Lifting sanctions could strengthen Iran-China ties: Analyst

Iran nuclear deal unlikely before midterm elections, executive fellow says

One analyst told CNBC that Iran would need to lift sanctions if it hopes to strengthen economic ties with China — and that can only come with a successful nuclear deal.

Iran, which has trade ties with China, is currently facing the US which has devastated its economy.

Iranian President Ibrahim Raisi is expected to meet Chinese President Xi Jinping and Russian President Vladimir Putin in Uzbekistan on Thursday.

It comes as the Islamic Republic of Russia, a security group made up of China, India, Pakistan and four Central Asian countries, prepares to join the SCO.

Iran currently holds observer status in the SCO, but is due to become a full member at an upcoming summit in the city of Samarkand, Uzbekistan.

To grow that relationship, you need sanctions relief, because too many companies… don’t have the appetite for the risk of sanctions.

Ali Ahmadiq

Geneva Center for Security Policy

Iran’s bid to become a member of the SCO does not necessarily reflect that Tehran will enjoy a smooth economic relationship with China, Ali Ahmadi, an executive fellow at the Geneva Center for Security Policy, told CNBC on Tuesday.

“This does not mean that Iran does not need sanctions relief,” Ahmadi said. “Iran sells some oil to China … but the relationship between the two is pretty much one-dimensional.”

Iran’s President Ibrahim Rasi speaks during a press conference in Tehran on August 29, 2022. Ali Ahmadi of the Geneva Center for Security Policy said Iran needed sanctions relief from a successful Iran deal to advance its ties with China. It comes as Iranian President Ibrahim 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 – formally called Joint Comprehensive Plan of Action or JCPOA.

Since then, Washington has imposed The sanctions on Iran that have crushed its economy, The US sanctions extend the ban on companies doing business with Iran and on all imports from Iran, among other sanctions.

“To develop that relationship, you need sanctions relief, because a lot of companies, even state-owned enterprises in China, don’t have the appetite for the risk of sanctions,” Ahmadi said.

Earlier this month, US imposes sanctions on Chinese companies who helped sell Iranian oil.

Sanctions can both prevent and encourage

US sanctions will make Chinese companies think twice about dealing with Iran, especially if the firms are too dependent on the West, Javad Salehi Isfahani, an economics professor at Virginia Tech, told CNBC.

“Sugar producers are highly dependent on exports to the West, for which they must comply with US unilateral sanctions, no matter how much they reassure their Iranian counterparts that they consider them unfair,” Isfahani said.

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However, the restrictions could benefit more risk-tolerant consumers, said Behnum Taleblu, senior fellow at the Foundation for the Defense of Democracies.

Oil restrictions that are not in place – or are sporadic – may According to Taleblu, opportunities for risk-tolerant traders while smugglers can find creative ways to generate revenue.

Iran’s relations with China

Iran has recently begun to actively pivot to the east. Before the US withdrew from the nuclear deal in 2018, Iran’s Supreme Leader Ayatollah Ali Khamenei declared that one of the top priorities for its foreign policy was “Preferring the East over the West”,

Last month, John Bolton, a former national security adviser to the Trump administration, told CNBC that lifting sanctions on Iran could prompt the Islamic State to forge closer ties with both China and Russia.

Bolton: Saving Iran deals with 'surprising mistake' of Biden administration

Bolton said that once 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] There are overlapping interests, their preferred partner being Iran. So it’s kind of a three-way arrangement that I think has a global impact,” Bolton said.

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