China’s Silk Road Initiative To Extend Influence To Europe
China sees Iran as a Key element in its Silk Road Economic Initiative, that will extend its influence through Central Asia and the Persian Gulf into Europe.
China has long been Iran’s largest Crude Oil customer, but the international sanctions recently pushed Iran from 3rd to 6th place among the suppliers. While China’s bi-lateral trade with Iran expanded to around $50-B by late Y 2014, it is dwarfed by its trade with the United States.
Much of Iran’s geo-strategic value lies as a Key hub in China’s westward overland push. It is an essential element to countering both US President Barack Obama’s eastward pivot and US naval superiority.
China and Iran’s ties go back as far as the Han and Parthian Empires, when the 2 civilizations were trading partners on the ancient Silk Road.
When the Arabs invaded Iranshahr in the 7th Century, Peroz III, son of the swansong Sassanian monarch Yazdgird III, sought and was offered refuge in Tang China by the Emperor Gaozong.
In modern times, despite substantive ideological differences, Ahuhollah Khomeini and Mao Zedong instilled both nations with revolutionary legacies that rejected imperial hegemony and foreign exploitation, putting them on the same side against the US.
Over time, China has become Iran’s most reliable major power ally and a Key to counterbalancing the United States.
During Iran’s 8-year war with Iraq, China was the only major power to supply Tehran with arms. And in 1985, the 2 governments signed a stealth nuclear cooperation deal during a visit by then parliamentary speaker Akbar Hashemi Rafsanjani.
Cooperation went from strength to strength until 1997, when US pressure over the previous year’s Taiwan Strait crisis spurred China to suspend nuclear and missile assistance to Iran. By that time, years of Chinese and North Korean technical assistance had helped Iran establish its own missile production industry, a Key pillar of its defense strategy.
On the economic front, China has reduced its Crude Oil imports from Iran in recent years to preserve the US sanctions waivers it enjoys. Owing to Iran’s sanctions-induced reductions it continues to buy half of Iran’s Crude Oil exports. In addition to the lower prices Iran is offering because of sanctions, Iranian supplies matter greatly to Beijing because the Gulf’s other major energy producers are US partners.
China is pushing West in the context of the Silk Road Economic Belt introduced by President Xi Jinping in September 2013. This “Westward March” was advocated in 2011 by Wang Jisi, one of China’s most strategic minds, with the aim of meeting and counterbalancing President Obama’s eastward pivot.
Under the Xi administration, Beijing’s immediate Silk Road priorities are threefold, as follows:
1. Securing the overland flow of energy from neighboring Central Asia and Russia) to offset the risk of maritime interdiction, especially at two sensitive waterways: the Strait of Malacca through which 80% of Chinese Crude Oil travels and the Strait of Hormuz through which about 40% of its Crude Oil imports pass.
2. Leveraging development projects to pacify the restive but energy-rich western province of Xinjiang, where Uyghur separatists advocating the establishment of an East Turkestan state have repeatedly taken up arms against the Han Chinese.
3. Encouraging greater regional stability and integration by locking China’s western neighbors into a zone of prosperity extending to Europe, with Beijing at its political and economic nexus.
China is the world’s largest net importer of Crude Oil.
Given the risks of maritime interdiction, the need for overland energy conduits is very important. Accordingly, 2 new pipelines came onstream in 2006 and late 2009. The 1st pumps Crude Oil from Kazakhstan’s northern Caspian region of Atyrau through China’s Xinjiang province and toward the coast, amounting to roughly 4% of the 6.2 mln bpd that China imported in 2014.
The other pipeline brings natural gas mainly from the Saman-Depe field in Turkmenistan, which has been China’s largest supplier since 2012. In 2013 terms, Turkmen gas accounted for about 50% of China’s 53 bln cubic meters in annual natural gas imports and about a 16% of its overall natural gas consumption. Ashgabat plans to more than double these exports by 2020.
