Iran Gains Prestige, Not Power, By Joining China-Led Bloc

Last week, after fifteen long years in political limbo, Iran’s application to join the Shanghai Cooperation Organisation (SCO) was finally approved. Iran first showed interest in the Chinese-led organisation in 2004, when it achieved non-member observer status. Although it first sought full membership in 2008, China and other member-states remained wary, primarily due to the impact of U.S-led multilateral sanctions, which made further political and economic entanglement with Iran a risky proposition. While India and Pakistan were admitted in 2017, continued instability in American policy towards Iran kept Sino-Iranian rapprochement on the back-burner. Since the Biden administration began to signal that it was open to negotiations with Iran, China made a renewed push for improved relations, culminating in the signing of a bilateral Comprehensive Strategic Partnership agreement with Iran in May of this year.

Despite these developments, Sino-Iranian relations remain limited and although Iran’s accession to the SCO—which may take up to two years to complete—appears significant, the move is unlikely to substantially change Iran’s geopolitical position. Despite Iranian rhetoric, the SCO is by no means an anti-Western alliance and is unlikely to furnish Iran much beyond symbolic support for its regional and international objectives. Iranian membership is also not a guarantee of increased Chinese investment or favourable policy decisions. In terms of dividends, Iran will have to make do with propaganda, prestige, and nationalist theatre for international and domestic audiences. 

The Iranian government has touted membership in SCO as a means of opposing the United States and ending Iran’s diplomatic and economic isolation. Iranian President Ebrahim Raisi was unrestrained in his comments at the SCO Summit in Dushanbe, the capital of Tajikistan. “The world has entered a new era,” Raisi said, where “hegemony and unilateralism are failing.” He painted Iran’s membership in the SCO as emblematic of an increasingly multi-polar world, where smaller powers could work in tandem to limit the influence of larger powers. More to the point, he called on member states to support Iran’s civilian nuclear program and resist sanctions, which he called a form of “economic terrorism.” 

Compared to the Iranian side, the Chinese press was more reserved. A report from Xinhua emphasized the SCO’s ability to foster a “regional consensus” and to connect Iran “to the economic infrastructure of Asia.” The news was presented alongside developments related to Afghanistan and Tajikistan, and while described as a “diplomatic success,” Iran’s membership was not cast as a key outcome fo the summit. Raisi’s exhortations to resist American unilateralism were not reported on at all. Xi Jinping’s summit address did not even mention Iran by name.

Despite the lofty rhetoric of the Iranian president, there are few ways in which the SCO will be able to directly confront American hegemony. As noted by Nicole Grajewski, the SCO is “governed by consensus, which limits the extent of substantive cooperation” between states with divergent policies and competing objectives. It also lacks any legal mechanisms to enforce its decisions or punish member-states that violate its policies or have conflict with other members. Far from the “anti-NATO” it has been portrayed to be, the SCO is more a “forum for discussion and engagement than a formal regional alliance.” Two of the eight present members, India and Pakistan, are close U.S allies, and neither China nor Russia are keen to openly challenge the U.S in the Middle East or Central Asia.

In short, Iran will gain the ability to participate in these discussions, but not in a way that is likely to strongly influence the organization or its policies. China and the rest of the member-states will be keen to avoid alienating the Arab states that see Iran as a regional rival. In a move that seems targeted directly at balancing this concern, Saudi Arabia, Qatar, and Egypt were also admitted during the Dushanbe summit as “dialogue partners,” joining nations like Turkey and Azerbaijan. While not full members, the presence of these voices will limit how much sway Iran will have at future SCO summits.

 Furthermore, despite its own rhetorical commitment to facilitating trade, economic, and cultural ties between members, the SCO’s success in these fields has been limited. In terms of tangible projects, the SCO has mostly stuck to regional security initiatives like counter-terrorism intelligence sharing, cross-border efforts to fight drug trafficking, and joint military exercises. While the organization has lately attempted to re-brand itself as an economic development platform, it still lacks any institutions for multilateral development finance. Beijing and Moscow also have divergent interests when it comes to major issues like free trade zones, and questions remain as to whether the organization can function as an actual forum for holding practical negotiations between member states, rather than “simply becoming their vehicle for norm-making power projection.”

China and Iran have set ambitious targets to increase trade for nearly a decade, but bilateral trade remains modest despite repeated commitments, discussions, and international summits. There remain substantial barriers to investment. Chinese investors have been urged for years to invest in Iran’s free economic zones in Maku, Qeshm, and Arvand, but investment remains limited. While China is more than happy to ignore sanctions when it comes to oil imports, outside this strategic trade, Chinese firms remain unconvinced that the profit is worth the risk of doing business, and privately grumble about the difficulty of working with Iranian partners. Iranians also face disruption and competition from Chinese goods and services, leading to popular discontent and political blowback from Iranian companies that have profited from the absence of both Western and Chinese competitors. Although there is no question that there is vast potential in economic co-operation between China and Iran, these are not minor issues, and there is little reason to believe that the SCO will provide a forum to address the barriers.

