The dragon dithers: assessing the cautious implementation of China’s Belt and Road Initiative in Iran

ABSTRACT

In the Belt and Road era, one would expect an increase in the amount of Chinese economic engagement with Iran due to its strategic position on the Persian Gulf and its rich oil reserves. Yet by 2020 a committed program of large-scale investment comparable to the China-Pakistan Economic Corridor (CPEC) had not materialized in Iran. The article uses an analytically eclectic framework to examine the record of Chinese economic activity in Iran since the advent of the Belt and Road Initiative (BRI) in 2013. The empirical analysis demonstrates that China uses a strategically hedged approach to economic engagement in the Persian Gulf incorporating ideational as well as material elements. Ideational elements include the BRI’s intentional geographical “fuzziness” which enables it to act as a loose “policy envelope” for China’s evolving foreign policy needs. Through its hedged approach, China aims to open up local markets to Chinese commercial actors and secure diversified oil supplies. At the same time, Beijing aims to soft balance against US regional hegemony while avoiding the appearance of a challenge to the regional status quo. China also hedges by attempting to maintain solid relations with as many regional actors as possible, including most importantly Iran’s regional rival Saudi Arabia, from whom China is receiving ever higher imports of oil. Data reveal that Chinese economic engagement with Iran has increased in the BRI era, but at a slower rate than in some other BRI partner countries and not at the expense of its relations with Saudi Arabia.

KEYWORDS:

• China
• Iran
• Belt and Road Initiative (BRI)
• outward foreign direct investment (OFDI)
• strategic hedging
• soft balancing

Disclosure statement

No potential conflict of interest was reported by the authors.

Additional information

Funding

This work was supported by the Czech Science Foundation (Grantová Agentura České Republiky) as part of the research project “China's multifaceted economic diplomacy in the era of the Belt and Road Initiative” [project no. 19-01809S].