25 August 2020, NIICE Commentary 5879
Jelvin Jose
The Sino-Iranian 25 year-long comprehensive strategic partnership if executed, has the potential to solidify the Chinese footprints in the West Asian country and would coerce Tehran to shift its core economic and strategic focus to Beijing. The bi-lateral action plan would bring the defence, infrastructure development, connectivity projects, banking, energy, and communication sectors to the fold of Chinese investments. The deal in the making comes up with an exorbitant sum of money, in terms of investment, that ranges over USD 400 billion. The arrangement would empower Beijing to bring in Iranian oil and gas to home at a highly subsidised price.
The proposed multifaceted partnership comes up with several strategic implications for New Delhi. However, the pact falls in line with neither Beijing’s regional action plan nor addresses Tehran’s sovereignty concerns. This article makes an in-depth analysis of the strategic implications of the deal for New Delhi and the conflict of interests involved in it.
Unfolding of the Accord and Incentives for Tehran
The partnership between China and Iran came to limelight by the Iranian Foreign Affairs Minister, Mohammad Javad Zarif’s visit to Beijing in 2016. The blueprint for a twenty-five-year long engagement covering the economic and strategic dimensions got finalised in the aftermath of these bilateral negotiations between the Chinese Foreign minister, Wang Li, and his Iranian counterpart.
In line with this, the Petroleum Economist reported that Beijing pledged an FDI investment worth USD 280 billion to upgrade Tehran’s energy sector. Similarly, another promise was made by Chinese authorities to provide a sum of USD 120 billion to develop Iran’s manufacturing and Transport networks. Besides these, a deal was struck by both sides to deploy around 5,000 Chinese armed service members in Iranian soil to safeguard the Chinese undertakings and investments.
American President Donald Trump’s unilateral push to abandon the Joint Comprehensive Plan of Action (JCPOA) in May 2018, complicated Tehran’s posture. Wide-ranging sanctions imposed by Washington played a stranglehold over the Iranian economy, highly reliant on the oil and gas exports. Tehran’s GDP marked 12.3 percent annual growth in 2016, the very next year since the JCPOA came into action.
The imposition of the crippling US sanctions in 2018, targeting the shipping, oil and gas, and financial sectors, hit the already weak Iranian economy. Last year, Iran witnessed the most significant political unrest since the Iranian revolution, over surging inflation, economic inequality and soaring unemployment.
The curbing of sanction exemptions in May 2019, further devastated the West Asian country’s economic base. According to BBC, Iran’s GDP in 2018, contracted by around 4.8 percent in the 2017-18 financial year as a result of this. In line with Forbes, the trade barriers have brought down Tehran’s oil production from around four mbpd in 2018 to the present 2.5 mbpd. Other than this, in April 2020, Iran ramped up criticism against the US for its economic sanctions, which adversely hit the COVID-19 battle. Given this, in search of an economic lifeline, Tehran turned to Beijing, which is in loggerheads with Washington and the West.
Beijing tabled the road map for the deepened multidimensional engagement in 2016 itself. However, the Iranian leadership, which sought to preserve the strategic autonomy, held the proposal in abeyance. The economic fallout and the socio-political turmoil resultant have impelled Tehran to bridge closer ties with Beijing. As the White House signals not to go back an inch from its hardline stance, it leaves the Rouhani government with no choice but to shake hands with Beijing.
Implications for New Delhi
In the wake of this development, India has concerns about the Chabahar project. The port given for a 10-year lease is vital for New Delhi as a viable transport corridor to Afghanistan and a gateway to the landlocked larger Central Asian Region. The completion of the 248 km Zaranj-Delaram highway connecting Kabul’s capital province Nimruz with the Chabahar port, carving out a transit corridor independent of Pakistan, marked a milestone in New Delhi’s regional strategy.
The transport corridor via the Chabahar assumes new criticality for India in the backdrop of the US-Taliban Peace Deal and the withdrawal of the American and NATO forces following it. A backlash in the port project would further shatter India’s regional aspirations in the new environment.
The recent exclusion of New Delhi from the Chabahar-Zahedan rail line project raises a red flag for the Indian authorities. Although Tehran cited dawdle behind dropping India’s state-owned, IRCON International Limited from the drive, Beijing’s compulsion cannot be dismissed entirely. The enterprise is to construct a 628 kms rail line up to the Zaranj in the Iran-Afghan border. The connectivity project also encompasses the future planning to build around a 1000 km long rail corridor to Sarakhs in the Turkmenistan boundary.
