Iran’s Raisi Visits Beijing, Signs 20 Agreements, as Iranian Lion and Chinese ‘Yellow Dragon’ seek to Outflank US Pressure

Ann Arbor (Informed Comment) – Iranian President Ebrahim Raisi visited China on Tuesday in response to an invitation from Chinese President Xi Jinping. China is probably now Iran’s biggest trading partner, and the trade of the two countries increased by 30% in 2022.

At the meeting, twenty economic commitments were signed by the two sides. One of them pledged China to build, inside Iran, a rail link between the capital of Tehran in the center-north and the eastern holy city of Mashhad near the border with Afghanistan. Another spoke of China helping expand Tehran’s international airport.

Agreements were also signed by President Raisi and President Xi regarding various fields, including agriculture, healthcare, information technology, tourism, the environment, and cultural heritage, among others.

Iran has joined the Shanghai Cooperation Council, which groups China, Russia, and the post-Soviet republics of Central Asia in a security arrangement. The SCO sponsors joint military exercises, but it so far is more notional than a real security pact. Iran’s step was part of its policy of looking east for trade and diplomatic ties after the Trump administration froze it out of the economies of the industrialized democracies. Raisi’s trip is meant to strengthen ties with China, which now also feels set-upon by the United States, which disputes China’s claim to Taiwan and which has imposed some sanctions on Chinese officials of the ruling Communist Party and of the People’s Liberation Army. China and Iran see in each other a means to sidestep those sanctions.

Iran has been allegedly supplying Russia with its drones for use against Ukraine.

At the summit, Xi told Raisi that he wanted to increase trade with and investment in Iran, and he pledged to help Iran restore the 2015 nuclear deal or Joint Comprehensive Plan of Action.

BBC Monitoring surveyed the reaction to the trip and to the announced economic agreements in Iranian newspapers, and found that reformist newspapers that were previously critical the the 25-year oil and security deal that Iran and China had signed in 2021 have entirely changed their mind — and that all newspapers, both reformist and conservative, now shower praise on the China relationship.

It seems likely that since the Biden administration has retained Trump’s harsh economic blockade on Iran, the reformists have been convinced that China is the only game in town for Iran.

In May 2018, Trump breached the Joint Comprehensive Plan of Action or Iran nuclear deal and slapped Iran with the harshest sanctions, amounting to a financial and trade embargo, ever imposed on one country by another in peacetime. Trump destroyed the deal even though Iran had scrupulously adhered to the treaty’s provisions, which were negotiated by the entire UN Security Council plus Germany, not just by the United States. The US went around convincing Japan, South Korea and other allies not to buy Iranian petroleum, threatening them with billions in fines if they did not go along.

The main way Iran broke out of Trump’s vise was to turn to the east. Diplomatically and militarily, Tehran grew closer to the Russian Federation. Economically, its lifeline was China. Even China could not disregard US Treasury Department sanctions entirely, however. Some 60% of China’s gross domestic product is generated by private firms, and those firms can be fined by the US to the tune of billions of dollars if they deal with Iran.

Iran and China both complain about unilateral US sanctions, not supported by the United Nations. China has to be careful, however, how it pushes back, since its private firms have substantial assets in Europe and the US, which can be confiscated at will by governments who see Beijing as soft on Iran.

Trump cut Iranian oil exports to perhaps 200K barrels a day in spring 2019, but over time these climbed again, to 800,000 barrels a day. The biggest buyer of discounted Iranian petroleum was China. It has a lot of small private refiners and in-country distributors in the south around Shanghai. These are companies that do not trade in dollars and do not trade internationally. They are therefore extremely difficult for the US Treasury Department to fine, since its authority only runs to dollar transactions. Iran accepts Chinese yuan or renminbe, which most countries do not, since it is still considered a soft currency. It is estimated by Reuters that China imports the bulk of that 800,000 barrels per day from Iran, which is brought in by stealth tankers hiding from the satellites, which have turned off their GPS transponders. Iran has to sell this oil at a steep discount because of the US sanctions.

From all accounts, Iran has suffered economically from the Russian war on Ukraine, since sanctions have also now been placed by the US on Russian petroleum, which is sold dirt cheap to China as a result.