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Ранджбар М.Д.
Аспирант и ассистент Кафедра теории и истории международных отношений, Факультет гуманитарных и социальных наук, Российский университет дружбы народов имени Патриса Лумумбы.
Новоселова М.Г.
Студентка магистратуры направления "Зарубежное регионоведение (Китай)", Факультет гуманитарных и социальных наук, Российский университет дружбы народов имени Патриса Лумумбы.
Ирано-китайское энергетическое сотрудничество под санкционным давлением в XXI веке: вызовы и возможности
Ranjbar M.D.
PhD Student and Assistant Professor Department of Theory and History of International Relations,
Faculty of Humanities and Social Sciences, Peoples' Friendship University of Russia.
Novoselova M.G.
Master student of "Regional Studies (China)" program, Faculty of Humanities and Social Sciences, Peoples' Friendship University of Russia.
Iran-China energy cooperation under sanction pressure in 21st century: challenges and opportunities
Introduction
China-Iran relations have a long history, with cultural and commercial exchanges being the mainstay. The 1979 Islamic Revolution has intensified these ties, particularly in the energy sphere, making Iran an increasingly important partner in energy cooperation, trade, and investment. Historically, both countries have established amicable relations due to their collective past as successors of ancient civilizations that faced the expansion of the West and experienced dramatic economic and political consequences.
Iran-China cooperation is fueled by mutual interests, with Iran's natural gas and oil resources fulfilling China's energy needs and serving as a
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new market for Chinese goods. This strategic partnership can be used as leverage against Washington, as Iran appears to be a new zone of influence in the USA-China rivalry for Middle East influence, particularly in China's Belt and Road Initiative.
The relationship between China and Iran began in 1949 due to Iran's mistrust towards China's communist powers. However, the Islamic Revolution of 1979 marked a new era of cooperation, with the PRC seeking international recognition and support. The PRC recognized the Islamic Republic of Iran (IRI) three days after its proclamation. The 1980s saw significant cooperation in arms exports, particularly for Iran, which sought alternative arms suppliers during the Iran-Iraq War1.
The end of the Iran-Iraq war in 1988 brought Iran closer to China, while the 1989 incident in Tiananmen Square affected Beijing's position in the international community and led to sanctions on China. Since the 1980s, Chinese trade with Iran has shifted to energy resources provision, with China becoming a net oil importer. The normalization of Sino-Amer-ican relations allowed for economic and diplomatic ties with Iran without tensions with the USA2.
To face Western sanctions and pressures, Iran pursued diplomatic strategies to improve economic relations with non-western countries and make new allies. China has always been part of Iran's strategies to reduce the effect of sanction pressures. The Sino-Iranian relationship fluctuated in intensity due to changes in Iran's diplomacy and different West-imposed pressures.
Over the last few decades, China and Iran have developed complex military, economic, and political relations, entering the 21st century as partners sharing mutual interests and having a stake in further developing Sino-Iranian relations. This article examines the challenges and opportunities faced by China-Iran energy cooperation under sanctions pressure, particularly in the 21st century.
This article uses Realism as a framework to analyze Iran-China energy cooperation under sanctions. Realism emphasizes state-centric behavior, national interests, and power dynamics in international relations. Methodology includes data analysis, geopolitical analysis, and historical analysis. Quantitative data will be used to understand trends and patterns in energy ties, while historical analysis will examine the historical context and implications of sanctions on the relationship.
1 Davis M. China-Iran: A Limited Partnership // URL: https://www.uscc.gov/sites/ default/files/Research/China-Iran--A%20Limited%20Partnership.pdf (12.10.2023).
2 Mackenzie P. A Closer Look at China-Iran Relations // URL: https://www.cna. org/reports/2010/D0023622.A3.pdf (12.10.2023).