Tehran decided to meet the approximate project expense of USD 400 million from Iran’s National Development Fund (NDFI). Tehran instituted the NDFI in 2011 as an independent entity aimed to promote durable economic assets, making use of the revenue from the oil and gas sector. As per the Tasnim News Agency reports, Ayatollah Khomeini, Iran’s supreme leader, in September last year itself gave a green signal for Rouhani government to withdraw USD 300 million for the connectivity project. However, the massive Chinese investments anticipated under the new comprehensive partnership plan would have boosted Tehran’s confidence to go ahead with the enterprise on its own.
At the same time, it is crucial that the West Asian regime did not toss out the Indian aspirations. However, the Chinese debt-trap is an aspect of the Sino-Iranian cooperation that cannot be undermined.
Beijing’s attempt to link the Chabahar port with either Gwadar port or controversial China Pakistan Economic Corridor (CPEC) will have direct repercussions on principal foundations on India’s politico-strategic frameworks. Given this, the CPEC crossing the Gilgit-Baltistan of POK (Pak occupied Kashmir) is a breach of its territorial integrity for New Delhi, which explicitly showcased its hostility towards the project.
The Islamic Republic of Iran has been a signatory of the Chinese Belt and Road Initiative. In March 2018, Islamabad’s foreign office spokesperson, Muhammad Faisal, termed both Gwadar and Chabahar, only 172 km far, as sisters. Any move on these lines will perplex the postulates underlying India’s external alignments.
Nevertheless, it seems bleak Beijing would gear up for further capital injection as the enterprise is yet to make any returns and uncertainty looms over the already made over USD 60 billion investment.
The deepening Tehran-Beijing partnership in the communication sector also constitutes obstacles to Indian interests. The induction of Iran to the BeiDou Navigation Satellite System, the Chinese alternative to the American GPS, will hinder India-Iran’s cooperation in the impending future.
In recent years, Beijing has been making relentless efforts to disseminate the technology across the globe through BeiDou Cooperation Forums and Digital Silk Road and has succeeded in attracting many West Asian and African nations to its umbrella.
Huawei Technologies, evicted from major Asian and European markets, has a toehold in Iran. Although Beijing-Tehran cooperation in the communication sector is not a new chapter, the proposed strategic partnership would raise cooperation to the next level. China has been facing charges for supplying the banned technological devices to Tehran through backdoor channels. In March, Reuter’s report brought Huawei’s role behind the illicit movement of sanctioned American gear to Iran, to the limelight. The current proceeding would give Beijing a sway over Tehran’s digital space.
The Chinese presence in the Kish Islands and the Jask port, critical from the geostrategic perspective would add one another string encompassing India. However, in line with The Jerusalem Post, the Iranian officials dismissed the reports claiming the transfer of Kish islands to Beijing.
Degree of Strategic Threat for New Delhi
Although New Delhi lacks the financial might to substitute what Beijing offers to Tehran, the criticality of the relationship with Washington further narrows Indian options. Bearing the policy implications of the Chinese capital outflow to countries like Djibouti, Kenya, and Sri Lanka had in mind, mortgage stress can persuade Tehran to align with Beijing’s policy stances in the future. Given the mounting India-China frictions, Beijing would exert pressure on Tehran to scale down its cooperation with New Delhi. Two significant reasons hinder the practical implementation of the accord.
First, being aware of the bitter experiences from the already materialised BRI projects, the extent to which Tehran is willing to get engaged with Beijing raises serious question marks. Iran’s traditional stance upholding the nations’ strategic sovereignty clashes with the new bi-lateral endeavour.
Iran’s former President and populist leader Mahmoud Ahmadinejad, articulated his discontent towards the deal saying the secret commitments that go against the people’s will and state interests lack legitimacy before the country. Nevertheless, at the same time, the new China tilt has the open support of Iran’s supreme leader Ayatollah Ali Khamenei since 2016 itself.
Second, the treaty does not comply with Beijing’s broader regional action plan, as the former has conflicting economic and military engagement with Tehran’s arch-rivals like Israel and Saudi Arabia.
The enlarging Sino-Iranian cooperation between Beijing and Tehran is a blow for New Delhi’s strategic calculations. However, the range and depth of these challenges would be determined by the extent of Beijing’s advance in dealing with the conflicts of interest involved. As the pact does not sync with the contemporary ground realities, the perils engendering from the agreement is more of a threat perception anticipated from a potential treaty than something at the door.
