Bargaining with Biden could be Iran’s ‘best’ path to reviving economy

January 13, 2021

A new administration may give Iran a chance to bargain for some freedom from sanctions. (AP Photo/Susan Walsh)

The new U.S. presidential administration offers Iran a rare chance to bargain for the lifting of American sanctions, a researcher says, which would allow the Persian Gulf state to deepen economic ties to China, a key trading partner and ally, one of its “best” shots at reviving its ailing economy.

Iran has seen its exports to China plummet more than 36% since the U.S. reimposed a “maximum pressure” campaign of sanctions against it in 2018, according to Mordechai Chaziza, a senior lecturer of politics and governance and social sciences at Ashkelon Academic College, Israel, who specializes in Chinese foreign policy and relations.

In his most recent research paper, published in late October in the Digest of Middle East Studies, Chaziza found that U.S. sanctions were also effective at preventing Iran from integrating into the Belt and Road Initiative, a $1 trillion infrastructure plan in the Middle East helmed by China. Joining the project would be “lucrative” for Iran and potentially raise the price of its goods, Chaziza explained.

He further contends that President-elect Joseph Biden, who served as vice president under President Barack Obama, will most likely seek a new nuclear nonproliferation agreement with Iran to reset relations, though it’s uncertain whether Biden will succeed.

“In order to achieve a new atmosphere, [the Biden administration] will consider lifting the sanctions of the Trump administration, and this could be the moment when China-Iran relations will be upgraded,” Chaziza told The Academic Times.

China first launched the BRI in 2013, outlining a series of major investments in new railroads, ports and energy facilities in a bid to revive the ancient Silk Road trade route between Asia and Europe while decreasing its dependence on Western oil exporters.

China has since committed itself to greater trade and political coordination with Iran, vowing to bolster trade volumes between the two to more than $600 billion by 2026.

However, Iran has been unable to “fully integrate” into the program, Chaziza said, due to secondary sanctions, which bar companies and individuals from trading with a country. These sanctions were reimposed in November 2018, when the U.S. withdrew from the Joint Comprehensive Plan of Action, or JCPOA, commonly known as the Iran nuclear deal. 

While the delayed implementation of the BRI did not apply direct pressure on Iran’s nuclear program, it did help to increase the economic strain on the country, which erupted in nationwide civil unrest in late 2019 through mid-2020.

“Iran does not have many options, as the reluctance is with China and the Chinese companies that are currently refraining from integrating it into the vision,” Chaziza said. “The options facing Iran are to enter into negotiations with the U.S. and reach an agreed compromise, or wait patiently as they have done so far and wait for the right moment to join the BRI.”

Despite this setback, Iran finds itself in a somewhat comfortable position, as linking Iran’s expansive railroad networks to those in Turkey is key to China’s vision of linking Asia and Europe. This was evident, Chaziza argued, when China cut the ribbon for a new railroad connecting the Mongolian interior to Tehran just two days after the U.S. withdrew from the JCPOA, a move that may have been deliberately timed to undermine the U.S.

To date, China remains Iran’s largest trading partner even after the return of U.S. sanctions, using firms that have no ties to Western markets, though the volume of trade has declined significantly due to the restraints.

China is also the only major foreign investor in Iran since European firms previously operating there withdrew from the country in the fallout of the sanctions.

“Iran knows that the implementation of the BRI depends on it because of its geographical location and therefore cannot be waived,” Chaziza said.

Notably, in July 2020, The New York Times obtained a secret 18-page proposal drafted by the two countries, indicating that talks on the BRI are still ongoing in spite of American blockades. The draft, labeled as the “final version,” would expand Chinese investments in banking, telecommunications and transportation in Iran in exchange for the “heavily discounted” supply of Iranian oil for 25 years.

“The BRI is one of the best options to help the Iranian economy recover from years of painful sanctions,” Chaziza said.

However, the U.S. may view the budding courtship between Tehran and Beijing as a potential threat to its sphere of influence, Chaziza said, especially since the BRI also targets investments in key U.S. allies in the region such as Saudi Arabia and the United Arab Emirates.

In fact, he wrote that China’s commitments to Iran mirror those it made with U.S. allies, which could prompt the Biden administration to discourage the Saudis and others from further engagement with China.

Chaziza found that such partnerships are so common now that China has developed a “scale terminology” with which it denotes the importance of each partnered country to Chinese foreign policy and economic objectives. At the top of the hierarchy are “comprehensive” strategic partnerships, of which China has created seven in the Middle East since 2012, including with Iran.

Though largely symbolic, the terminology also guides “enhanced practical cooperation” between nations, as China’s comprehensive strategic partnerships involve frequent high-level communications between diplomats and top leaders, Chaziza wrote, citing earlier research on the subject.

Despite having numerous incentives to compromise with the U.S., it’s unclear whether Iran is prepared to make concessions on its nuclear program, Chaziza said. He also noted that the Iranians may have a limited amount of time before Biden leaves office to make a deal.

“The agreement will probably be graded and spread over years, and then it could be that the administration will change and the atmosphere will also change,” he said. “Iran has a short window of time to reach an agreement and rake in as much profit as it has done with the Obama administration.”

The paper, “The impact of U.S. sanctions on Iran’s engagement and integration in the Belt and Road Initiative,” was published Oct. 23, 2020 in the Digest of Middle East Studies. It was written by Mordechai Chaziza, a senior lecturer at the Department of Politics and Governance and the division of Multidisciplinary Studies in Social Science at Ashkelon Academic College, Israel.

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