Iranian Foreign Minister Mohammad Javad Zarif (right) and his Chinese counterpart Wang Yi are pictured during the signing of an agreement in the capital Tehran, on March 27, 2021. Photo: AFP

In August of last year, it was reported that China and Iran had signed a 25-year strategic pact. China’s growing influence in the Middle East is hardly a new development. Beijing’s Belt and Road Initiative (BRI) and global ambitions are no secret and have been in progress for decades – this time through Iran.

Now, new evidence has come to light suggesting that China-Iran relations are taking further steps, posing direct implications to US-led efforts to renegotiate the terms of the nuclear deal while holding Iran accountable for any nefarious activities in the region and beyond.

Iran and China have been deepening bilateral relations for years, if not decades. The new strategic agreement includes cooperation in the political, economic, mining, and technical spheres, as well as defense, with joint military exercises, and the development of Iranian airports and ports, railways, and infrastructure.

Additionally, after a four-month-long closure, Iran’s bitcoin mining facility, Rafsanjan Bitcoin Mining Center, is set to be revived as Chinese investors eye the opportunity.

Furthermore, it entails a plan for cooperation in the oil and petrochemicals industries, totaling a US$450 billion investment into Iran, which could alleviate Iran’s decades of isolation.

In a more recent development, indicating yet another step in this growing alliance, China is reportedly helping Iran circumvent US-led sanctions.

According to the report – originally published on Al-Seyassah, a Kuwait-based daily – Tehran and Beijing established a financial and commercial apparatus known as Chuxin Bank, which has been operating in Iran since 2016.

It is designed to allow Iran to receive the proceeds from its oil deals with China and help the country bypass US-led sanctions in place since May 2018. This is another tangible example of the deepening of the China-Iran alliance.

The Chuxin bank is an independent entity allowing the Iranian regime and Chinese authorities to open numerous bank accounts, and deposit and withdraw funds with no questions asked. Free from external governmental oversight and regulation, Iranian authorities are now able to conduct financial transfers similar to the SWIFT system.

The bank hampers efforts to act against money-laundering and terrorist financing, as it does not conform to international standards, raising questions over fraud and transparency.

Yet China is simultaneously portraying itself on the international stage as a leading economic power. This raises the question: Why would China risk its international standing as a role model for economic growth?

To put simply, China sees collaboration with Iran as an important opportunity to deepen its influence. China sees economically vulnerable nations as an investment opportunity to strengthen its own economic and political might. The recently established strategic agreement allows China to obtain closer access to oil and expands its BRI agenda. 

The Iranian opposition has come out against this partnership, stating that the ayatollahs are “selling Iran.” Even Mahmoud Ahmadinejad, former president of Iran, declared that the agreement is a “national humiliation that betrays Iran’s sovereignty and interests.”

Iran’s elites and working population have also voiced their opposition, arguing that the influx of low-cost Chinese products will impact the local economy, pushing business owners out of work.

From a Western perspective, this deal is particularly alarming given Iran’s military, political, and cultural influence in the Middle East. With an increased flow of money, Iran will now have enough to revive its funding of terrorist organizations like Hezbollah, Hamas and Kataib Hezbollah, as well as others across the region. 

Also, the selling of Iranian oil to China creates a closed-market situation, and therefore, as trade increases among these two powers, it undermines the US dollar.

China, a fast-growing global power, is entering risky waters by rubbing shoulders with Iran, considered a global pariah by the US and its allies. Instead of advancing its regional and global ambitions through rogue actors, China’s immense potential, both human and economic, could greatly improve economies and living conditions around the world.

However, rewarding countries like Iran for their misgivings has wider implications to global security and Western attempts to contain Iran’s expansionist ambitions.

Johan Svensson

Johan Svensson is a geopolitical analyst for Sandberg & Löfgren Consulting based in Malmö, Sweden.