A "$400 billion" China-Iran Deal? The View from History

14 Oct 2020


A "$400 billion" China-Iran Deal? The View from History

By Bill Figueroa

October 14, 2020


The leak of a document attributed to the Iranian Ministry of Foreign Affairs made waves on social media in June 2020. The document outlined a statement of intent to pursue a strategic partnership between China and Iran that would enhance political, military, cultural, and economic cooperation between the two nations. Called a "deal," a "pact," and even an "alliance" as it filtered into the mainstream media, this news has been received in the United States with predictable panic. Foreign policy commentators proclaimed it was the beginning of an "Iran-China axis" between "totalitarian twins" that plans to "dominate the Middle East" through "defying the U.S," a plan that would be "bad news for the West" and make China "the Middle East arbiter." Despite the document's nebulous nature, commentators asserted that the agreement would fundamentally alter geostrategic calculations in the Middle East. Comments on social media were similarly outraged, with some comparing the alleged deal to Iran's past exploitation by imperial Britain and Russia.

These alarmist predictions stand in contrast to analysts like Jacopo ScitaLucille GreerEsfandyar BatmanghelidjJulia GurolMaysam Behravesh, and Jonathan Fulton. Through careful quantitative analysis, they have pointed out several inconsistencies between the reality of the proposed agreement and the response it has generated. Their arguments can be summarized as follows:

First, such analyses miss the broader regional context. Greer and Batmanghelidj note that China has pursued similar and more extensive ties with most of Iran's neighbors. Saudi Arabia and the United Arab Emirates, Iran's two main regional rivals, have already signed comparable comprehensive agreements with China. Scita and Gurol have written about how China has sought to balance ties with Iran against relations with other Gulf Arab states. As Fulton has noted, the ninth China-Arab States Cooperation Forum (CASCF) Ministerial Meeting was taking place the same week that news of the leak broke. Overall, a partnership similar to the one proposed would bring Sino-Iranian relations back in line with the rest of the Middle East.

Second, economic cooperation between China and Iran has stagnated or declined since 2014. In 2019, Sino-Iranian trade stood at nineteen billion dollars, the lowest number in a decade. At the same time, China's trade relations with other countries in the region have remained constant. While China has defied US sanctions to remain the primary importer of Iranian oil and the only country to do so in violation of US sanctions, it has remained conservative about its overall investment in the Iranian economy over the last six years. Exports, foreign investment, and Chinese construction projects have all fallen considerably. Therefore, the proposed agreement should be understood as an attempt to rectify China's underinvestment in Iran relative to other Middle East states.

Third, the terms of the document itself have been greatly exaggerated. The quoted figure, four hundred billion dollars, seems extraordinarily unlikely given China and Iran's current economic capabilities and the impact of international sanctions. Claims that Chinese military personnel will be stationed in Iran are similarly dubious. Doing so would also be nearly impossible given the Iranian public's long-standing hostility to the presence of foreign armies and the legacy of repeated British and Russian occupations. The Chinese and Iranian press have also been silent on the news, and Iran's oil minister Bijan Zanganeh denied that such massive investment was incoming. According to Scita, the head of the Iran-China Chamber of Commerce, also referred to the report as "a joke." It seems clear that no massive investment is forthcoming.


The take-away from this analysis is that Sino-Iranian relations have historically been consistent, but limited. The record shows moments of cooperation and competition, but overall the lesson is that China does what is best for China.


These observations do not mean that news of improved Sino-Iranian ties is entirely "fake news." Economic and political relations between China and Iran are likely to increase in the next few years, though not to the degree suggested by recent reports. Since the leak, China and Iran have continued to signal their intentions to increase economic cooperation and mutual commitment to the JCPOA. Chinese Foreign Minister Wang Yi and Iranian Foreign Affairs Minister Javad Zarif met on 11 October and reaffirmed their commitment to a Sino-Iranian partnership. More substantially, Wang proposed a Mideast security forum with "equal participation from all sides." Acceptance of the JCPOA will be a precondition to participating in this forum, a clear rebuke of the Trump administration, which abandoned the agreement in 2018.

However, these are minor diplomatic challenges. China has hosted multiple "Middle East peace forums" in the past around the Israel-Palestine conflict. None of these led to any substantial development or significant challenge to US policy, partly because of China's close relationship with Israel. Furthermore, in supporting the JCPOA, China is actually in line with most of the international community. In short, these efforts are a far cry from a substantial realignment of China's Middle East policy.

