Relations between China and Iran go back to the early twentieth century. Iran was the first country in the Middle East that recognized the new Chinese government after the end of the dynasty rule in the 1920s. However, relations began to sour with the foundation of the People’s Republic of China (PRC) in 1949. In 1955, Iran joined the Baghdad Pact which was perceived as Iranian move against communism. When the Sino-Soviet relationships collapsed in the 1960s, partly due to competition for dominance in Asia, China increased efforts to reflate relations with Iran which had a long record of conflict with Russia. A common opponent was found and the relationship eventually lived up when Tehran supported China’s UN accession in 1971. The Islamic Republic of Iran (IRI), founded in 1979, was first skeptical of the Chinese government as it had close ties to the preceding Shah regime, but Beijing welcomed the new government and managed to maintain the Sino-Iranian friendship. However, the relations were primarily based on the countries’ mutual animosity towards Moscow with little more to sustain it. Throughout the Iran-Iraq War (1980-1988), the relationship got more substantial with China supplying arms to Iran (and Iraq), and Tehran turning to Beijing for post-war reconstruction. In 1992, the two countries signed a nuclear cooperation agreement under which Beijing provided nuclear resources and technology, thus setting the foundation for Iran’s controversial nuclear program. In 1993, the Chinese-Iranian Joint Commission on Economic, Trade, Scientific, and Technical Cooperation was established to expand relations to further areas.
Given the above background, this paper investigates the Sino-Iranian relations on the economic, diplomatic, cultural and ideological dimension. This investigation serves as a basis to speculate about future geopolitical implications. These speculations are by no means comprehensive, but rather focus on limitations of Beijing’s Iran support in the light of the current nuclear crisis and implications that could emerge out of Iran’s possible inclusion into the Shanghai Cooperation Organization (SCO).
China’s energy demand and Iran’s wealth of energy resources are at the very basis of the Sino-Iranian relations. China’s oil and gas consumption, driven by Beijing’s ambitious agenda for economic growth, quadrupled over the past two decades. China has passed Japan to become the world’s second largest oil consumer in 2004. In 2008, China’s oil consumption was estimated at 7.8 million barrels per day (bbl/d) with net imports of 3.9 million bbl/d. While the country’s oil production is forecasted to remain relatively flat, consumption is expected to reach 14.2 million bbl/d by 2025, resulting in an import rate that exceeds 75 per cent.
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Iran, with over 10 percent of the world’s oil reserves and 15 percent of the world’s natural gas reserves, has what Beijing needs to fuel its growth. In addition, from a security strategy perspective, China is concerned of its current energy transport routes from the Middle East through the Straits of Malacca being highly vulnerable to disruption (see Figure 1 in the appendix). Therefore, the possibility of overland pipelines through the Caspian Sea region in the future makes Iran an attractive supplier. Iran, on the other side, needs a partner with the funds and know-how to exploit its oil fields and creates refining capacities. Insufficient refining capacities require Iran to import around 40 percent of its gasoline. Recognizing their complementary interests, the two countries engaged in two major energy deals in 2004. In March 2004, China engaged in a 25 years import commitment over 110 million tons of natural gas per year. Just month later, the state-owned Sinopec bought the exploitation rights of Iran’s largest oil field and made a 25 years import commitment over 150,000 bbl/d. Further commitments aiming developing Iran’s oil and gas industry followed. Today, Beijing is estimated to have invested $120 billion into Iranian energy projects. As a result, China emerged to Iran’s biggest oil import market and most important development partner. Iran, on the other side, is China’s third largest importer of crude oil accounting for approximately 12 percent of total crude oil imports in 2008. However, Iran is not as important for China as may be assumed. In fact, Sino-Iranian bilateral trade accounted for less than one percent of China’s total foreign trade in 2008. Similarly, China’s oil dependence on Iran is often overestimated. Saudi Arabia, China’s leading oil supplier and Iran critic, reiterated its ability to supply China’s entire oil demand single-handedly during an official visit of the Saudi king in Beijing in January 2006. Just one week later, China agreed to take Iran’s nuclear issue to the UN Security Council (UNSC) – perhaps no coincidence. While Beijing forms diplomatic ties around the globe to follows it’s urgent desire to diversify oil imports, Iran is facing political and economical isolation, thus might have trouble finding partners, other than China, that are able and willing to develop its oil industry. Hence, China is a lot more important for Iran than Iran is for China.
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