Iran-China relations could strengthen if sanctions lifted, analyst says
Iran will need sanctions lifted if it hopes to strengthen economic ties with China — and that can only come with a successful nuclear deal, an analyst told CNBC.
Iran, which has trade ties with China, is currently facing a host of United States that have devastated its economy.
Iranian President Ebrahim Raisi is expected to meet Chinese President Xi Jinping and Russian President Vladimir Putin in Uzbekistan on Thursday.
It comes as the Islamic Republic prepares to join the Shanghai Cooperation Organization, a security group made up of Russia, China, India, Pakistan and four Central Asian countries.
Iran currently holds observer status in the SCO, but is expected to become a full member at the upcoming summit in the city of Samarkand in Uzbekistan.
Iran’s candidacy for SCO membership does not necessarily indicate that Tehran will enjoy harmonious economic relations with China, Ali Ahmadi, an executive fellow at the Geneva Center for Security Policy, told CNBC on Tuesday.
“That doesn’t mean Iran doesn’t need sanctions relief,” Ahmadi said. “Iran sells oil to China…but the relationship between the two is very one-dimensional.”
Iranian President Ebrahim Raisi speaks during a news conference in Tehran on August 29, 2022. Iran needs sanctions relief from a successful deal with Iran to nurture its relationship with China further said Ali Ahmadi of the Geneva Center for Security Policy. It comes as Iranian President Ebrahim Raisi is expected to meet his Chinese and Russian counterparts in Uzbekistan on Thursday.
STR | AFP | Getty Images
In mid-2018, the United States unilaterally withdrew from the nuclear deal – officially called the Joint Comprehensive Plan of Action or JCPOA.
Since then, Washington has imposed sanctions on Iran which have crushed its economy. US sanctions extend to companies doing business with Iran and a ban on all imports from Iran, among other embargoes.
“For this relationship to grow, you need sanctions relief, because many companies, even state-owned companies in China … don’t want to take sanctions risks,” Ahmadi said.
Earlier this month, the The United States has imposed sanctions on Chinese companies who helped sell Iranian oil.
U.S. sanctions will make Chinese companies think twice about doing business with Iran, especially if the companies are heavily dependent on the West, Djavad Salehi Isfahani, an economics professor at Virginia Tech, told CNBC.
“Chinese producers are heavily dependent on exports to the West, for which they must abide by unilateral US sanctions, even if they assure their Iranian counterpart that they consider them unfair,” Isfahani said.
However, sanctions can benefit more risk-tolerant consumers, said Behnam Taleblu, senior fellow at the Foundation for Defense of Democracies.
Oil sanctions that are not enforced – or that are sporadic – could be opportunities for risk-tolerant traders, while smugglers can find creative ways to generate income, according to Taleblu.
Iran has recently begun to actively pivot to the East. Before the United States pulled out of the nuclear deal in 2018, Iran’s Supreme Leader Ayatollah Ali Khamenei announced that one of his top foreign policy priorities was “prefer the East to the West.”
Last month, former Trump administration national security adviser John Bolton told CNBC that lifting sanctions on Iran could push Islamic State to forge closer ties with China and Russia.
Bolton said that, freed from international sanctions, Iran would become richer and stronger, making it “a better partner for Russia.”
“In the Middle East, where [Russia and China] have overlapping interests, their preferred partner is Iran. So it’s kind of a threesome arrangement that I think has global implications,” Bolton said.