The China-Iran link could be a Geopolitical Gamechanger : the Stakes for India

Sub Title : The deal will give immense strategic advantage to China

Issues Details : Vol 14 Issue 3 Jul – Aug 2020

Author : Lt Gen Syed Ata Hasnain, PVSM, UYSM, AVSM, SM, VSM & BAR (Retd)

Page No. : 22

Category : Geostrategy

: July 28, 2020

There is news of a China- Iran deal, which was conceived four years ago. Its coming to light now is not surprising, given the space China finds  itself in. If it fructifies, immense strategic advantage will accrue  to China and Iran will try and leverage it to draw the maximum advantage. It is India which will have to manoeuvre deftly in the new maze being created

The Covid 19 pandemic has paralyzed the world and created geopolitical opportunities galore. In consequence  pin pricks, pressure points and strategic messaging have all become the order of the day. It happens when uncertainty looms large in the geopolitical environment. China’s opening of multiple windows in South China Sea and against Taiwan, Hong Kong, Vietnam, Australia and India, sets new tones and narratives but all in the former Asia Pacific (now Indo Pacific) region. That is exactly where the US wishes to shift its focus to fight China’s future ambitions. It has always wanted that shift even before the turn of the millennium but high profile events such as 9/11 and the onset of the wars in Afghanistan and Iraq always pulled it towards West Asia. Now with West Asia uncharacteristically quiet and all the international geopolitical focus suddenly revolving around China and its activities in South Asia and the Indo Pacific it seemed just the time for China to create yet another pull to get the US focus diverted back to West Asia. That is what is being assessed about an 18 page draft strategic deal between China and Iran drawn up in 2016 which now appears to have been deliberately leaked to influence which way international groupings may swing post Covid 19.

The Draft Deal

As per the draft deal China would expand its presence in Iran’s banking and telecommunications sectors as well as railways, ports and other projects. In exchange for this investment, Iran would supply Beijing with a heavily discounted supply of oil over the next 25 years.

China is a key market for Iranian crude oil exports, which have been dampened by US economic sanctions imposed after Washington’s 2018 withdrawal from the 2015 Joint Comprehensive Plan of Action (JCPOA) nuclear deal with Tehran. The deal would be worth $400bn – with over 100 projects detailed in the document.

It also details a deepening military relationship between China and Iran. The deal would allow China to gain a foothold in a region where the US has had strategic residence for the last few decades. The proposal outlines joint training and exercises, joint research and weapons development and intelligence sharing in “the lopsided battle with terrorism, drug- and human-trafficking and cross-border crimes”. All the latter references to terrorism actually translate into comprehensive intelligence sharing.

It also proposes investment in two port facilities in Iran, along the coast in the Sea of Oman, which would add to an expanding list of ports that China has constructed along the Indian Ocean that give the country  its military refuelling stations running from the South China Sea to the Suez Canal. China has been stepping up its military cooperation with Iran over the past decade.

For all these years many analysts wondered why China was so tentative about expanding business and strategic links with Iran in a bigger and more transparent way which would convey its clear disagreement with US policy on Iran. Its approach to issues on Iran in big power meets bordered on remaining just transactional. The US re-imposed sanctions after it pulled out of the Joint Comprehensive Plan of Action (JCPOA) in 2018 but some short term concessions were available to nations such as India and China which obtained much of their energy needs from Iran. India had its compulsions about adherence to US directives due to its emerging relationship with the US and the need for US support for its technological development and other considerations which have helped develop the emerging Indo-US strategic partnership and kept it on even keel.  It seems the Chinese too had some compulsions about not getting their energy requirements from Iran to the extent they needed. China’s oil imports reduced almost six times over six months within 2019. A natural surmise from the above is that China yet lacked strategic confidence to implement those agreements in the face of US sanctions. We may recall that the Trump Administration’s trade related coercion was just about taking shape. The period Apr-Jul 2020 has been a time of serious introspection, testing of resolve and re-strategizing by China in relation to its future position in international geopolitics. Under moral pressure from the US and other nations over the spread of Covid 19, the terming of the virus as Wuhan virus and appearance of a bolder attitude by some of these nations has given it the perception of being pushed from the space it had acquired for itself over the last two decades. All actions it took so far were in the domain of near direct involvement; SCS, Hong Kong, Taiwan and India, thus enhancing risk and creating conditions for greater solidarity among pro-US nations.  An alternative was necessary through diplomacy and China achieved the required diversion by projecting its will to engage with Iran through the leaked draft agreement.

Sino-Iran Strategic Interests

The broad strategic significance of Iran and West Asia is well known but the region now assumes a different importance with China’s direct involvement beyond the commercial and energy based interest that it has evinced so far. A change of tack by a big power in international geopolitics has the capability of creating a major impact. A prime example was in 2015 when Russia proactively stepped up its military presence in Syria in support of Bashir Assad. Its decisions and actions were all taken in its strategic interest to maintain the balance of power.

