President Donald Trump's decision to pull the United States out of the nuclear deal with Iran is giving China even more of an opportunity to fill the vacuum of power, says Frank Sieren.
Just two days after President Donald Trump announced that the United States was exiting the nuclear deal with Iran, a train carrying 1,150 tons of sunflower seeds set off for Tehran from Bayannur in northern China. It was the first journey on a new railway line that will enable goods to be transported from Inner Mongolia to Iran in 20 days fewer than the sea route. The train was decorated with flags and was clearly a symbolic mission whose message was that Iran will have a reliable partner in China going forward.
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Developing relations with Iran
Trump's move and decision to impose sanctions anew is changing global power relations. Russia, Germany, Britain, France and China have announced that they will maintain the deal despite pressure from Washington. Beijing even wants to develop China's cooperation with Iran. The two had agreed after sanctions were lifted two years ago to increase their mutual trade tenfold to $600 billion (€509 billion) over the next 10 years. These plans are not expected to change.
Beijing wants stability in the Middle East, which is why it signed the deal with Iran to prevent a nuclear arms race in the region. Moreover, China's new Silk Road project would not be possible without Iran. The trade volume between the two countries has more than doubled since 2006. Iran has very valuable natural resources for China. The country has about 10 percent of the world's secure oil resources, and China is its biggest buyer. In fact, China last year surpassed the US as the biggest importer of oil on the planet. This gives the Chinese government greater negotiating power when it comes to buying conditions.
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By filling the vacuum that the US will leave in Iran, Beijing will be able to come a step closer to its dream of the "petro yuan." The US dollar's international dominance is based on the petrodollar system that has existed since the mid-1970s and whereby international oil transactions have to be made in dollars. Thus, the US has profited from the dollar's dominant role. But Beijing would like transactions to be made in yuan in future. This would save costs on the exchange rate and strengthen the yuan as an international currency. The more countries use the yuan, the weaker the dollar will become — and the US' political influence as a result. Moreover, there will be more demand for Chinese goods and investment. Iran, Venezuela and Russia already conduct their oil transactions with China in yuan. Washington's new sanctions on Iran will lead other countries to avoid contact with the US financial system and seek a path to China.
Closing ranks against the US
Beijing will not support further sanctions on Iran. The Chinese government has understood that such measures are not effective in a multi-polar world order and not a way of imposing its foreign policy inclinations. Former US President Barack Obama also recognized this. Trump seems to think differently. The price he will pay does not seem clear to him. Along with climate change and the trade dispute with the US, the European Union now has another matter on which it will have to work more closely with China and Russia.
However, it is not yet clear whether they will achieve anything. The EU cannot force the US to come around. Trump's domestic success is more important than chaos in foreign policy. He will have this success if Iran budges. And I have to admit — the attempt is not completely futile.
Frank Sieren has lived in Beijing for over 20 years.