The SCO provides an impressive stage for China and Iran to enact their shared opposition to Western sanctions, hegemony, and unilateralism. But the realities of international political economy and the conflicting agendas of the body’s member states means that joining the SCO is unlikely to empower Iran in a meaningful way.

Photo: Government of Iran

Iran Looks to Central Asia in Effort to Grow Exports

Over the past year, Iran has faced disruptions in its foreign trade relations following the withdrawal of the United States from the Joint Comprehensive Plan of Action.  Trade with partners like Europe and China has suffered because of U.S. secondary sanctions. In the face of these uncertainties, Iran has adopted a “neighborhood policy” as it seeks to protect trade flows. The policy has been recently expanded to Central Asian states, which serve both as an export market as well as the geographic bridge as Iran seeks to strengthen integration with Russia and China. For the landlocked Central Asian states, Iran is a vital conduit to international waters. In a May 2018 speech, President Rouhani described closer ties with Central Asia as a “fundamental policy.” The policy is now in the early stages of implementation.

At the beginning of December, Tehran hosted two economic summits with Tajikistan and Kyrgyzstan, the first such meetings in two and three years respectively. A week later, an Iranian delegation traveled to Tashkent in an effort to deepen trade ties.

On December 2, a joint commission of economic cooperation was held between Iran and Tajikistan. Iranian energy minister Reza Ardakanian presided over the meeting, which focused primarily on cooperation in energy and transportation projects. Iranian contractors have a history of infrastructure development in Tajikistan, such as the Anzob Tunnel completed in 2015 and Sangtuda 2 hydroelectric power plant. But discussions at the joint commission focused on new projects that would improve Tajikistan’s links to export markets through Iran, and also help support increased bilateral trade, such as the construction of warehouse facilities at Chabahar Port, and the completion of a railway corridor that would link Tajikistan and Turkey through Iran as part of the integration efforts of the Economic Cooperation Organization. 

As part of a broader effort to reset political relations, Iran’s President Rouhani made a state visit to Dushanbe in March 2019. Tajik President Emomali Rahmon may soon make his first visit to Iran in six years.

Just a day after the summit with Tajik officials, Iran held a similar high-level commission with Kyrgyzstan. Mohammad Eslami, Iran’s minister of roads and urban development, led the Iranian participation in what was the first commission meeting in three years. The negotiations, which resulted in an extensive memorandum, included a focus on banking ties and transport links.

In the area of banking the Iranian and Kyrgyz officials discussed the establishment of a protocol to ease trade conducted in national currencies among commercial banks. Iranian economy minister Farhad Dejapsand and his Kyrgyz counterpart, Hukan Batov, also discussed the establishment of a joint export bank and export credit agency to help facilitate trade. In the area of transit ties, Iranian and Kyrgyz officials continued dialogue on the use of Iran’s Chabahar port, where Kyrgyzstan has owned land since 2007 following a land swap with Iran, but has yet to develop warehouses or other infrastructure at the site. Iran has sought expanded ties with Kyrgyzstan in recent years. Kyrgyzstan so far is the only Central Asian state to have agreed a 10-year strategic roadmap with Iran—the agreement was signed in December 2016.

A week after the Tajikistan and Kyrgyzstan summits, Iranian industries minister Reza Rahmani led a delegation of over 50 Iranian companies for a two-day business summit in Tashkent, Uzbekistan. Like Tajikistan and Kyrgyzstan, Uzbek companies use Iranian ports to get their goods to global markets. But with a population of 33 million, Uzbekistan also represents a significant potential market for Iranian exporters. Iran’s Zagros Airlines has re-established a direct light between Tehran and Tashkent, after a three-year hiatus. Bilateral trade between Iran and Uzbekistan grew 40 percent in 2018.

Increased trade with neighbors such as Iraq and Turkey has been a key contributor to Iran’s economic resiliency over the past decade, particularly as sanctions depressed exports to markets like Europe and China. In this regard, improved relations with Central Asian states have a strategic importance for Iran in the face of the U.S. “maximum pressure” sanctions companies. Moreover, the Central Asian states will also play an important role in China’s growing sphere of economic influence and as part of the Russian led Eurasian Economic Union, with which Iran has recently concluded a free trade agreement. If the plans discussed by Iran with its Central Asian neighbors are properly implemented, a new pathway for regional economic development will be opened in the medium-term.

Photo: Railnews.ir