China’s emerging role in Iran’s petroleum sector

Al-Monitor | : There is no doubt that the reimposed US sanctions on Iran will compel Tehran to shift more proactively toward deeper political and economic ties with Eastern powers. Here, China stands out not only as Iran’s largest trading partner, but also as the top buyer of Iranian oil — and hence the key player in filling the vacuum left by a withdrawal of Western companies from Iran.

At the same time, past experiences with Chinese petroleum sector companies have been disappointing for Iran’s technocrats. In fact, as recently as 2014, Tehran terminated the major Azadegan oil project with China’s CNPC due to dissatisfaction with progress made. The question is how the new circumstances in the aftermath of the US reimposition of sanctions will impact China’s role in Iran’s petroleum sector.

Post-revolutionary Iran’s international relations have been based on a complex set of drivers borne out of revolutionary ideals alongside security, economic and technological needs. Iran’s relationship with the European Union is a case in point. Indeed, despite all tensions and challenges, the EU has in the past three decades been the desired partner for the technological needs of Iran, and especially in the petroleum sector. However, Iran-EU economic ties have been challenged by ups and downs in the relationship, including the role that anti-Iran sanctions have played periodically. In fact, as a consequence of sanctions related to the nuclear standoff, China in 2010 replaced the EU as Iran’s most important trading partner. The expansion of Iran-EU trade since the implementation of the Joint Comprehensive Plan of Action (JCPOA) in January 2016, such as a 53% growth in 2017 compared with 2016 and further growth in 2018, was yet another indication that Iranian decision-makers still prefer European technology over that found in Asia. Nonetheless, the reintroduction of US secondary sanctions has undermined Iran-EU trade and investment, despite efforts by Europe to sustain the JCPOA. Consequently, Tehran will have to develop an alternative plan to fill the financial and technological gaps that a decline in relations with Europe will create.

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