The significance of this research question lies in the fact that China-Iran relations have become a subject of considerable international interest, particularly in the wake of the United States' withdrawal from the Joint Comprehensive Plan of Action (JCPOA) and the reimposition of sanctions on Iran. Understanding the dynamics of China-Iran energy collaboration in the face of sanctions pressure can provide valuable insights into the strategic choices made by both countries and the implications of their choices for regional and global politics.
Iran-China Energy Cooperation in the 21st Century
Iran has been providing energy to China since the 20th century, becoming one of the three oil exporters. From 2000-2005, Iran and China signed agreements to enhance cooperation. The Iran-China Energy Committee facilitated collaboration and investment in Iran's energy sector. Chinese companies, including Sinopec, CNPC, and CNOOC, invested in Iran's oil production, constructing the Hormuz Oil Refinery and expanding the Abadan Refinery3.
Chinese investments in Iran's energy sector surpassed $40 billion by the end of the first decade of the 20th century. In 2004, Zhuhai Zhenrong Corp. and Sinopec Engineering Inc. signed 25-year contracts for natural gas and crude oil. China's energy consumption increased, prompting increased imports of Iranian oil. In 2009, China became the leading importer of oil from Iran, with Iran providing up to 11% of imports4.
Between 2011-2015, international sanctions on Iran's energy sector led to limited oil exports. China's energy diplomacy was unstable, with China boosting its energy ties with Iran and buying Iranian oil. However, in 2012, China cut down on oil imports and limited activities of its leading oil companies. China's total volume of oil imported from Iran dropped to 429,000 bpd in 2013, making Iran the sixth leading energy exporter to China, behind Saudi Arabia, Angola, Oman, Russia, and Iraq5.
The 2015 Joint Comprehensive Plan of Action between Iran and several world powers led to increased competition for China, resulting in a drop in Iran-China trade and investment cooperation. However, China continued to deepen its energy cooperation with Iran, investing in its oil and gas fields6. The USA's withdrawal from the agreement and sanctions on
3 China-Iran. The Observatory of Economic Complexity (OEC). // URL: https:// oec.world/en/profile/bilateral-country/chn/partner/irn?dynamicBilateralTradeSelector=-year2007 (12.10.2023).
4 Евсеев В.В. О стратегическом партнерстве Китая и Ирана // Ислам на Ближнем и Среднем Востоке. 2012. № 7. С. 514.
5 Wu F. China's Puzzling Energy Diplomacy Toward Iran // Asian Perspective. 2015. Т. 39. № 1. С. 64.
6 Smirnova V.A. Sino-Iranian Economic Cooperation under Sanctions // Problemy dalnego vostoka. 2022. № 6. С. 126.
Huawei posed new challenges for Iran-China cooperation. 2019 sanctions and the nuclear deal's hurdles further hindered development. The 2019 Coronavirus pandemic reduced trade turnover between Iran and China from 37 billion in 2017 to 15.7 billion in 20 227.
The Cooperation Program's conclusion positively impacted energy cooperation between China and Iran, with Chinese imports of Iranian petroleum increasing to 1.2 million barrels daily in 2022. However, bilateral cooperation extends beyond energy deals, with crude petroleum exports decreasing to 71.4% in 2021, replacing it with iron ore, ethylene polymers, and acyclic alcohols8.
It's important to note the three main sanctions that harmed iran-china energy cooperation. 1) Iran Sanctions Act (ISA) / Iran Sanctions Extension Act (ISEA)92) Executive Order 1359010 3) CAATSA.11 Secondary sanctions, imposed by the US, discourage foreign energy cooperation with Iran, affecting companies and countries worldwide12. These sanctions, along with embargoes on shipping, insurance, and technology transfer, directly impacted Iran's energy industry and hindered collaboration with foreign countries. Iran's diplomacy towards sanctions policy has created new opportunities for energy cooperation with China in the 21st century. Challenges in Iran-China Energy Cooperation under Sanction Pressure Iran and China face numerous challenges in their bilateral economic and energy cooperation, including international sanctions, a lack of a clear legal framework, infrastructural issues in Iran, and money laundering issues. These obstacles limit growth opportunities and create uncertainty for investments. The global community's sanctions pressures impact both nations' energy security, economic stakes, and geopolitical ties. China's limited interest in Iran's investments, such as $618 million in 2018-2022, is a significant issue in the current energy alliance13.