All of this points to a modest increase in Sino-Iranian relations along the lines of what already existed, not a "milestone in history." Most analyses of Sino-Iranian relations lack precisely this sort of historical perspective, in part because the history of Sino-Iranian relations is not widely known. In order to provide some much-needed context, I will next explore the history of modern Sino-Iranian relations, from the beginning of the twentieth century to the present. Doing so demonstrates that the long-term pattern of Sino-Iranian relations has always been limited, cautious, and self-interested, and that these patterns are deeply rooted in the history of both countries. 

A Historical Perspective

Throughout history, China and Iran were indirectly linked through language, trade, and imperial diplomacy.[1] Persian was an important courtly and religious language throughout Asia, and it played a minor role in Chinese politics throughout the medieval and pre-modern periods. By the early 1900s, traditional ties between China and Iran had lost their earlier significance. At the same time, new forms of political and intellectual contact emerged in the context of a common search for modernity. Once mediated by merchant caravans and imperial decrees, it was now European steamships, railroads, and newspapers that created new opportunities for Sino-Iranian connections.

Official diplomacy between Iran and Nationalist China began with the Sino-Iranian Treaty of 1920 and the establishment of an Iranian consulate in Shanghai in 1934. These developments took place against the backdrop of Sino-Iranian cooperation and competition at the League of Nations. Both China and Iran sought to improve their international prestige by participating in the institutions of European diplomacy. In addition to engagements at the top, there was also pressure from the bottom. Chinese and Iranian merchants in Shanghai took advantage of the improved relationship to push their economic interests. They petitioned for a Sino-Iranian trade agreement to enable the revival of direct silk and tea trade between them. Ultimately, however, this trade agreement never materialized, in part because Iran was slowly becoming a competing producer of tea and silk for the Middle Eastern market. Relations between the two countries did not progress beyond low-level trade and diplomatic exchanges. 

Following the Chinese Communist Revolution of 1949, Iranians began to pay more attention to China. In magazines and travelogues, official state discourse painted the "loss of China" as a tragedy and a warning against the possibility of Communist revolt in Iran. Simultaneously, the Tudeh Party–Iran's pre-eminent Communist organization and the most popular opposition party–saw China as a proverbial city on a hill and the Chinese revolution as a massive achievement of historic proportions. Several Tudeh leaders and a small number of student activists visited China throughout the 1950s to express solidarity and support for the Chinese Communist Party (CCP). Official Chinese newspapers extensively covered Iran and encouraged Chinese citizens to stand in solidarity with their Iranian comrades. For China, Iran stood out as a quintessential victim of Western imperialism–another great civilization humiliated by the West, and therefore a potential ally in the global struggle against imperialism. While these unofficial connections were mostly limited to leftist circles, they laid the groundwork for important ties between China and Iranian student groups in the 1960s, who gravitated towards Chinese theories of Communist revolution.




A political cartoon by famed Chinese cartoonist Fang Cheng (1918-2018) about the Iran oil crisis of 1953. Uncle Sam replaces a poster entitled “American Monopoly” over one that says “British Monopoly” on a barrel of “Iranian Oil.” A brush labeled "Mediate the British-Iranian Dispute" is dipped in a paste bucket: "American Loans to Iran." Behind, a grumpy Mr. Britain.

Maoism became a force in Iranian opposition politics abroad after the collapse of the opposition movement in Iran, which was brutally repressed following the US-backed pro-monarchist coup of 1953. The center of gravity for anti-Shah activity moved to Iranian students in Europe and the United States, where students were hungry for a new model of revolution. Iran’s first Maoist organization, the Revolutionary Organization of the Tudeh Party (ROTPI), was founded in 1965 and sent small numbers of students to China to study guerilla warfare and Marxist theory. Maoist groups became an influential faction within the Confederation of Iranian Students National Union (CIS-NU) and the Iranian Students Association in the United States (ISAUS). They supported some of their most dramatic confrontations with the Shah in the early 1970s, which seriously damaged the Shah's international standing and support. At the same time, Marxist and Muslim students in Iran were affected by both the student movement and international leftist debates. Small underground networks of radicalized students debated the military tactics and Marxist theories of Mao, Liu Shaoqi, Che Guevara, Regis Debray, and other radical thinkers. They often freely mixed Muslim and Marxist ideological concepts. Although they were not Maoist, the Iranian guerrilla movement launched in the 1970s was still impacted by these debates. Radical Third World politics were so popular among the Iranian opposition that the state strategically borrowed the rhetoric and formulas of the radical left.




“The Collected Works of Mao Zedong, Vol 1” Persian edition. Published in Beijing, 1969.

