In what could be considered the first strategic engagement by an Iranian leader with the Asian economic powerhouse in years, President Ebrahim Raisi has just concluded a three-day state visit to Beijing. Raisi's trip happened two months after Xi's tour of Saudi Arabia, where Crown Prince Mohammed bin Salman gave him a royal welcome and set up his meetings with the Gulf Cooperation Council (GCC). 

This was the first high-level contact between the two nations since Chinese President Xi Jinping visited Tehran in 2016, shortly after Iran signed the Joint Comprehensive Plan of Action (JCPOA) with the West in 2015.

Iran-China agreements

Although Beijing and Tehran signed 20 covenants to strengthen security and economic cooperation during the meeting, the true purpose of this grand exercise—drawing Iran's central bank governor and half a dozen cabinet members to Beijing—is more than meets the eye.

According to official Iranian media, the objective of the visit was to strengthen political and commercial ties between the two nations, as is evident from a host of agreements made during the summit conference in Beijing. Media reports, on the other hand, say that the focus is still on the strategic 25-year agreement between the two countries that was signed by the foreign ministers of Iran and China in Tehran in March 2021.

The main goal of the trip, according to Raisi's deputy for political affairs, Mohammad Jamshidi, was to "finalize the operational steps" of the 25-year comprehensive cooperation agreement that the two countries signed in 2021.

Iran's foreign minister, Hossein Amirabdollahian, claims that the agreement has begun the implementation phase, although no big contracts or projects have yet been made public due to Iran still being subject to stringent US sanctions.

Balancing act

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Loss of Raisi: Reaffirming Unity and Resistance

Raisi's journey to Beijing came after Xi's high-profile tour of Saudi Arabia in December last year as part of Beijing's well-planned strategy to gain a foothold in West Asia, where the US held comfortable clout. Tehran, however, took offense to a subsequent joint statement China and the Gulf Cooperation Council (GCC) released after the tour was over.

The statement called on Iran to abide by the nuclear non-proliferation treaty and cooperate with the International Atomic Energy Agency (IAEA). It also urged the United Arab Emirates (UAE) to attempt to negotiate a resolution with Iran regarding the territorial dispute over three islands in the Strait of Hormuz, a matter on which Iran has made clear that it will not engage in negotiations. To formally protest the statement to Beijing, Iran had to summon the Chinese ambassador to Tehran.

According to observers, Beijing's warm welcome for Raisi served as a means to arrive at a consensus on the contentious joint statement of the Riyadh summit. They claim Beijing's support for Iran on regional matters, such as jointly denouncing "interference in Yemen" (a subliminal reference to the Saudi-led intervention), and its demand that "Israel" signs the non-proliferation treaty to effectively put its nuclear facilities under IAEA safeguards, were an effort to soften the Riyadh declaration.

Raisi's trip to Beijing happens at a time "when Iran becomes a full member of the Shanghai Cooperation Organization (SCO) following its candidacy being approved at the organization's annual meeting in Tajikistan's capital, Dushanbe, in September 2021. President Ebrahim Raisi's remarks shortly after Iran was granted SCO membership highlight Iran's push for regional cooperation to counter the US's "unilateralism and hegemony" in the region. The latter developments that unfolded in the post-SCO scenario showed that Tehran wants closer ties with its regional neighbors, including China.

Mutual trade

The expanding trade ties between China and Iran are another feature of Raisi’s visit to China. Despite the US and EU sanctions, China has become a good market for Iran to sell oil and other goods. Tehran wants to increase bilateral trade because non-oil exports from Iran are expected to reach $52 billion by the end of 2023. 

Iran's state-run Fars News Agency reveals, quoting an Iranian investment official, that China invested only $162 million in Iran's economy during the first year of Raisi's presidency, less than both Afghanistan and Turkey put together. Yet China remains its largest trading partner, as evidenced by the fact that, for the first ten months of the current Iranian calendar year—which ends in March—Iran imported $12.7 billion worth of goods from China and exported $12.6 billion to China, according to most estimates.

In 2022, commodities worth US$15.795 billion were traded between Iran and China, 7% up from the previous year. To put it another way, that represents an increase of just over $1 billion over what was projected for 2021. With this increase, Chinese exports to Iran will reach US$9.44 billion in 2022, a 14% year-over-year increase from 2021. To put this in perspective, the value of Chinese exports to Iran in 2016 was $8.258 billion.

Recent monthly data shows a shift in bilateral commerce as China acquires more oil and energy resources from Iran, with China exporting US$893 million and importing US$312 million from Iran in December 2022, for a positive trade balance of $581 million.

Crude Oil

Iran has the fourth-greatest oil reserves and the second-largest gas reserves in the world, despite being under severe sanctions from the US due to its nuclear energy industry. Iran's oil exports surged by a factor of 10 by the end of 2022, and this pattern persisted throughout the first few months of 2023. For instance, Iranian crude shipments in November hit 1.23 million barrels per day (bpd), the highest level since August 2022.

The growth is happening despite harsh US sanctions and constant rhetoric, which makes people wonder if there are still any chances for a nuclear agreement and for Iran to be able to trade and grow its economy.

Notwithstanding the US sanctions on Iran, China still buys Iranian oil, and several companies that track data say that Iran's oil exports hit record highs in November and December 2022 and got off to a good start in 2023.

China has bought US$47 billion in Iranian oil since US President Biden took office in 2021, solidifying China as a crucial lifeline for Iran. The current levels are much higher than the less than 500,000 barrels per day projected for 2020, even if they are much lower than Iran's peak exports of 2.5 million barrels per day at the beginning of 2018.