7 Safronova E. China and the 2023 Iran-Saudi Agreement: Setting, Goals and Significance // Problemy dalnego vostoka. 2023. № 3. C 70.
8 China-Iran. The Observatory of Economic Complexity (OEC).
9 The Iran Sanctions Act (ISA) // URL: https://policycommons.net/arti-facts/1178006/the-iran-sanctions-act-isa/1731135/ (13.10.2023).
10 Sanger D.E. Obama Ordered Wave of Cyberattacks Against Iran // URL: https:// www.nytimes.com/2012/06/01/world/middleeast/obama-ordered-wave-of-cyberattacks-against-iran.html. (15.10.2023)
11 Prastiti D.N. B. Countering America's Adversaries Through Sanctions Act (CAATSA) Inconsistencies: The Case of India S-400 Weapon Procurement // Jurnal Global & Strategis. 2019. Vol. 13. № 2. Р. 123.
12 Aliakbari F. The effects of economic sanctions on private investment in iran // Resistive Economics. 2020. Vol. 8. № 4. Р. 1-11.
13 Shokri U. Obstacles and opportunities for closer Iranian-Chinese economic cooperation // URL: https://www.mei.edu/publications/obstacles-and-opportunities-closer-irani-an-chinese-economic-cooperation (15.10.2023).
Figure 1: Iran Oil Exports in the 21st Century17.
Iran's sanctions hinder its access to international financial systems, making it difficult to secure funding for energy projects and complicating China's oil and gas import payments. This creates uncertainties for energy deals and hinders investment prospects. To overcome these challenges, Iran and China must enhance bilateral trade relations, adopt flexible foreign policies, and cultivate new growth points14.
China's energy cooperation with Iran faces challenges due to financing constraints, but active working capital management can alleviate these effects. The country must navigate international pressure and potential oil crises, and Tehran and Beijing need more trust and commitment for energy cooperation15.
The slow development of energy cooperation between China and Iran is attributed to Beijing's fear of provoking a confrontation with Washington. This has led to a decrease in Chinese imports from Iran, a situation that has been exacerbated by US sanctions. Other regional players, like Saudi Arabia and the UAE, have maintained successful economic ties with Chi-na16. As shown in Figure one, despite sanctions, China has been less likely to comply and has maintained much of its current oil trade with Iran.
Sanctions imposed by China have strained Iran's energy cooperation
14 Yang T. Characteristics and Constraints of China-Iran Economic Trade // Journal of Xidian University. 2011.
15 Hong Z. China's Dilemma on Iran: between energy security and a responsible rising power // Journal of Contemporary China. 2013. Vol. 23. № 87. Р. 408-424.
16 Güler M.A. China and Iran: Obstacles to trade and revised goals for future // URL: https://www.dailysabah.com/opinion/op-ed/china-and-iran-obstacles-to-trade-and-revised-goals-for-future (15.10.2023).
17 Central Bank of Iran. Iran Oil Exports - 2023 Data - 2024 Forecast - 19952022 Historical - Chart - News // URL: https://tradingeconomics.com/iran/oil-exports (15.10.2023).
with China, potentially threatening China's energy security and economic growth. The sanctions' impact on Iran's energy exports is influenced by international conflicts and differing interests. Legal complexities and uncertainties arise for companies involved in energy cooperation, potentially leading to delays, disputes, and additional risks18.
The Chinese leadership is balancing energy and economic cooperation with Iran with other interests, such as enhancing its image as a responsible country. The government increases subsidies for energy firms during trade policy uncertainty, with political-ties firms receiving more. The contractual and legal uncertainty surrounding China's energy cooperation with Iran significantly impacts its decision-making and actions19.