So, what was it that China had seen in Iran in 2016 when the agreement with was first conceived and what emboldened it to discard its caution which had prevented it from pursuing the agreement to finality? These may be some of the reasons:-

  • Energy security appears to be at the heart of it. Guaranteed supply of energy from Iran enhances China’s economic confidence which has off late been under some strain. Although China also obtains energy from Saudi Arabia there always exists the possibility of denial by Saudi Arabia under US pressure.
  • An important consideration appears to have been the rising US interest to shift focus to the Indo Pacific to contest China’s apparent attempts at domination of the West Pacific.
  • Russia was already in support of Iran and Sino-Russian interests are in consonance. The US-Saudi-Israeli combine was threatening to dominate West Asia with only a token US military presence. For China it was strategically important to keep the US pegged to its West Asian interests.
  • West Asia is likely to be beset by Islamic sectarian conflicts. The rich Gulf States being Sunni are all ranged against Iran. Thus, while it appears strange that China is throwing its lot with Shia Iran what appears likely is that China is investing in what it assesses as the future power centre in West Asia.
  • Russian naval presence was only in the Mediterranean leaving space in the Persian Gulf for China whose interests anyway were deeply in favour of a strong naval presence in the North West Indian Ocean. With Djibouti and Gwadar already virtually ‘acquired’, China evinced much interest in Chahbahar.
  • Chahbahar assures access to Iran’s energy resources even if the Straits of Hormuz are closed to oil traffic due to tensions in the Persian Gulf.
  • Iran is the overland terminal region for China’s Belt & Road Initiative in West Asia with potential for expansion further west into Europe through Turkey and south west into Africa.
  • It would be an extension of the Sino-Pakistan relationship which also looks at Central Asia as an area of strategic significance. It would help stabilize Pakistan’s west and north leaving it to concentrate in the east against India. That would greatly increase Pakistan’s value as a strategic partner in an apparent joint coercion of India.
  • 400-500 billion US $ as the contemplated value of such a deal is no small sum of money. It would revitalize China’s manufacturing hubs in the long supply chain which has ensured Chinese prosperity all these years.
  • Joint training, equipment provision and manufacture, as also intelligence would ensure presence of China’s long arm of security in the region.

Given the rising importance of all the above, especially when the stage is being reset for a return to fresh balance of power politics and the shifting focus to the Indo Pacific a revitalisation of the draft agreement helps to impose caution. China probably views Iran as a nation which could build nuclear weapons but it won’t, provided it is economically secure and retains its influence in the ongoing Shia Sunni struggle. China also wishes to further test the resilience of the European powers and the US staying the course knowing fully well how reluctant the former have been as regards the virtual scuttling of JCPOA 2015 by President.  Two other reasons could be subscribed to the leak of the draft agreement and the change in China’s strategic approach. The first is the election scenario in the US with the polls still three months or more away. Failure to continue the imposition of sanctions if China goes ahead with the deal would weaken Trump’s ability to project his strong stance towards Iran; China would be far happier with Trump out of the way.  Second with Russia and China both not adhering to the sanctions the stage would be set for writing new rules which do not necessarily adhere to US strategic needs. Whether there exists sufficient leeway for the Sino Russian combine to so decisively take the diplomatic battle to the US remains uncertain because US power looks weakened due to the pandemic, a potential economic downturn and internal political rifts. Yet the US is in no way down and out and retains the power to dictate the course of strategic events.

Likely Impact of the Deal on India

How will the signing of the deal impact India? Every Indian analyst calls Iran a most important nation for India. The importance can be described as under:-

  • There is a civilizational relationship which exists between India and Iran. However, Iran has a perpetual complaint that India never translates this link into anything strategic.
  • As Pakistan’s western neighbour a strong Indo-Iran relationship offsets the possibility of Iran’s support to Pakistan which could be detrimental to India’s interests.
  • Iran remains an important player in Afghanistan just like India but that importance is not allowed to be translated on ground due to Pakistani intransigence and efforts to keep both nations out of Afghanistan.
  • As a Shia dominated state it balances the larger extremist Sunni intent to dominate Islamic politics.
  • Iran can substantially contribute towards energy security of India provided geopolitical pressures are put to rest.
  • The port of Chahbahar is the crucial factor. As explained earlier the port lies outside the Gulf and thus could remain open even with the closure of the Straits of Hormuz. It also offers potential for being the start point for the construction of a rail link to Zahidan on the Iran-Afghan border. With the existence of the Indian constructed Delaram-Zeranj Highway the route from Chahbahar to Kabul can become an important artery for trade with Afghanistan and further with Central Asia. It will neutralize all Pakistan efforts to deny overland access to Afghanistan and Central Asia.
  • The presence of 25 million Shias who are well respected in India, provides a clear cultural link to Iran as against the abhorrent way in which Shias are treated as apostates in Pakistan.