In accordance with the Chinese saying “if you want to prosper, first build roads, ” Beijing has also been modernizing the vast network of roads and railways crisscrossing Central Asia, financing its efforts through the Asian Infrastructure Investment Bank (AIIB) and the Silk Road Fund.
In 2012, it completed a rail line extending from Khorgos to Zhetygen, Kazakhstan, and onward to Western Russia and Europe, paralleling an existing line from Xinjiang’s provincial capital of Urumqi through China’s Dzungarian Gate, and into Kazakhstan’s largest city, Almaty. This East-West corridor may eventually cut through Iran to the Gulf.
According to Chinese strategist Gao Bai, Beijing has sought to offset US naval superiority by building a high-speed railway capable of projecting power from China’s eastern seaboard into the Eurasian interior, a continental hedge in the event of maritime trouble. And despite the challenges that a China-bound Eurasian order could pose to Russia, President Vladimir Putin gave Xi Jinping his blessing in October 2014 after the latter agreed to include the Trans-Siberian and BAM railways in the Silk Road Economic Initiative.
Iran is not a dominant player in Central Asia, partly because of its relationship to Moscow, and because some of the countries in question are wary of Iranian soft-power penetration, its trade with the Central Asian republics is conspicuously modest.
Iran fills a geo-strategic role as their most convenient non-Russian access route to open waters, and the only East-West/North-South intersection for Central Asian trade.
In May 1996, Iran and Turkmenistan forged the link by inaugurating a 300-kilometer railway between Mashhad and Tejen. And in December 2014, Kazakhstan, Turkmenistan, and Iran inaugurated a railway from Uzen to Gorgan and onward to Iran’s Gulf ports.
Turkmenistan and Iran completed a natural gas pipeline in 1997 linking Korpeje to Kordkuy, followed in 2010 by the Dauletabad-Serakhs-Khangiran pipeline. Turkmenistan supplies about 14 bln cubic meters of natural gas annually to Iran, as well as a large proportion of the country’s imported electricity. Also, Kazakh Crude Oil sent via Caspian Sea tankers has powered Iran’s hydrocarbon-deprived northern provinces, in a swap arrangement that sees Iran selling equivalent amounts on Astana’s behalf via the Persian Gulf.
In addition to the shorter export pathways it offers, energy relations with Iran are tempting because Russia’s long history of pricing with its Central Asian neighbors.
For China, Iran’s geo-strategic value is enhanced by its position alongside one of China’s two overland bridges to the West. The other bridge skirts the northern coast of the Caspian through Kazakhstan and southwestern Russia near the Caucasus region, but Iran presents the more important route because it connects with both Europe and the Gulf. Given that continental anchor, Iran has taken on an importance in Beijing that exceeds the size of its domestic market or its role as energy purveyor.
If a nuclear agreement with the United States brings sanctions relief to Tehran, China will likely intensify its presence in Iran’s economy.
And it will encounter fewer obstacles in extending its road, rail, and pipeline networks through the land bridge that is the Iranian plateau. A nuclear deal could also pave the way for Iran’s full membership in the Shanghai Cooperation Organization (SCO), a request that has been rejected since 2008 on the grounds that Iran is under UN sanctions. The SCO, whose full members include China, Russia, and all of the Central Asian republics except Turkmenistan, is widely seen as a counterbalance to NATO and the United States, so Iran regards it as insurance in the event of future hostilities with the West.
Against this backdrop, Washington , DC has very little room to maneuver.
Trying to containing both China and Iran is a sure way to drive them together. And counteracting Iran while accommodating China would leave loopholes that either could exploit.
The more the Obama White House is distracted by Iranian imponderables, the less powerful its re-balancing of resources toward Asia will be, which suits Beijing just fine.
The Middle East and Iran are two of President Obama’s more immediate priorities, but China represents its most important long-term foreign policy challenge. How Beijing and Tehran interact now will have significant consequences for America’s grand strategy.
By Reza Hashami, CEO, Global Modern Insurance, Inc.
Paul Ebeling, Editor
HeffX-LTN
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