China and Iran face potential sanctions-related financial and reputa-tional risks, which could deter foreign investors from engaging in Iran's energy sector. Investment risks include disruptions in oil supplies and diplomatic liabilities, which could affect China's energy cooperation with Iran. Additionally, sanctions restrict the export of advanced technology and equipment, hindering Iran's modernization and expansion of energy infrastructure, potentially leading to suboptimal outcomes20.
The US-led sanctions against Iran have intensified, putting pressure on China's policy regarding its investments in Iran. This has led to limited shipping and insurance options for energy transportation, posing logistical challenges in Iran-China energy cooperation. China's attempts to balance its energy and economic interests with Iran's may create merits and shortcomings, potentially affecting the close energy cooperation links and affecting Chinese non-energy sector outputs and economic growth.
However, China has played an important supportive role in helping Iran overcome the difficulties caused by sanctions21. Despite the challenges, Iran and China have created new opportunities and developed a broad and deep partnership focused on China's energy needs and Iran's abundant resources.
Opportunities in Iran-China Energy Cooperation under Sanction Pressure
Iran and China are forming strategic energy cooperation despite sanc-
18 Hu X., He L., Cui Q. How Do International Conflicts Impact China's Energy Security and Economic Growth? A Case Study of the US Economic Sanctions on Iran // Sustain-ability. 2021. Vol. 13. № 12. Р. 6903.
19 Li X.-L. Trade policy uncertainty, political connection and government subsidy: Evidence from Chinese energy firms // Energy Economics. 2021. Vol. 99. Р. 105-272.
20 Chen W.-S. China's Oil Strategy: Going Outá to Iran // Asian Politics & Policy. 2010. Vol. 2. № 1. P. 39-54.
21 Loroun B.B. Invetigation on Iran- China Economic Relation after Removing Sanction on Iran // Journal of Business Management & Economics. 2017. Vol. 5. № 3.
tions, aiming for mutual growth and resilience in the energy sector. China sees Iran as a strategic partner, focusing on energy needs and abundant resources. Iran views China as a rising great power and an opportunity to improve its status in the world economy. Both countries see each other as potential partners in a post-US unipolar world22.
China, the world's largest energy consumer, is focusing on diversifying its energy supply to fuel its economic growth. Iran, despite sanctions, holds vast oil and gas reserves, making it an attractive source for China's energy diversification strategy. Despite the COVID-19 pandemic, China remains a key market for Iranian oil. Both countries are exploring renewable energy cooperation, including joint research and investment in solar and wind energy projects23.
Iran and China are enhancing their energy cooperation through the Belt and Road Initiative (BRI), with Iran's strategic location making it a key partner for China's infrastructure projects. The two countries are exploring joint ventures, technology transfer, and investment opportunities in the energy sector24. The BRI could improve Iran's geo-economic and geopolitical status, while China's energy security can be improved through diversification strategies.
China's investment in energy facilities in BRI countries, including Iran, is crucial for energy security. Iran's strategic position and oil reserves make it a vital partner in China's Belt and Road Initiative, strengthening energy trade and cooperation25.
Iran and China signed a 25-year agreement called "China-Iran Comprehensive Strategic Partnership" in March 2021, aiming to deepen energy cooperation and strengthen bilateral relations26. The agreement provides China with substantial investments in Iran's oil and gas fields, refineries, and pipelines, bolstering Iran's energy sector despite international restrictions. This stability and predictability can ensure a consistent flow of energy resources to China, providing Iran with a steady revenue source and a reliable partner amidst geopolitical uncertainties27.
22 Долатабади А.Б., Зареи Р. Будущее Отношений Ирана И Китая: Альянс Или Просто Сотрудничество? // Сравнительная политика. 2018. Т. 9. № 1.
