Last week, China and Iran formalized a new and enhanced relationship, which had been in the works for some time amid a growing convergence of interests. In theory, Beijing’s move could undercut the Biden’s administration’s efforts to cause Tehran to return to compliance with the JCPOA before offering any sanctions relief. But the administration has said little publicly about the China-Iran accord, suggesting a view that the new agreement amounts to less than meets the eye.
A New Axis?
In late March, Foreign Minister Wang Yi signed the agreement during a ceremony at the foreign ministry in Tehran. By all accounts, the text agreed upon by both parties is essentially unchanged from a draft agreement reached in 2020. Worded vaguely, the earlier draft proposed $400 billion of Chinese capital to be invested over the next 25 years in a range of fields, including banking, telecommunications, sea and land transportation, healthcare, and information technology. In exchange, Tehran agreed to provide Beijing with, as one Iranian official and trader put it, “a regular… and heavily discounted supply of Iranian oil.”
The oil is indeed flowing as advertised from China to Iran. Beijing has also increased its consumption of Iranian oil, in defiance of US sanctions. Industry analysts believe that, by the close of April, nearly one million barrels per day of Iranian crude will have arrived in Chinese ports over the course of the month. That would account for almost half the volume that the Kingdom of Saudi Arabia, the world's top exporter, supplied to China in the first two months of 2021. Although China never fully halted its importation of oil from Iran, the latest numbers represent a substantial increase. According to Refinitiv Oil Research, February’s imports totaled 27 million barrels of oil, or 3.75 million tons, topping the previous record in January of 3.37 million tons. As Emma Li, a senior Refinitiv analyst observed, "The trend seems to be continuing, though buying appetite is waning because of high inventories at ports and abundant supplies."
Beijing has aligned its political rhetoric and economic interests. Following the inking of the agreement, China’s Foreign Minister echoed Tehran’s position that Washington should re-enter the agreement without preconditions. “China firmly supports Iran in safeguarding its state sovereignty and national dignity,” Mr. Wang said in his meeting with President Hassan Rouhani, as recounted by the Chinese foreign ministry. Washington, Mr. Wang added, should immediately rescind its sanctions on Iran and “remove its long arm of jurisdictional measures that have been aimed at China, among others.” Several weeks prior, Chinese foreign ministry spokeswoman Hua Chunying was even more blunt, demanding that Washington “unconditionally” return to the agreement.
Other observers remain unconvinced, however, and hold that the agreement means little more than formal acknowledgment of pre-existing realities. The optics of the announcement — Foreign Minister Wang Yi attended the signing ceremony during the Tehran leg of his six-nation tour of the Middle East — suggested that the pact “carries less weight in Beijing than agreements with, say, Bangladesh, as one analyst put it: “When President Xi Jinping wants to signal his interest in deepening Chinese influence somewhere, he puts his own signature on the paperwork.”
While the text of the agreement has yet to be released, if it is comparable to last year’s draft, possibilities substantially outweighed specifics. At that time, the amount of Chinese capital to be invested was variously reported between $400 and $800 billion. At the same time, as many Iranians were quick to note, Beijing had yet to address its large and growing debt of oil payments in arrears, then estimated at nearly $30 billion.
So it is unsurprising that the Biden administration has shown few signs of concern. Last month, in an adroit show of both good faith combined with diplomatic pressure, the administration offered to rejoin nuclear talks with Iran if Tehran would return to full compliance with the JCPOA first. After Tehran refused to meet without first receiving financial incentives, White House national security adviser, Jake Sullivan, said simply, “The ball is in their court.”