China took note of this development and directly supported the ROTPI. The CCP sponsored the ROTPI’s trips to China, and even hired members to work as translators for Radio Peking's Persian programming. Stronger ties did not develop, however, because China continued to court the Iranian state in secret. For this reason, Beijing refused to commit any actual military equipment or direct assistance to active revolts in Iran, despite the repeated requests. Eventually, this stance became a liability for the Iranian Maoist movement when China began openly supporting the Shah in 1971. Iran's about-face on the China question, which did not occur until after an attempt on the Shah's life by a young Maoist-affiliated radical, was partly motivated by a desire to undercut the appeal of Chinese propaganda in the student movement. In this way, the unofficial relationship between China and Iranian revolutionaries may have substantially impacted official policy. More importantly, it shows that China consistently balanced its ideological support for the Iranian opposition with attempts to reach out to the Iranian government.

Since establishing official relations between the People's Republic of China (PRC) and Iran in 1971, China has continued to take a cautious and balanced approach to Sino-Iranian relations.[2] Official ties developed when Iran was still a monarchy under Mohammad Reza Shah, and China was still ideologically committed to Mao Zedong's particular brand of Communism. In the context of Cold War politics, Iran was interested in playing the "China Card" against both the United States and the Soviet Union and reducing the appeal of Chinese propaganda among the Iranian left. China wanted to tempt Iran away from the United States and the Soviet Union, mostly to counter the Soviet Union after the collapse of Sino-Soviet relations in the 1960s. If a monarchy and a communist dictatorship seemed like strange bedfellows, the situation became even stranger after 1979, when officially-atheist China quickly recognized and established relations with the Islamic Republic of Iran. Positive relations emerged despite profound ideological contradictions between the two governments.

Throughout the 1980s and 1990s, Sino-Iranian relations remained limited even as China slowly expanded its role in the Middle East as an economic power and small arms supplier.[3] China sold weapons to both sides in the Iran-Iraq war, although its contributions were vastly outstripped by the United States, Russia, Germany, and France, which did the same.[4] When the war ended in 1988, Chinese industries played an essential role in reconstructing the Iranian economy, and Chinese companies completed critical projects like the Tehran Metro. By the mid-2000s, China had also become a significant importer of oil in violation of US sanctions.[5] Trade relations increased steadily, from just over one billion dollars annually in the 1980s to nearly three billion dollars by the early 2000s.[6] China also gained Iran's support—and silence—on hot-button issues that traditionally have damaged Chinese international standing. Notably, Iran has refused to condemn China's horrific treatment of the Uighurs in Xinjiang, which recently has escalated to a policy of systematic brutality centered on a network of concentration camps.

Despite many analysts' predictions, Beijing consistently balanced its relationship with Tehran against Washington's demands. John Garver argues that from the 1980s to the mid-2000s:

 "China is both a partner and a rival of the United States. At times it has cooperated with the United States in ways contrary to Iranian policy. At other times, it has cooperated with Iran in ways contrary to U.S policy…The United States–China–Iran relation involves elements of Sino-American cooperation at the expense of [Iranian] policy interests, and elements of Sino-American rivalry with Beijing supporting Tehran against U.S. policy aims…In effect, China has decided not to oppose the United States in the Middle East."[7]

At times, China did oppose American policy in Iran, but it has balanced its support for Tehran with the need to maintain relations with the United States. This policy has remained consistent in recent years, as has been demonstrated by Behravesh and Scita. Though China denounces US policy, it has occasionally voted for resolutions that have expanded sanctions at the United Nations. Though it sells Iran military equipment, it withholds drones due to US pressure. Though it has continued to do business, it has also kept trade and political ties modest and in line with Iran's regional rivals. This is out of necessity, as whatever it might desire, China has no real capacity to oppose things like the US decision to assassinate Iranian General Soleimani or the unilateral re-imposition of sanctions.

The take-away from this analysis is that Sino-Iranian relations have historically been consistent, but limited. The record shows moments of cooperation and competition, but overall the lesson is that China does what is best for China. Since the 1970s, China has judged that good relations with the United States are best for China, though sometimes that pill has proven difficult to swallow.[3] At the same time, it demonstrates that China tends to choose stable relations with geostrategic advantages over volatile ones that are likely to spark conflict, and is not above playing both sides of an issue. Even at the height of Maoist ideological influence, the Chinese state simultaneously courted the Iranian government and the Iranian opposition. Ultimately, they chose stability over chaos and the Iranian state over Maoist rebels. For all its propaganda, it was more interested in its geopolitical goals than overturning the global order. Any future Iran-China comprehensive agreement is likely to be similarly limited. While it may challenge Trump's attempts to tear up the JCPOA, such attempts will not fundamentally alter the balance of power in the region and are likely to be offset by concessions to the US position, especially if tensions between the United States and China decrease.


