Iran, which does business with China, is currently dealing with a US blow that has crippled its economy. On Thursday, Iranian President Ebrahim Raisi is expected to meet Chinese President Xi Jinping and Russian President Vladimir Putin in Uzbekistan. It comes as the Islamic Republic prepares to join the Shanghai Cooperation Organization, a security group made up of Russia, China, India, Pakistan and four Central Asian countries. Iran currently holds observer status in the SCO, but is due to become a full member at the upcoming summit in the city of Samarkand in Uzbekistan. For that relationship to grow, you need sanctions relief, because a lot of companies… don’t have the risk appetite for sanctions. Ali Ahmadi Geneva Center for Political Security Iran’s bid to join the SCO does not necessarily indicate that Tehran will enjoy a smooth economic relationship with China, Ali Ahmadi, executive fellow at the Geneva-based Center for Security Policy, told CNBC on Tuesday. “It’s not going to mean that Iran doesn’t need the sanctions relief,” Ahmadi said. “Iran sells some oil to China … but the relationship between the two is very one-dimensional.” Iranian President Ebrahim Raisi speaks during a news conference in Tehran on August 29, 2022. Iran needs the sanctions relief from a successful Iran deal to further cultivate relations with China, said Ali Ahmadi of the Center Security Policy of Geneva. This comes as Iranian President Ebrahim Raisi is expected to meet his Chinese and Russian counterparts in Uzbekistan on Thursday. STR | AFP | Getty Images In mid-2018, the US unilaterally withdrew from the nuclear deal — officially referred to as the Joint Comprehensive Plan of Action, or JCPOA. Since then, Washington has imposed sanctions on Iran that have crippled its economy. US sanctions extend to companies doing business with Iran and a ban on all imports originating from Iran, among other embargoes. “For this relationship to develop, you need sanctions relief because many companies, even state-owned enterprises in China … do not have the risk appetite for sanctions,” Ahmadi said. Earlier this month, the US imposed sanctions on Chinese companies that helped sell Iranian oil.
Sanctions can deter and motivate
US sanctions will make Chinese companies think twice about doing business with Iran, especially if the companies are highly dependent on the West, Djavad Salehi Isfahani, an economics professor at Virginia Tech, told CNBC. “Chinese producers are heavily dependent on exports to the West, for which they must comply with unilateral US sanctions, no matter how much they assure their Iranian counterpart that they consider them unfair,” Isfahani said. But sanctions may benefit consumers who are more risk-tolerant, said Behnam Taleblu, a senior fellow at the Foundation for Defense of Democracies. Oil sanctions that are not enforced – or are sporadic – could be opportunities for risk-tolerant traders, while smugglers may find creative ways to generate revenue, according to Taleblu.
Iran’s relationship with China
Iran has recently begun actively pivoting to the East. Before the US pulled out of the nuclear deal in 2018, Iran’s Supreme Leader Ayatollah Ali Khamenei announced that one of his top foreign policy priorities was to “preference the East over the West.” Last month, former Trump administration national security adviser John Bolton told CNBC that lifting sanctions on Iran could push the Islamic State to forge closer ties with both China and Russia. Bolton said that freed from international sanctions, Iran would become richer and stronger, making it “a better partner for Russia.” “In the Middle East, where [Russia and China] have overlapping interests, their preferred partner is Iran. So it’s kind of a tripartite deal that I think has global implications,” Bolton said.
