Iran joins Beijing in signing Eurasian trade agreement weeks before Rouhani looks to join Eurasian security organisation.
Something I haven’t seen reported much in English language media: During the Astana Economic Forum (17-19th May), China signed an economic and trade agreement (经贸合作协定) with the Eurasian Economic Union (EEU).
My reaction to this development is somewhat conflicted.
On the one hand, the agreement probably won’t amount to much. Xinhua says that the deal covers ’13 chapters including customs facilitation…’ etc., but a Kazakh official is quoted (in a Google translated Russian article that I’ve now lost…) as saying something along the lines of “this agreement doesn’t obligate anyone to do anything.” Without seeing the document, it’s hard to tell, but if the agreement contained any concrete provisions, Beijing would have probably advertised that fact.
On the other hand, the agreement demonstrates to me that Beijing is inching forward with its agenda setting ambitions in Eurasia. As I understand it, the EEU is fundamentally a protectionist, inwards looking organisation that Russia set up in order to exclude external actors from its post-Soviet sphere of influence. Meanwhile, China’s Belt and Road Initiative is about wielding Beijing’s economic might abroad and incorporating Central Asian markets into its Silk Road Economic Belt. Thus, an element of tension exists between the EEU and China’s BRI (as this excellent paper explores). Xi Jinping has long insisted that both the EEU and the Shanghai Cooperation Organisation (the SCO, which we will come to shortly), should work together, and with the Belt and Road, to promote common development in the Eurasian region.
Beijing has been pushing for an free trade agreement (FTA) with the EEU for as long as Moscow has been postponing that very agreement. Within this (somewhat simplified) context, the new trade deal could be seen as either a victory for Moscow’s delaying tactics, or for Beijing’s integrationist ambitions. I tend to view it as the latter. For Moscow, China is a somewhat problematic but ultimately inexorable economic and geopolitical fact; Beijing’s pull on Central Asian markets is only heading one way, and this latest agreement is a step in the right direction for Beijing.
But the China-EEU agreement is interesting for another reason: On the same day that Beijing signed its cooperation deal, Iran also signed an agreement with the EEU – an FTA lasting three years until a more permanent arrangement can be agreed upon. Post-Trumpian withdrawal, everyone seems keen to salvage the Iran nuclear deal. But while European companies are struggling to continue business in Iran under the threat of US sanctions, Russia and China are well positioned to welcome Iran into the emerging Eurasian regional architecture.
As well as signing deals with the EEU, Iran’s President Hassan Rouhani is also attending the annual SCO summit that is being held in Beijing this month. The largely China-led SCO is an organisation that was born out of efforts to reduce border tensions between China and its Western neighbours. Security still features foremost amongst the organisation’s mission statements, but it’s since become a more comprehensive forum for regional cooperation. Beijing is especially keen on promoting the SCO as a platform for greater regional economic integration and it’s been pushing the Belt and Road pretty hard at SCO fora.
Last year, the SCO admitted India and Pakistan as full members, making the SCO the world’s most populous regional organisation – accounting for something crazy like 3.1 billion people. Iran has long wanted to join this crowded club, but has been unable to do so because the SCO has a policy against admitting countries under UN sanctions. Fortunately for Rouhani, those sanctions no longer apply.
The decision to admit Iran isn’t necessarily an easy one. Put crudely, admitting Iran will piss off Saudi Arabia, and some SCO members, particularly Pakistan, might think twice about pissing off Saudi Arabia (this article explores these dynamics at greater length).
Beijing has largely managed to avoid being mired in the whole Sunni-Shia conflict. It has pretty much declared war against Islam in Xinjiang, yet maintains healthy economic relations with Israel, Iran, and Saudi Arabia alike. This is a pretty impressive feat of double-think on the part of the Islamic world, but there is always the question of how long Beijing can maintain this balancing act.
So, Iran’s membership of the SCO is far from a done deal, but it is a confirmed topic of discussion at this year’s summit. Xi Jinping has also invited Rouhani to bilateral talks at the sidelines of the summit. We should expect Russia, China, and the SCO at large to make a statement of support for the Iran nuclear deal, but the thing to watch out for is the question of Iran’s full-time membership.
If Iran is admitted to the SCO just weeks after signing a deal with the EEU, and just a month after the US absconds from its international commitments to Iran, it would be a pretty clear signal that Beijing can build and maintain the new Eurasian order without help from Brussels or Washington.