An agreement that China and Iran are reported to be on the verge of signing has the potential to dramatically reshape regional and global geopolitics. The deal, which provides for a comprehensive military and trade partnership, is expected to draw about $400 billion in Chinese investment in key Iranian sectors, including energy and infrastructure, over the next 25 years. Stronger military ties will see the two sides engage in joint training, shared weapons development and intelligence-sharing. Both sides are poised to benefit. For Iran, the agreement is a veritable lifeline. Struggling under the weight of US led sanctions, Iran has been starved of foreign investment; its infrastructure, especially in the oil and gas sector, is badly in need of upgradation. Chinese investment will radically transform the health of its economy. Of course, it could push Iran into a debt trap.As for China, it will receive heavily discounted Iranian oil for the next 25 years. This would stabilise its economic growth and boost energy security. American officials say that the deal could even pave the way for Chinese military bases in Iran. The Sino-Iranian agreement has significant implications for the world. Not only will it reduce Iran’s vulnerability to American bullying but also, it has the potential to change the current regional strategic balance to favour Iran. Importantly, it could set in motion the decline of American military domination of the Persian Gulf. Already, China has a military base in Djibouti and is operating Gwadar port on Pakistan’s Makran coast. The agreement with Iran envisages a Chinese role in the Chabahar port and duty-free zone. It will also build a port at Jask at the mouth of the Persian Gulf. Heightened Chinese presence at the mouth of a waterway through which a significant proportion of the world’sship-borne oil is carried will alter global geopolitics significantly. The proposed Sino-Iranian agreement, recently announced by the Iranian foreign minister in parliament, has implications for India.
For one, increasing Chinese presence in and around Chabahar port, built and operated by India, could hurt India’s economic, energy and strategic interests in Iran and the region beyond. The breadth and depth of the envisaged Sino-Iranian partnership is indeed spectacular. It involves China’s massive investments to modernise the entire expanse of Iran’s economy — from roads and railways to ports, and from telecommunication. A proposed $400 billion economic and strategic agreement between Iran and China, including a major port development project on the Strait of Hormuz, is likely to eclipse the China-Pakistan Economic Corridor, a project that symbolizes the geopolitical ties between the two countries and is a linchpin of Pakistan’s efforts to develop its infrastructure. For another, it will draw Iran, along with Russia and Pakistan – with Afghanistan squeezed in between – ever deeper into China’s Belt and Road Initiative. Fearing American sanctions and struggling with self-doubt, India has for years been reluctant to give a greater push to its economic ties with Iran. It thus failed to act on an opportunity that had for long existed in Iran. China, confident that it is able to defy Washington, may well have grabbed that opportunity now