day in 2012. Meanwhile, because of the financial sanctions, a lot of payment problems remained unresolved in China-Iran economic relations, and the potential has not been cultivated.

Progress on this issue will benefit China-Iran economic cooperation since China will face less pressure from both the US and Iranian sides. Neither nation feels satisfied with China’s policy in this regard. While the US claimed that China had not sufficiently pressured Iran for compliance, the Iranian side questioned how China could have stood by the US.

But any inconclusiveness of the Iran nuclear issue will continue to complicate China-Iran economic relations in general. In the short term, China-Iran economic relations will continue to be affected by the sanctions, particularly those in financial sectors, and the payment obstacle will still greatly restrict the size of the economic relations between the two.

The Belt and Road Initiative would also face tough challenges. Iran should be significant in the implementation of the initiative since Iran is pivotal both by its geographic position and by its demographic size. But unresolved aspects of the nuclear issue will mean that Iran will still have problems with its economic development and integration with its neighbors.

In the longer term, the negative impact of financial sanctions on Iran’s economy and China-Iran business relations will be greatly weakened. First, because Iran will develop more ways to circumvent sanctions. Second, because the roles of the US in the global economy and the US dollar as a global payment currency will both decline.

As many US scholars have been arguing, it is the sanctions that make Iran go to the negotiating table. But the sanctions are preconditioned on the dominant roles of the US in global economy and US dollar as an international payment currency. Without its position as the market’s most important player, how can the US sustain its tough sanctions on Iran?

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