September 2020

As per usual, the articles published by the wider Mediterranean region’s media offer interesting insights into how China is perceived. Among the most valuable ones, we found commentaries published in Iran that further shed light on the local perception of the much-discussed new cooperation agreement between Beijing and Tehran. China’s role in Gulf and eastern Mediterranean security, the fate of the China-Iraq “oil-for-investment” deal, and Chinese investments in Israel are also among the topics that we cover in this issue of the ChinaMed Observer.

In Iran, the newspapers Etemad and Donya-e-Eqtesad published a number of articles that reveal how Iran understands China’s goals in their relationship, and how past interactions with China have shaped today’s cautious approach of the Iranian government. According to Etemad, Iran made three mistakes in its past dealings with China that should not be repeated again. [1] The first was a lack of understanding of Chinese business practices and goals. In particular, Iranian companies and institutions often signed agreements with their Chinese counterparts that forced them to rely on their Chinese partners without the possibility of holding competitive bids. This is why they often had to pay unreasonably high prices. Moreover, they did not notice that many contracts allowed the Chinese companies to renegotiate the terms of the agreement in more favorable ways if they wanted to. The second problem is that the interests on loans provided by Chinese financial institutions were not low. Moreover, much of the capital raised in that way had to be spent on Chinese equipment and material. The result was that local Iranian companies ended up buying Chinese products for prices that were not justified by their quality. While the previous issue was caused by the lack of preparation by Iranians, this second problem is described as the result of the Chinese leveraging their position as the only ones willing to work with Iran. Finally, the contracts and agreements contained no instruments that allowed Iranian companies and institutions to monitor and, if necessary, punish Chinese contractors when they could not complete their projects on time. On the contrary, China could easily withdraw money from an account of the Iranian government in China whenever Iranian companies failed to pay back the loans. The author of the article argues that the Iranian government is now trying to solve these issues, and this explains why Iranian policymakers have not given much detail about the negotiations with China.

However, an energy market analyst argued in Donya-e-Eqtesad that Iran cannot do much to improve its position vis-à-vis China. [2] Two key elements contribute to this difficult situation. On the one hand, China’s diplomatic priority is to avoid a further deterioration of the relations with the United States. On the other hand, the idea that many have in Iran–that their country is at the center of the world energy market–is wrong. Iran has significant energy resources, but its long-standing marginalization in global energy trade and the availability of large quantities of oil and natural gas on the market make Iran a relatively unimportant partner for China.  In fact, China can choose to buy from others without paying more and without adding pressure to its relations with the United States. Iran’s hope is that China and the United States could stabilize their relations but, wrote the analyst, this seems unlikely in the foreseeable future. Somehow in a similar way, Behzad Shahande, Professor of East Asia at the University of Tehran, made the same argument, inviting Iranian leaders to keep these elements in mind when they assess China’s strength and interests. [3]

We found a similar call to not exaggerate China’s will and resources to play a more active role also in the context of regional security. In a rare article on this topic published by the Qatari al-Sharq, a local analyst argues that regional policymakers should not think that China will substitute the United States and become the leading security provider in the Gulf. [4] Simply put, the United States is not going to scale back its military presence and diplomatic involvement in any significant way, regardless of the decreasing depending on Middle Eastern oil. Moreover, even if the Americans did so, China has repeatedly shown that it is not interested in getting involved in regional security issues or claiming regional hegemony. Instead, the author argues, China might be interested in becoming the leader of Asia but it also seems quite comfortable to rely on the United States for providing stability in the Middle East. Nonetheless, policymakers in the wider Mediterranean region might still try to win China’s support against their rivals. For example, the Greek Prime Minister Kyriakos Mitsotakis seemed to be asking for Chinese support in the dispute with Turkey when he emphasized that the visit of Yang Jiechi is deemed of great importance in Athens.  According to Mitsotakis, China’s permanent seat in the Security Council of the United Nations and its respect of international law make Beijing an important partner as Greece faces “Turkish aggression”. [5] It is unlikely, however, that the Greeks expect any concrete action from China on this issue.

In Israel, the situation does not differ much from that in Iran as the debate on China is highly polarized and, in any case, the relations with Beijing are experiencing a significant downturn because of American pressure. Indeed, speakers at the Israeli Go Global Forum remarked how difficult it has become for Israeli companies to conduct business with and in China. [6] However, it seems that only four of the thirty most successful Israeli start-ups have relations with Chinese investors or the Chinese market. Moreover, others also pointed out that other Asian countries might fill the gap of investments created by the cooling down of economic cooperation with China. Investors that wanted to enter the Chinese market before, might currently also consider the Israeli one as an alternative.

At the same time, the prospects of cooperation with China also look bleak in Iraq. As we reported in the past issue of the ChinaMed Observer, the so-called “oil-for-investment” deal between the two countries seems dead. A recent article published by al-Zaman describes a complex situation where many members of the Iraqi Parliament continue to support the agreement with China while the government denies that there is any relationship between it and other agreements signed with the United States. [7] However, the journalist believes that it is likely that the Iraqi government will officially terminate the agreement with China. The risk of the government refusing to clarify its position is that of further damaging the relations with Beijing. Interestingly, an Iraqi MP was quoted saying that the deal with China was undermined by some in Iraq that were paid for by Kuwait, which hopes to prevent Iraq from linking with China via the Umm Qasr Port. [8]