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US Sanctions on Iran: Good or Bad News for China?

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US Sanctions on Iran: Good or Bad News for China?

Some Chinese are celebrating Trump’s move, but the new sanctions pose economic and political risks for China.

US Sanctions on Iran: Good or Bad News for China?
Credit: Russian Presidential Press and Information Office

On February 3, the administration of U.S. President Donald Trump enacted new sanctions on Iran. The measures are partly in reaction to Iran’s January 29 test of a medium-range missile. Based on Trump’s decision, the U.S. Treasury Department will apply sanctions on 25 individuals and companies connected to Iran’s ballistic missile program and those providing support to Iran’s Islamic Revolutionary Guard Corps Force. The sanctions list includes three separate networks linked to supporting Iran’s missile program, which the U.S. opposes.

The new U.S. sanctions come at a time when most Iranians, according to a poll released in December 2016, are not positive about Iran-U.S. relation. A majority of respondents believed that the United States would live up to its obligations under the Joint Comprehensive Plan of Action (JCPOA), the deal reached between Iran and other world powers to limit Tehran’s nuclear program. The new sanctions are not surprising given the fact that during the campaign, Trump harshly criticized the Iran deal. He told the American Israel Public Affairs Committee in March that the JCPOA was “catastrophic for America, Israel, and the whole of the Middle East.” He added, “My first priority is to dismantle this disastrous deal on Iran.”

When the news of the sanctions broke, many Chinese assumed that it was “bad news” for Iran, but “good news” for China. The sanctions, many believed, gave China an opportunity to enhance its relationship and trust with Iran, as well as expand its economic cooperation with Iran.

This positive evaluation of the impact the sanctions will have on China’s interests is largely based on the worry that after JCPOA, China’s long-held dominant economic and investing position in Iran is being challenged by the companies from Western states, especially those from France and the United States. The Iranians, while valuing China’s economic relations with their country during the past few years of intense sanctions, now hope to establish new connections with the West to get more advanced technology and management skills. China, in Iranian eyes, is still a state that lacks needed technology and management experience.

Against this backdrop, some Chinese believe the new sanctions will create valuable opportunities for China’s interests in the Middle East. On the one hand, politically, the new U.S. sanctions on Iran will worsen the Iran-U.S. relationship, pushing Iran further into the “anti-U.S. camp.” On the other hand, the new sanctions, according to some Chinese, may deter further possible economic cooperation between Iran and the West. Some believe that, with these sanction and the possibility of more sanctions in the future, China may become the only reliable economic partner for Iran — Iran’s only choice.

However, the new U.S. sanctions on Iran actually challenge and may harm China’s interests in not only Iran, but also in terms of China’s “One Belt One Road” initiative (OBOR). The most direct challenge is economic. China’s economic relations with Iran were largely untouched by the series of U.S. sanctions adopted by Trump’s predecessors over the past decade. Now, one of the three networks sanctioned by the United States includes Chinese individuals and their companies. Chinese actors may serve as a logical target for undermining Iran’s ballistic missile tests due to a documented history of disguising and shipping equipment to Iran that bolsters its missile program and which, under current international restrictions, Tehran cannot acquire on its own.

Besides the economic challenge for China, the more serious and long-term challenge is political. Given the geopolitical rift and competition between the “Shia camp” led by Iran and the “Sunni camp” led by Saudi Arabia, the new sanctions amplify the political contest in the Middle East, rather than alleviate it. For the sake of China’s OBOR initiative, it is important for Beijing to stay neutral and develop fair relationships with all Middle East states, regardless of the different ideologies and political rifts in the region. However, one of the most important premises for OBOR’s success in the Middle East is a relatively peaceful region. The United States’ new sanctions may further accelerate the turmoil of the Middle East and widen the contrasts in the region; it will be a challenge for China to decide whom to support.

On the other hand, given the fact that the new sanctions will see U.S.-Iran ties deteriorate, China-U.S. relation may also face challenges. Although Trump criticized China during the election campaign by labeling China as a “currency manipulator” and later promised to strengthen U.S. relations with Taiwan, China is not on top of Trump’s “criticism” list. Trump has criticized Germany, Japan, Mexico, or even Australia more pointedly than he has China. However, an Iran full of increasing “anti-U.S.” sentiments after the new round of sanctions may push China into an embarrassing international position. For example, Iran is one of the possible candidates for the enlargement of Shanghai Cooperation Organization (SCO), which is one of the most important multilateral mechanisms that China leads. If a more “anti-U.S.” Iran, which has already been an “observer state” of the SCO, successfully becomes a full member, it is quite likely that the SCO would turn from a neutral international group (as China hopes), to an “anti-U.S.” regional organization. This would put China in an awkward spot.

Trump’s new sanctions on Iran represent a slight escalation compared to the Obama administration, which in the wake of signing JCPOA preferred to target Iranian proxies and allies like Hezbollah or Syria rather than Iran itself. For China, the U.S. sanction may become big challenges, not only to China-U.S. relation, but also to China’s relations with Iran and to the OBOR initiative in the Middle East.

Wang Jin is a Ph.D. Candidate at the School of Political Science, University of Haifa, Israel.