Xi Jinping’s strategic Middle East gambit

The Chinese president’s visit to Iran (after summits in Saudi Arabia and Egypt) is of strategic significance.

What is the difference between India and China’s strategic partnerships with Iran? Over $35 billion per year (the gap between India’s and China’s annual bilateral trade with Iran, which stands at $15 billion and $50 billion, respectively). Significantly, China’s bilateral trade earned it a surplus of $3.2 billion in 2014, while India raked up a deficit of over $4 billion during the same period.

Against this backdrop, Chinese President Xi Jinping’s visit to Iran (after summits in Saudi Arabia and Egypt) is of strategic significance for several reasons. First, its timing—within a week of the implementation of the Joint Comprehensive Plan of Action (JCPOA) on Iran’s nuclear programme and the lifting of sanctions—underlines that Beijing was well prepared to move quickly to take advantage of the opening provided by the so-called ‘Implementation Day’ of the JCPOA. Indeed, Xi is the first leader from the six countries that negotiated the JCPOA with Iran to visit Tehran after its implementation.

Second, building on its position as Iran’s largest trading partner, China signed 17 new agreements related to nuclear energy, the oil industry, and to enhance bilateral trade more than 10-fold to achieve the target of $600 billion over the next decade. Moreover, Beijing is set to fund the building of road and rail facilities in Iran, which will closely tie it to China’s ambitious ‘One Belt One Road’ initiative. Additionally, China also promised to support Iran’s membership in the Shanghai Cooperation Organization, thus bringing Tehran closer into Beijing’s orbit of institutional arrangements.

Finally, while Tehran was, clearly, the primary focus of Xi’s three-nation trip, his initial stopovers in Riyadh and Cairo are part of a classic hedging strategy to ensure a semblance of balance between the three key power brokers in the region. Although the official Xinhua news agency describes China’s approach as focusing on “dialogue and development”, it belies Beijing’s supply of military equipment to both Iran and Saudi Arabia.

Indeed, China’s sale to Saudi Arabia of the nuclear-capable Dong Feng 3 missiles in the late 1980s (even before they had established diplomatic ties) and the Dong Feng 21 missiles in 2007 on the one hand and the Silkworm anti-ship missiles to Iran since the mid-1980s on the other reflect this equivocal approach. The fact that both Saudi Arabia and Egypt agreed to host Xi before his visit to Iran is an acknowledgement that Beijing has become an indispensable player in shaping the future of the region. By this measure alone, Xi’s Middle East gambit has paid off.

In contrast India has remained immobile on account of its “unnecessary caution”, according to the Iranian envoy to New Delhi, and has not taken advantage of the swift implementation of the JCPOA. On the contrary, Indian businesses are facing increasing competition from Chinese and other companies. Some reports suggest that Tehran is losing patience with the slow pace of India’s investment for the Chabahar port and related projects and might look to other sources, perhaps even from China.

Clearly India, which imports over 70% of its oil from the region and also receives over $21 billion in remittances, has even greater interests in the region than China and needs to do more.

Yet, even if Prime Minister Narendra Modi’s much anticipated visits to Iran, Israel and Saudi Arabia were to materialise, it would be too little too late. While visits to all three countries on the same trip would, doubtless, be a diplomatic coup, it is unlikely that Modi would be able to outdo Xi either in terms of economic largesse or enhancing strategic partnerships. Worse, New Delhi would have to contend with the evolving security architecture with China in the driver’s seat. The only way that India can ensure its interests in the region is either to work with the US and its regional allies in ensuring a smooth transition or to accept China’s dominance of the region.

This article first appeared in Mint on February 01, 2016. Like other products of the Brookings Institution India Center, this is intended to contribute to discussion and stimulate debate on important issues. The views are those of the author.