A dangerous deal: How Chinese investment could make Iran a puppet state

SARAH WATSON: Imperial powers have always vied for influence in the Middle East, prosperous with natural resources and strategic geographic advantages. In the same lineage as the American-Saudi arms trade and Russian action within Afghanistan and Syria, a rising China is the next great power attempting to extend its hegemony into the Middle East — through a partnership with Iran. U.S. economic sanctions have only driven Iran further away and into the arms of the Chinese Communist Party. 

An economic deal between Iran and China currently being negotiated includes investments into Iranian infrastructure, banking system, and telecommunications. The approximately $400 billion agreement will grant Iran investment in its free trade zones, railways, ports, refineries, and digital infrastructure. China will also invest in Iran's military in terms of training, weapons development, and mutual intelligence sources. In exchange, Iran will give China discounted oil. The original investment partnership between Iran and China was created in 2016, and extended this year for the next 25 years. 

After years of sanctions, draining of funds into the nuclear program, and now the crushing impacts of COVID-19, Iran needs an economic bailout. But this deal with China leaves Iran indentured, or as some Iranians protest, owned by a world power.

During its state of economic weakness, Iran really has no choice. Amidst attempts by the U.S. to exclude Iran from any international market to obstruct Iran’s nuclear program, China is the nation’s one and only economic opportunity. Iran’s oil output has been falling steadily, from 4 million barrels of oil per day in 2018 to 2 million in 2020. As of October, Iran health officials were claiming a death toll of 33,714 with a total of 588,648 positive COVID-19 cases. These numbers come among a BBC investigation that Iran’s real COVID-19 statistics are 3 or 4 times greater than reported.

But, many critics of the deal maintain that it makes Iran an indentured economic servant to China. While U.S.-Iranian tensions are higher than ever, this deal commits Iran to economically benefiting China for the next quarter century. Iran’s infrastructure will be aided by China’s funding, but it will not set-up Iran for the economic and political independence it desires following its recovery from the pandemic. China will have a much greater presence in Iran’s military, as well as within multiple sectors of its economy. At the same time, Iran’s greatest bartering tool, its oil reserves, will be severely discounted.

China has been long criticized for its use of debt diplomacy — a strategy that indebts weaker nations in binding agreements to investment, allowing the stronger nation like China to consolidate its influence. The Sri Lankan government was forced to lease its Hambantota Port to China for 99 years after defaulting on Chinese loans. Similarly, Pakistan is indebted to China for investment for its Gwadar Port. This lending does not just grant China opportunities to expand its economy, but to increase its political authority over foreign governments, essentially forming puppet states. 

Considering one of the reasons for the 1979 revolution was U.S. influence in the Iranian government, the people have reason to be concerned about any type of significant influence by a foreign power. Just like in the past, it is international interest in Iranian oil and a desire to solidify power in the Middle East that resulted in Beijing’s original 2016 deal with Tehran.

From China’s perspective, the deal is not just about discounted oil reserves, but contradicting the United States. Ever since President Trump withdrew from the Iran Nuclear Deal, he has simultaneously increased economic sanctions against Iran, straining its economy entirely and encouraging the rest of the world economy to boycott trade with the nation. 

China and Iran’s deal is not just a signal of the current political climate — it is here to stay. Chinese influence is not completely a bad thing for Iran, but it does put all of Iran’s economic eggs in the proverbial basket for the next 25 years. For the United States, the deal is a creation of their own aggressive policies with Iran. China will always act as the antagonist, making use of any economic opportunities with the enemies of the U.S. to their advantage. For China, their enemy’s enemy will always be their friend. The ongoing question is whether this deal will truly be a friendly option for Iran, or strangling imperialistic ownership.

Sarah is a sophomore in the School of Foreign Service interested in foreign policy in Iran and Central Asia. Her major is Regional and Comparative Studies, and she is learning Persian.