23 Garver J.W. China and Iran: Expanding Cooperation under Conditions of US Domination // Toward Well-Oiled Relations? 2016. Р. 180-205.
24 Garlick J., Havlova R. The dragon dithers: assessing the cautious implementation of China's Belt and Road Initiative in Iran // Eurasian Geography and Economics. 2020. Р. 1-27.
25 Dorraj M. The Belt and Road Initiative and China's Relations with Iran and Saudi Arabia: A Delicate Balancing Act // Critical Reflections on China's Belt & Road Initiative. 2020. Р. 125-138.
26 CO$KUNB.B. Global Energy Geopolitics and Iran // Uluslararasi Ili^kiler Konseyi Iktisadi i^letmesi. 2009. Vol. 5. № 20.
27 Minullin Y., Schrattenholzer L. Lessons Learned for Regional and Global Energy Security // Wiley Handbook of Science and Technology for Homeland Security. 2008. Р. 1-25.
ífií China's expertise in energy technology, particularly in renewable en-
ergy and energy efficiency, can complement Iran's aspirations for sustainable energy development. The collaboration offers opportunities for knowledge transfer and technology exchange, enabling Iran to enhance its energy efficiency and reduce its environmental footprint28.
Iran-China energy cooperation offers opportunities for economic growth, energy security, and technological advancements. By leveraging strengths and synergizing interests, they can form a formidable alliance amidst geopolitical challenges, ensuring sustainable development and long-term prosperity for both nations.
Conclusion & Policy Recommendations
Despite facing numerous challenges and sanctions, the energy cooperation between Iran and China has demonstrated remarkable resilience and adaptability. The historical trajectory reveals a robust partnership, with both nations strategically navigating geopolitical complexities. China's global outreach, particularly in the Middle East, and Iran's efforts to diversify trade partners showcase a pragmatic approach. The Belt and Road Initiative (BRI) has emerged as a pivotal factor, providing economic growth and energy collaboration opportunities.
In navigating the complex landscape of energy cooperation under sanctions, Iran and China should continue prioritizing the diversification of trade partners and markets. This entails a proactive approach to risk management, identifying potential challenges associated with sanctions, and developing comprehensive strategies to mitigate these risks effectively. Additionally, both nations should leverage diplomatic platforms like the Shanghai Cooperation Organization (SCO) to strengthen regional collaboration, address geopolitical concerns, and foster stability in the Middle East.
Furthermore, the collaboration on technological advancements should be intensified, focusing on innovation in renewable energy and sustainable practices. This joint effort can enhance energy efficiency, reduce environmental impact, and position both nations as leaders in the global transition towards cleaner energy sources. The Belt and Road Initiative (BRI) presents significant opportunities for economic growth and regional stability. Iran and China should capitalize on these opportunities, fostering infrastructure development, transportation, and energy corridor synergies.
Both nations should continue refining and expanding alternative payment mechanisms to facilitate smoother financial transactions. This in-
28 The 25-year Iran-China agreement, endangering 2,500 years of heritage // URL: https://www.mei.edu/publications/25-year-iran-china-agreement-endanger-ing-2500-years-heritage (15.10.2023).
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eludes exploring innovative financial instruments that align with international standards while mitigating the impact of sanctions. Balancing international relations is crucial; maintaining a diplomatic equilibrium between various stakeholders will be essential to fostering stability and economic growth. Public diplomacy efforts should be intensified to manage perceptions, clearly communicating the partnership's mutual benefits to domestic and international audiences.
Furthermore, Iran and China should strengthen coordination between policy domains to ensure coherence in energy, diplomacy, and economic development strategies. An integrated approach will enhance the effectiveness of policies and initiatives. Considering potential geopolitical shifts and policy changes, scenario planning exercises should be conducted to anticipate challenges and facilitate swift adaptation to evolving circumstances. By implementing these recommendations, Iran and China can solidify their collaboration, navigate geopolitical complexities, and contribute to a sustainable and prosperous future.
Библиографический список / References
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