Inscribed on the blue tiles above the entrance to Iran’s foreign ministry in downtown Tehran is the ideological motto that has informed its foreign policy since the 1979 revolution: “Neither East, Nor West; [only] the Islamic Republic”.

But in what appears to be a tactical shift for a theocratic state under pressure from US sanctions and hopeful for better relations with other states, Iran’s leaders are working on a “comprehensive” 25-year plan to become “important strategic partners” with China.

A proposal approved by the Iranian cabinet in June and yet to be put to Beijing reflects the regime’s attempt to better position itself and its economy in the face of US sanctions and what it sees as limited European efforts to save the 2015 nuclear deal, say analysts. That deal – under which Tehran agreed to abide by limits on its nuclear programme in return for sanctions relief – has faltered since the US abandoned it in 2018.

For Iran’s conservative forces — who are hostile to the west — China and Russia offer a counterweight to historically strong business ties with Europe.

“Iran’s political message to western states is that Iran is not alone. [ It is like] shouting: ‘Hello! my daughter has an important suitor and is getting married’, in case they want to rush and do something to prevent it,” said a regime insider close to hardline forces.

“If this makes westerners, in particular Europeans, change their approach, then we can see how to find solutions. If not, Iran will continue to play this game with China as we have no other choice.”

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Reformists, who typically pivot to Europe but are disillusioned by the nuclear deal, also favour a deal with China. “Over the years, China has strengthened its foothold in Iran without trying to interfere in Iran’s political stability, security and independence,” said Saeed Laylaz, a reformist analyst. “This distinguishes China from the US and even Russia, both of which tend to interfere in Iran’s domestic affairs.”

The 18-page document seen by the Financial Times suggests many areas of potential co-operation, including the energy, petrochemicals, technology and military sectors as well as maritime projects. Despite local media reports of Chinese troops being sent to Iran and an Iranian island being given to Beijing — fanned by opposition groups who said closer ties risked Iranian independence — there were no details of this in the plan.

China is already Iran’s biggest trade partner as a crippling US sanctions regime has deterred all but smaller companies without US operations from dealing with Iran. Iran-China trade was $20.7bn during the last Iranian year, which ended in March, according to Iran’s customs administration, roughly a quarter of Iran’s total. The figure does not include Chinese goods reimported from countries such as the United Arab Emirates.

A woman waits for a train at Tehran’s metro. Iran is negotiating with China over the purchase of 630 carriages for the city’s metro, according to comments made by Tehran’s mayor
Iran is negotiating with China over the purchase of 630 carriages for Tehran’s metro, according to comments made by the city’s mayor © AFP/Getty

Scaling up this business to the multi-billion-dollar projects Tehran hopes for requires better relations with the US, Iranian businessmen said. Both Chinese and European companies left Iran in the wake of US sanctions. 

“This agreement is a political decision for Iran but it is a business decision for China, which means China cannot do anything serious with Iran as long as sanctions are in place,” said Pedram Soltani, a businessman who deals with China. “Chinese top financial institutions and banks and big companies will not risk their interests in the US market by investing in Iran.”

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In July, Zhao Lijian, a spokesman at the Chinese ministry of foreign affairs, said China and Iran enjoyed a “traditional friendship” and had “been in communication on the development of bilateral relations”. President Xi Jinping visited Iran in 2016.

Iran’s geographical position was “strategically important” for Beijing, said Yu Jie, senior research fellow on China at Chatham House, especially given its proximity to Pakistan, where China is involved in infrastructure projects through the so-called China-Pakistan Economic Corridor. “Iran would be operating as a very important transit point for China,” she said.

There are already many signs of co-operation between Iran and China. China is one of the biggest export markets for Iranian crude. Iranian analysts say that while Iran wants a guaranteed market for its oil, Beijing wants assurances of safe passage of oil tankers through the at-times tense Strait of Hormuz to China.

A manager of a leading truck company, who asked not to be named, said imports from China had doubled already this year and he expected them to increase further. Iran is negotiating with China over the purchase of 630 carriages for Tehran’s metro, according to comments made by the city’s mayor Pirouz Hanachi in July. “Iran’s bus companies may still dream of Germany’s Mercedes-Benz at night but wake up in the morning to the reality that they can at best afford Chinese buses,” said Mr Laylaz.

Iranian analysts expect the agreement with China to be signed next year, regardless of the outcome of elections in the US in November and Iran next year. But the scope of co-operation will hinge on any negotiations with the US.

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“China will certainly sign provisional agreements in all fields, ” said the regime insider, adding that the investments could be tied to crude exports. “They [China ] will continue this game until US sanctions are lifted when they hope to be in the front row to reap benefits.”

Iran lacked trust in global powers, the person said, but saw the US as a “giant wolf” and China as “an army of ants”. “Both will empty our silos, but we are horrified when we look at that wolf but not too scared of those ants,” he added.

Additional reporting by Thomas Hale in Hong Kong

Via Financial Times