Iran Nuclear Deal: China Approaches a Watershed

Conventional wisdom has it that China stands to benefit from the U.S. withdrawal from the 2015 international nuclear agreement with Iran. This relative gain might come at Europe’s expense, particularly if major European companies feel that the risk of running afoul of U.S. secondary sanctions is too high.

The record to date shows that, while China supported the sanctions, it proved itself adept at circumventing any of the restrictions.

However, this time round, as China joins Russia and Europe in trying to salvage the deal, things could prove to be different in ways that may give China second thoughts.

The two biggest changes are that China has to take account of a United States of America that has Donald Trump as its president and of a Middle East that is much more combative and assertive, a region that sees its multiple struggles as existential, at least in terms of regime survival.

China’s trade with the United States stood last year at $636 billion, trade with Iran was in that same period at $37.8 billion or less than 5% of the U.S. trade volume.

In the Middle East, the fallout of Mr. Trump’s recognition of Jerusalem as the capital of Israel and his seemingly unqualified backing of Israel in its almost certainly stillborn plan for peace with the Palestinian is reverberating.

Where China has to recalculate

China has to rethink its path in three categories: First, the degree to which China feels that it can continue to rely on the U.S. defense umbrella in the Gulf.

Second, there is clear-cut pressure on China by Middle Eastern states to step up to the plate and shoulder the responsibility that comes with being a great power, if not take sides.

And third, deal with a region that is not only in a process of transition, but that is also volatile, violent and where change could take decades to play out.

China thus has a big strategic stake in the region’s stability, but appears ill-equipped to deal with it. The traditional policy tools it has brought to bear in such situations in the past either fall short or no longer are applicable.

Increasingly, China will have to become a geopolitical rather than a primarily economic player in competitive cooperation with the United States, even though the latter will remain the dominant external actor in the region for the foreseeable future.

China has signaled its gradual recognition of these new realities with the publication in January 2016 of an Arab Policy Paper, the country’s first articulation of a policy towards the Middle East and North Africa.

However, rather than spelling out specific policies, the paper reiterated the generalities of China’s core focus in its relations with the Arab world: Economics, energy, counter-terrorism, security, technical cooperation and its Belt and Road initiative.

China’s strategic vision

Ultimately, China will have to develop a strategic vision that outlines foreign and defense policies it needs to put in place to protect its expanding interests. It will also have to define its role and place in the region as a rising superpower, as well as its relationship and cooperation with the United States in managing, if not resolving conflict.

To be sure, China is taking baby steps in that direction with its greater alignment with international moves to combat Islamic militancy, even if its own campaign in north-western China risks straining relations with the Islamic world.

Dealing with regional partners like Saudi Arabia and the United Arab Emirates that seek to establish regional hegemony by imposing their will on others at whatever cost may be more difficult. So far, Saudi Arabia and the UAE have not pressured China to choose in their rivalry with Iran.

But it can only be a matter of time before they do, particularly if Chinese investment in Iran and trade were able to offset the impact of U.S. sanctions to the degree that the Islamic republic is not forced to compromise.
To evade that situation, China has offered to mediate between Saudi Arabia and Iran, an offer the kingdom was unwilling to take up.

China, for its part, has so far relied on its economic clout as well as on Saudi Arabia remaining silent about a crackdown in Xinjiang that targets Islam, even though this puts the kingdom — as custodian of Islam’s two most holy cities — in an awkward position.

The long and short of all of this is that, in an environment in which the Middle East views conflicts as zero-sum games, China is likely to find it increasingly difficult to remain aloof and straddle both sides of the fence. Salvaging the Iranian nuclear deal could come at a cost China may not want to pay.