China-Iran 25-year ‘Strategic Pact’

April 2, 2021

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Recently, China and Iran signed a 25-year “Strategic Cooperation Pact”.

Background

The partnership was first proposed by China’s leader, Xi Jinping, during a visit to Iran in 2016.
The agreement comes amid a major push from China to back Iran which is under the weight of U.S sanctions.
- Earlier, China and Russia called for the U.S. to “unconditionally return to the Joint Comprehensive Plan of Action (JCPOA) as soon as possible and revoke the unilateral sanctions against Iran”.
- Chinese and U.S. officials also held talks on the Iran nuclear deal and “new changes in the Iranian nuclear situation.

Key Highlights

The investment and security pact would vastly extend China’s influence in the Middle East, throwing Iran an economic lifeline and creating new flashpoints with the United States.

It would expand Chinese presence in banking, telecommunications, ports, railways and dozens of other projects.
- This will give Beijing a bigger foothold in Iran and also make China an important decision-maker in the region.
In exchange, China would receive a heavily discounted supply of Iranian oil over the next 25 years

This pact’ can be very effective in deepening” relations and would establish a blueprint for “reciprocal investments in the fields of transport, ports, energy, industry and services.”
China’s multi-country Eurasian infrastructure projects, under the umbrella of the Belt and Road Initiative (BRI), are now being extended to Iran.

Concerns for India

India has repeatedly conveyed its concerns regarding the US sanctions on Iran.
- Iran happens to be the third-largest energy supplier to India and the sanctions have blocked these supplies, adding to a spurt in the oil prices and throwing the trade balance off the track.
Iran also happens to be the entry point for India for trade with the Central Asian countries where India’s geographical approach is limited.
With the increasing presence of China in Iran, India has been concerned about the strategic stakes of the Chabahar port project.
- The port is close to Gwadar port in Pakistan, which is being developed by China as part of its China-Pakistan Economic Corridor that links it to the Indian Ocean through BRI.
- The access to the Chabahar port may prove strategically important for India.

Chinese closer ties with oil producers can bring governance and energy security issues for India.
Presently India finds itself caught in the geopolitical rivalry between the US & China over Iran.

Way Forward

India must try to remain politically engaged with Iran for a better appreciation of each other’s sensitivities and compulsions and mutual interests.
It is extremely important for India to take the lead in creating an institutional structure with Iran and Afghanistan and seriously pursue the Turkmenistan–Afghanistan–Pakistan–India (TAPI) gas pipeline project to ensure energy security.
India must have balanced diplomatic relations with the US and Iran.

Belt and Road Initiative (BRI)

BRI is a transcontinental long-term policy and investment program which aims at infrastructure development and acceleration of the economic integration of countries along the route of the historic Silk Road.
The Initiative was unveiled in 2013 by China’s President Xi Jinping and until 2016, was known as OBOR – One Belt One Road.

BRI aims to “promote the connectivity of Asian, European and African continents and their adjacent seas, establish and strengthen partnerships among the countries along the Belt and Road, set up all-dimensional, multi-tiered and composite connectivity networks, and realize diversified, independent, balanced and sustainable development in these countries.”

Belt and Road Initiative combines two initiatives