The Saudi Arabia-Iran deal brokered by China in March 2023, has been dubbed as a major boost for Iran which was isolated, in the Middle East as well as globally, after the US pull out from the Iran Nuclear deal 2015/ Joint Comprehensive Plan of Action (JCPOA) in 2018. Under this agreement, both countries agreed to resume diplomatic ties. Three Iranian diplomatic missions in Riyadh and Jeddah have already resumed operations.
If one were to look at Iran-US ties, while US President Joe Biden did send out clear signals, after being elected, that his administration would push for the revival of the Iran deal and reducing tensions with Iran, the prospects have diminished after enrichment of uranium to weapons grade levels, by Iran as well as Tehran’s supply of drones to Russia during the Russia-Ukraine conflict. In March 2023, senior functionaries in Iran’s Qods Aviation industries (an Iranian defence manufacturer) were sanctioned for providing unmanned aerial vehicles (UAVs) to Russia for use in Ukraine. US Secretary of Treasury, Janet Yellen while commenting on the US decision to impose these sanctions said: “The United States will act swiftly against individuals and entities supporting Iran’s UAV and ballistic missile programs and will stand resolutely in support of the people of Ukraine.”
In the aftermath of the Russia-Ukraine conflict, Washington again seemed to show urgency vis-à-vis the deal, and Iran was also able to sell oil in spite of oil sanctions with Washington turning a blind eye. The continued enrichment of uranium by Iran, well above the levels agreed to in the JCPOA, and supply of weapons to Russia however diminished the possibility for revival of the deal.
US has also imposed sanctions on not just Iranian companies, but companies from other countries – including India – for allegedly selling Iranian petroleum products.
In the changing geopolitical climate and as a result of deterioration of ties with the West, Tehran has been left with limited options. Its ties with China and Russia have strengthened significantly due to steady deterioration of ties with the West.
Iran-China ties
In recent years, Iran’s ties with China have strengthened and both countries had signed an agreement — “Iran-China 25-Year Comprehensive Cooperation Agreement — to give a fillip to economic and strategic ties in March 2021. While China had committed an investment of $400 billion under the agreement, it has been cautious with regard to investing in Iran and Tehran has reiterated this point. Bilateral trade between Iran and China was estimated at $15.8 billion (China has been buying large quantities of oil from Iran at discounted prices).
Iran-Russia ties
Moscow and Tehran are also negotiating a 20-year agreement on the lines of the Iran-China agreement (Iran and Russia had first signed a 10 year agreement in 2001 which was extended with five-year extensions). In the aftermath of the conflict, Tehran and Moscow both sides announced Rouble/Rial trade. Of the total trade estimated at $4.6 billion, 60% was in Rouble/Rials. In January 2023, both countries also linked their banks in order on circumventing western sanctions. Tehran has been pushing for de-dollarization.
At the 51st annual Asian Clearing Union (ACU) meeting, Iran’s First Vice President Mohammad Mokhber said:
“De-dollarization is not a voluntary choice by countries anymore, it is the countries’ inevitable response to the ‘weaponization project of the dollar”.
Both countries are also seeking to push greater regional connectivity. Both sides have also signed a deal, earlier this month, to build a rail link that will connect Iran with Azerbaijan. The 170-kilometer section of the railroad will link Rasht (Northern Iran) with Astara (a border town in Azerbaijan)
This railway line is important in the context of the International North-South Transit corridor (INSTC), which seeks to link India with Europe. While commenting on the importance of this agreement, Putin stated that this would: “help substantially diversify global transport flows. Shipments along the new corridor will enjoy significant competitive advantages.”
India has been pushing for linking the Chabahar Port (Sistan-Baluchestan, Iran) to the INSTC. New Delhi has developed part of the Shahid Beheshti terminal phase 1 of the Chabahar Project. In 2016, India committed $500 million for Chabahar given its strategic importance as a gateway to Afghanistan, Central Asia and beyond.
An Indian government owned company – IPGL (India Ports Global Limited ) — has been running the operations since 2018. While for some time, India was cautious vis-à-vis the Chabahar Project, given the complex geopolitical situation, since 2021 it has been giving greater importance to the project given its strategic and economic importance.
As a result of the Saudi-Iran deal, several opportunities have opened up for Iran, within the Middle East as well as outside. Iran’s growing proximity to Moscow and Beijing, while also maintaining an important relationship with India, which shares strong economic and strategic ties with the US, highlights the complexities of the current global order.
[Photo by Nasim Online, via Wikimedia Commons]
The views and opinions expressed in this article are those of the author.
Tridivesh Singh Maini is a New Delhi based analyst interested in Punjab-Punjab linkages as well as Partition Studies. Maini co-authored ‘Humanity Amidst Insanity: Hope During and After the Indo-Pak Partition’ (New Delhi: UBSPD, 2008) with Tahir Malik and Ali Farooq Malik. He can be reached at [email protected].
