Should the deal be finalized, it will firmly establish China as the key interlocutor between those two bitter enemies, Israel and Iran, with both of whom it long has maintained excellent relations. Despite America’s major military presence in the region, in practice it will be China that will mediate between Tehran and Jerusalem in order to ensure that its sources of oil, gas and technology remain stable and secure.
China’s deal with Iran parallels those that it signed with Russia in 2013 and 2014. The 2013 arrangement provided for Russia to supply 360 million tons of crude over 25 years, with a value of $270 billion. When the deal was announced, skeptics argued that the arrangement was far less than met the eye. It seemed doubtful that Russia would even come close to delivering oil in the amounts called for in the agreement.
Moscow is proving the skeptics wrong. In 2019, Russia delivered 900 million barrels, or about 125 metric tons of crude, to China. Based on delivery levels through March of this year, it is estimated that Russia will deliver 1.5 billion barrels of crude, or at least 165 million metric tons, in 2020. At that rate, Russia will surpass the agreement’s 360 million ton target in 2021. Similarly, Moscow is likely to meet China’s needs for natural gas as outlined in their 2014 agreement. Russia’s recently completed $55 billon Power of Siberia pipeline began delivering natural gas to China in December 2019.
Given China’s insatiable need for energy supplies to fuel its economy, particularly as it recovers from the economic impact of the coronavirus, there is no reason to expect that its prospective oil-for-investment arrangement with Iran will prove any less successful than those it established with Russia.
For its part, China will pour investment funds into Iran’s banking, telecommunications and infrastructure sectors. Indeed, Chinese development of ports and airports can be expected to bolster its maritime “string of pearls” that currently ranges from Hambantota in Sri Lanka through Gwadar in Pakistan and on to its base in Djibouti on the Horn of Africa. Though nominally commercial undertakings, China’s port developments clearly are of military significance that will be further enhanced by the joint training and exercises, joint military research and development, and intelligence cooperation that its agreement with Iran also provides for.
Yet even as it embeds itself in Iran’s economy and military structure, China continues to be a major investor in the high-tech sector of Tehran’s arch enemy, Israel, much to the chagrin of Washington. Faced with American pressure, Jerusalem backed away from awarding the Chinese firm Hutchinson a contract to construct the world’s largest desalination plant. But it is entertaining bids from Chinese companies to build the Tel Aviv light rail that will pass near its Defense Ministry headquarters. All of the bidders have built or are building railways, subways or motorways in Iran. A Chinese firm, Shanghai International Port Group, is building a container port in Haifa. China Harbour Engineering Company is building a port in Ashdod. Both ports are located cheek by jowl to Israel’s major navy bases. For this reason, the U.S. Navy has been contemplating termination of all port visits to Haifa.
Israeli analysts fear that China might employ its economic leverage to pressure Jerusalem to forego any planned attack on Iranian nuclear facilities, or to exert political leverage in Jerusalem at the United Nations or elsewhere. Israel already finds itself forced to coordinate its operations in Syria with Moscow. It now would have to do the same with China vis-à-vis Iran. Interestingly, Iranian opponents of the proposed arrangement with China also fear that Beijing’s heavy hand would restrain Tehran’s freedom of action in the region. The fears of both Israelis and Iranians are probably not misplaced.
Finally, Beijing’s increasingly close military and economic relationship with Russia — which, like Iran and China, is a target of American sanctions — will further strengthen China’s hand in the Middle East. Unless Washington can develop a coherent strategy that enables it somehow to engage all of the region’s players with something other than, or in addition to, sanctions, it is likely to find itself relegated to the sidelines as little more than a bystander while China emerges as the arbiter of the region’s fortunes.
Dov S. Zakheim is a senior adviser at the Center for Strategic and International Studies and vice chairman of the board for the Foreign Policy Research Institute. He was under secretary of Defense (comptroller) and chief financial officer for the Department of Defense from 2001 to 2004 and a deputy under secretary of Defense from 1985 to 1987.
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