Ultimately, the idea that China threatens US geostrategic interests through the Persian Gulf is patently absurd on its face. China has a single strategic port, in Obock, Djibouti, which sits on the Bab al-Mandeb Strait between the Red Sea and the Gulf of Aden, and is only a short distance from the Gulf of Oman and the Strait of Hormuz. But this pales in comparison to the United States, which has bases in virtually every Gulf Arab country and a massive capacity to project naval power globally. Moreover, the types of military cooperation between Iran and China under discussion that are feasible–joint training exercises and intelligence sharing–already exist. Although infrequent, there have been three joint drills and port exercises between China and Iran.[4] By comparison, the United States conducts annual air, land, and sea drills with nearby countries like Iraq, Saudi Arabia, Turkey, Pakistan, India, Egypt, and the United Arab Emirates.

The real problem that US officials and hawkish analysts have with Sino-Iranian relations is no mystery: it runs counter to the Trump administration's attempts to instigate regime change in Iran through a cruel policy of wide-ranging sanctions. Despite the Trump administration's repeated protests that they are only seeking to compel Iran to act like a "normal nation," the logic of the sanctions is obvious: if the Iranian people have enough pain inflicted upon them, they might rise up and overthrow the Islamic Republic. This policy is long-standing and has shifted justification from Iran's nuclear ambitions to general accusations of an Iranian threat to regional stability and, perplexingly, the American people. While there is no denying that the Islamic Republic is an authoritarian regime that poses a threat to its own people and has regional ambitions, such exaggerated and inconsistent reasoning only highlights the sanctions' real purpose. The Iranian people are collateral damage in this conflict, as they are the ones who can no longer easily afford food, clothing, and medication. The price of nearly all consumer goods has skyrocketed as Iran's oil exports plummet.

Ironically, sanctions are the reason Iran is courting China in the first place. Since the reinstatement of sanctions, Iran's oil production has fallen from 4 million barrels a day to as low as 1.9 million bpd in June. This is the lowest level since 1981 when Iraq launched the Iran-Iraq War with an attack on Iranian oil facilities. Iran's economy has been hard hit, and ultimately the Iranian people pay the heaviest price. While exaggerated, the leaked deal represents the Iranian state's attempts to tempt China to commit to buying Iranian oil at a discounted price in exchange for economic development. Even this modest and limited attempt to break out of economic isolation is met with apocalyptic predictions from the foreign policy establishment. 

That said, closer cooperation between China and Iran is not necessarily a win for the Iranian people. Proponents of the deal describe it in superlative terms, a mark of China's policy of "mutually beneficial relations" and based on a historic and ancient friendship between Iran and China. It is important to remember, however, that China remains fundamentally self-interested. Opening to Chinese markets has inherent dangers. In the decade when Sino-Iranian trade was at its peak, a flood of cheap, low-quality goods seriously damaged local manufacturing and retail industries and depress wages in Iran. In 2013, the Guardian observed that an influx of Chinese products and capital were putting ordinary Iranians out of business: "Tehran's roads are thus full of taxi drivers who until recently owned businesses, but went bankrupt because they could no longer afford to pay for imports while competing with cheap Chinese merchandise." Should the proposed agreement be put into effect, this problem will no doubt intensify at a time when Iranians are already in severe economic pain. China may also share information and internet censorship techniques, extending the "Great Firewall of China" to Iran.  Iranians both inside and outside Iran have raised such objections, notably in a symbolic letter to the United Nations signed by a coalition of expatriate intellectuals, artists, and public figures.[8]

As a non-Iranian and a historian by training, I refrain from making predictions about the benefits of Sino-Iranian cooperation. However, the view from history suggests that the sober analyses highlighted here are more accurate than the alarmist response of most prominent foreign policy publications. The question "does it benefit Iran" would be better rendered as "who in Iran does it benefit?" It would unquestionably benefit the government's desire for foreign investment, a market for oil, and pushback against diplomatic isolation. But it is less certain that it would help Iranians. The only certainty is that China will pursue a deal that is in its own best interest, whether or not that lines up with the interests of either the Iranian state or the Iranian people.

[1] The following sections are taken from my forthcoming dissertation, “China and the Iranian Left: Transnational Networks of Social, Cultural, and Ideological Exchange, 1905-1979”.

[2] John W. Garver, China and Iran: Ancient Partners in a Post-Imperial World (Seattle: University of Washington Press, 2006) 57-94.

[3] Ibid, 95-129, 166-201

[4] Ibid, 169

[5] Ibid, 237-281

[6] Ibid, 240

[7] Ibid, 281-283

[8] Shirzad Azad, Iran and China: A New Approach to Their Bilaterial Relations (Lexington Books, 2017).