What the China-Iran Strategic Cooperation Pact Means for India

On March 27, China signed a landmark 25-year Strategic Cooperation Agreement with Iran, marking a renewed commitment to their Comprehensive Strategic Partnership established in 2016. News reports have claimed that the deal may be worth $400 billion in Chinese investments and provide Beijing with a source of cheap oil for the coming quarter century. The finalization of the deal – a draft of the 18-page document was leaked in June 2020 – caused a media frenzy, with many concerned that China and Iran were looking to form a new axis in the Middle East, aimed at undermining the United States.

India’s stake in the situation hinges on its interest in Iranian natural gas reserves and its desire for continued participation in the Chabahar port project with Iran. With the deal now inked, and considering India’s changing geopolitical and security environment vis-a-vis China, what are the key implications of the China-Iran pact for India? How can New Delhi respond to Beijing’s major drive to support Tehran?

A China-Iran Axis in West Asia?

Historically, China’s relationship with Iran has been a positive, albeit largely limited one. China has been exceedingly careful in its dealings with the turbulent Middle East; it has cautiously adhered to a balanced policy of not cozying up to Iran and maintaining an equidistant relationship with rival Gulf nations like Saudi Arabia and the United Arab Emirates (UAE). In fact, a quantitative analysis of China’s economic and security engagement in West Asia found that Iran is lagging in comparison to other states like Pakistan and Saudi Arabia.

The China-Iran deal has been widely claimed a game-changer for the region, and a cornerstone for China’s footprint in West Asia. However, in substantial terms, the pact is merely an extension of China’s Arab policy, outlined in its 2016 White Paper. The $400 billion investment figure is both unsourced and unrealistic, considering that Chinese FDI in Iran totaled just $3.23 billion in 2018. Further, the Strategic Cooperation Agreement conforms to similar agreements between Beijing and both Saudi Arabia and the UAE, currently in the works. The deal is thus meant to reinforce the “strategic” element to the China-Iran partnership through a grand political statement, but not materially elevate it.

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