Ever since India’s decision to move closer to the US for various strategic reasons which include economic, military and technological aspects India has remained on the horns of dilemma. It has not been able to translate the obvious advantages that accrue from a strong Indo-Iran relationship due to the competing demand for an Indo-US Strategic Partnership which too has a slew of advantages. The need to safeguard its interests in a strategic environment which is witnessing the progressive rise of an ambitious China creates the competitive demand for such a strategic partnership with the world’s only superpower with which India has considerable convergence of interests.

In view of the obvious advantages of a strong Indo-Iran relationship India has been attempting to balance its relationship between US and Iran. India, despite close relations and convergence of interests with Iran, voted against Iran in the International Atomic Energy Agency in 2005, which took Iran by surprise. Most analysts rightly acknowledged that India’s votes against Iran at the International Atomic Energy Agency were “coerced”. Ever since It has been a difficult call for India which was made easier by the JCPOA of Jul 2015 which partially lifted sanctions and aimed at de-isolating Iran. China’s President Xi Jinping visited Iran in early 2016 followed by Prime Minister Narendra Modi in May 2016. The former visit as is revealed now probably led to the conception of the draft deal now being spoken of. However, interestingly Prime Minister Modi’s visit too resulted in a transparent set of agreements on the development of Chahbahar port and the Farzad-B gasfield. . Most important was the development of the 650 kilometer long rail link to Zahidan on the Afghanistan border which as stated before would establish India’s alternate connectivity to Afghanistan, Central Asia and to Russia’s North-South Corridor.

Interestingly it appears that Iran was willing to live with cooperation with both India and China as is evident from the two deals. However, China and Iran perhaps were yet unwilling to translate this substantial package deal although China pursued business as usual with Iran in terms of energy trade. India on the other hand was following up its agreement transparently although not as energetically as Iran wished.  A consignment of wheat was transported from India to Afghanistan through Chahbahar. However, President Trump’s re-imposition of sanctions after pulling the US out of JCPOA in 2018 upset the entire applecart. India had to slow down its efforts on Chahbahar reducing these to almost zero and the Indian company IRCON could not pursue the Zahedan rail project either.  Although it is often quoted that Chahbahar remained outside purview of sanctions the US appears to have used a bureaucratic ploy to make sanctions work. It may have permitted Chahbahar to remain outside sanctions but the companies working on these projects including the railway were not exempt. To worsen it India completely stopped import of Iranian oil after the period of US reprieve ran out. The transformational civilizational relationship in the making with Iran thus came to a grinding halt. India on its part has taken some measures from time to time to ride out the period until the US elections and maintain a positive stance towards Iran.

Pakistan’s Gain

For Pakistan two issues would be heartening and strategically meaningful.  First, any strategic loss for India would be welcomed. In this case potential loss of Chahbahar and the rail link along with connected facilities would ensure that Indian presence which was threatening to reach into Pakistan’s west would be neutralized. The strategy of denial of access to Central Asia and Afghanistan would continue to be played. India’s inability to assist Afghanistan in a more meaningful way would contribute to lowering of Indian influence in the period that Afghanistan is going to witness in terms of struggle for space, post US withdrawal whenever that takes place.

The second issue for Pakistan to remain positive about is the enhanced and potentially strategic Chinese presence on its western flank. Thus far Pakistan was considered Saudi Arabia’s proxy on Iran’s eastern flank. The question would now be which equation strategically suits Pakistan more; the Saudi-US or the Sino-Iran. Ideologically Pakistan is far closer to Saudi Arabia on one hand and has also enjoyed a love hate relationship with the US. Yet, its geostrategic location will always remain important for the US. On the other hand, the Sino-Pak partnership would be further strengthened with possibility of Chahbahar and Gwadar being linked.  Russia too would be apprehensive about the Saudi-Pak influence in the Central Asian Republics which is a region considered its soft underbelly. It would be inclined to lean towards the Sino-Pak link.


There are far too many imponderables yet to discern which way the crucial region of South West Asia goes. There is as yet no certainty of the draft deal becoming a reality too. The US would contest the rise of Chinese presence in West Asia and the West Indian Ocean region. Much will depend on which way the US Presidential elections in Nov 2020  go and whether there will be any move thereafter towards a Western effort to retrieve lost ground if Joe Biden comes to power. Congruence of US-Euro interests will need to be retrieved before anything substantial is initiated. US efforts to shift the centre of gravity to the Indo Pacific will remain a challenge if China’s presence in West Asia leads to initiation of fresh conflicts.

For India, the important thing is to ensure that it continues to work on its existing equations and partnerships. The Quad in particular will be a balancing group to the rising Chinese ambitions. Meaningful strategic partnerships with more enhanced military cooperation will help in countering the Chinese search for ways of imbalancing Indian interests. With strengthening Chinese presence in North West Indian Ocean, a balancing act would mean enhanced presence of friendly navies around the Andaman & Nicobar Islands. It would also mean much more energetic moves to manage our neighborhood. Sri Lanka and Maldives would be two very important nations on which China would place its focus to extend its naval presence in the Indian Ocean.