The myth of China's leverage in Iran
The China-Iran relationship is one of the most politicized bilaterals I can think of, perhaps right after China-Russia. I understand why; Iran is an outright revisionist state and the rivalry between the US and China shapes a lot of thinking about Beijing’s behaviour. The US Department of Defense identified China and Russia as its two primary threats, and Iran, North Korea and terrorism as its three secondary threats. That China and Iran have a comprehensive strategic partnership agreement, meet frequently and are in harmony on the need for alternatives to Western-led global governance feeds into the perception that they’re aligned more generally.
And in this perception, the asymmetry between the two creates a widespread assumption that China has leverage with Iran, that it can lean on Tehran to alter its behaviour. I think this is wrong. Or at least I think it’s wrong now. There have been times in recent memory when Iran needed what China has to offer - money, household consumer goods, telecomms equipment, political support - and it was responsive to Chinese concerns. At least it seemed like that. The runup to the JCPOA and the period immediately following it, and the maximum pressure campaign looked - from the outside - like episodes where China was able to influence decisions in Tehran.
Since October 7, 2023, I don’t think China has had any leverage in Iran. China mostly offers material incentives through economic engagement - trade and investment is nowhere near substantial enough to sway Iran at a time when it is facing political, ideological, and military threats.
When they signed the comprehensive strategic partnership agreement way back in January 2016, they optimistically forecast trade hitting $600 billion by 2026, and talked about massive Chinese investment into Iran. That hasn't happened, not by a long shot. Writing for Bourse & Bazaar last year, Saeed Azimi noted that since finalizing the comprehensive strategic partnership deal in 2021, Iran had been the recipient of a flimsy $185 million in Chinese investment, paling in comparison to more than $5 billion injected into Saudi Arabia in 2022 alone. Iran’s deputy economy minister Ali Fekri complained last year that he “is not happy with the volume of Chinese investment in Iran, as they have much greater capacity.” This frustration seems to have boiled over in January, when Iran decided that the days of cheap oil for China were done; Iran began withholding crude shipments to Beijing and demanded higher prices after long offering significantly discounted crude.
The limits of what Beijing is willing to do for Tehran have been made clear time and again. Since China is not able to move the needle on most political issues in the Middle East and is not willing to engage militarily, It has little to offer Iran during a major crisis. No doubt Iran will continue to publicly thank the PRC and hype up the bilateral, but they know there's a very low ceiling of real support. China will continue to offer rhetorical support to Iran, but little in real terms. Anyone expecting China to broker some kind of meaningful breakthrough with Tehran will, in my opinion, be disappointed.
As the prospect of escalation continues in the Middle East, Iran and Israel remain the two countries to watch. It has been painfully clear for over a year that Beijing has no capacity to directly affect decision-making in Israel. It is also clear from all the commentary that has been generated that a lot of people do think China has the capacity to affect decision-making in Iran. So for the rest of the week I’ll be talking with experts who have given the China-Iran relationship a lot of serious thought, and posting our conversations here. Regular posting will continue, but I’ll double up while having these discussions. I hope you find them useful, insightful, and helpful. My goal is provide you with a better sense of the limits, challenges, and opportunities inherent in the China-Iran relationship.
On a related note, starting tomorrow the newsletter is moving to a paid subscription model. In addition to compensating me for the time I put into this, it also will allow me to pay for the many subscriptions and books that I need in order to keep up on all of this. I hope you support the work with a paid subscription.