By Furqan Khan
Great Power Politics Fellow, PoliTact

Context

President Donald Trump is set to meet Chinese President Xi Jinping this week in Beijing, a summit originally scheduled for April and was stalled due to the ongoing US-Iran war. With the conflict carrying enormous economic consequences due to the closure of the Strait of Hormuz, it is likely to be a major point of discussion at the summit. What was expected to be a reset moment for US-China relations is now overshadowed by the Middle East conflict, which carries significant implications for the global economy.

Conflict at an Impasse Stage

After the initial Islamabad Talks failed to ease tensions between Iran and the United States, Pakistan’s shuttle diplomacy has reopened the lines of communication between Washington and Tehran. Tensions escalated after Iran closed the Strait of Hormuz in response to the US’ refusal to end the blockade of Iranian ports. While a ‘fragile’ truce remains in place, negotiations are stalled and fears of escalation are growing as the two parties recently exchanged fire in the Persian Gulf. After rejecting Iran’s proposal to open the Strait of Hormuz and end the war, which also suggested delaying negotiations over the nuclear program, Trump reviewed another 14-point proposal from Iran, but has expressed doubts – and later rejected another version. Meanwhile, domestic opposition in the US to the war is growing, which has already cost $25 billion. Moreover, the conflict has caused extensive damage to the US military assets across the Middle East and raised the gasoline price to its highest level in four years.

In the big picture, as the US jumps into another war in the Middle East, diverting its resources from the Pacific, it is pertinent to highlight what this conflict means for China, and its interests in the Middle East, as it also embroils in great power competition.

What is at Stake for China?

Since the beginning of this conflict, China has consistently condemned the US-Israel joint strikes on Iran in February that killed Iran’s Supreme Leader Ayatollah Khamenei and demanded an immediate ceasefire. China has released numerous statements criticizing America’s broader approach to international affairs, and calling the US’ blockade of the Strait of Hormuz “dangerous and irresponsible.” Without mentioning the Iran war or blockade of the Strait of Hormuz, President Xi has criticized American actions in the Gulf, saying that the world may be returning to the “law of the jungle.”

China has substantial stakes in this conflict. It relies heavily on the Strait of Hormuz for more than a third of its energy imports. China remains Iran’s largest trading partner, and over 80 percent of its crude goes to Beijing. At the same time, China has deep economic and investment ties in the Gulf states, and the Strait of Hormuz being critical for its energy supplies, Beijing has leveraged diplomacy to seek an end to this conflict.

The China Hand

The US has accused both China and Russia of providing dual-use equipment and satellite imagery enabling Iran to target US positions in the region. The New York Times and CNN reported, citing US intelligence sources, that China was preparing a shipment of weapons, including anti-aircraft missiles, to Tehran. China has denied these claims, calling them “untrue,” and stating that China opposes such “ill-intentioned conduct.”

As he is set to meet President Xi this week, Trump also played down Chinese assistance to Iran, mentioning Chinese President Xi Jinping’s reassurance that China is not providing any weapons to Iran, while warning of “big problems” for Beijing in case they do so.

The war benefits China in many ways. The spike in oil and gas prices is pushing American allies, from the European Union to the United Kingdom – and from South Korea to the Philippines, into China’s clean energy infrastructure. They see it as a long-term solution to protect their economies. China may also be relieved seeing its rival getting bogged down in yet another war with declining credibility among its allies and the diversion of the American fleet from the Pacific. The US military has already expended an enormous amount of critical munitions that could potentially be used in a future conflict with China. China also appears most resilient in terms of energy security, given its huge oil reserves – the largest in the world. According to a recent report, China has enough oil stored to cover seven months of imports via Hormuz.

However, a conflict with wider economic and security risks reverberating throughout the region is not what China wants. Prolonged instability will threaten global markets and cause supply chain challenges. Moreover, the rising oil prices is already hurting the Chinese economy, making the Iran war and opening of the Strait of Hormuz a central concern for the upcoming Trump-Xi meeting.

China’s Leverage Over Iran

China has a strategic partnership with Iran, which is reflected in the 25-year Comprehensive Strategic Partnership signed in March 2021. This included a massive $400 billion Chinese investment in Iran and defense cooperation in exchange for the discounted purchase of Iranian oil. The partnership allows Tehran to bypass Western sanctions while giving Beijing long-term energy security. China has also expanded its diplomatic footprint in the region by brokering a peace agreement between Iran and Saudi Arabia in 2021, helping the two rival Gulf states restore diplomatic relations.

Despite strong economic and security ties with Iran, China’s leverage has been limited. Nonetheless, Beijing’s role has been consistent, limited, and largely predictable. Chinese officials have used their conventional shuttle diplomacy, where Foreign Minister Wang Yi dialed nearly all regional partners and played its role in the UN Security Council, calling for a negotiated settlement. Beijing also joined Islamabad, the principal mediator in this conflict, to issue a joint ‘five-point initiative’ to end the war in the Middle East. At the same time, as both the New York Times and the Washington Post reported, China actively pursued the Iranians to agree to the initial two-week-long ceasefire.

A week before the Trump-Xi summit, Iran’s Foreign Minister Abbas Araqchi met FM Wang Yi in Beijing, where Araqchi supported President Xi’s four-point proposal to end the conflict, reaffirming his “trust” in China. As part of his regional diplomacy, FM Araqchi also met Russian President Vladmir Putin in Moscow to discuss the war and continue “consultation” on regional and international issues. Trump held his own phone call with Putin during which the later expressed interest in playing an active role in ending hostilities in the US-Iran war. Trump, however, rebuffed the proposal and instead pressed Putin on ending the Ukraine war.

China’s response reflects a cautious great power strategy, where Beijing is concerned about the risks of conflict escalation but is also reaping its limited geopolitical benefits. It has not been pursuing the role of a mediator but rather a great power concerned about its broader interests in the region. Nonetheless, given its diverse energy sources and limited strategic commitment to Iran, China appears to be confident at managing the risks of this conflict.

Trump-Xi Summit 2026

As the two leaders meet this week, the Iran war and the resulting energy crisis will likely be a potential point of discussion. Trump’s announcement to continue the blockade of the Strait of Hormuz, which China uses to import one-third of its energy needs, complicates the process of seeking a reset on major issues, including bilateral trade with China.

Tensions are already mounting as the two powers are taking actions against each other’s firms. The Trump administration recently sanctioned China’s largest refiners and threatened secondary sanctions against Chinese banks for facilitating Iran’s economy. Beijing has blocked Meta’s $2 Billion bid to acquire the AI startup Manus, an attempt to keep cutting-edge AI technology inside China.

The rare Trump-Xi summit is an opportunity for both competitors to bring the US-China relations on track following their trade truce in October last year. Trump realizes this and has been seeking a deal with Iran before the Summit. He wants to meet Xi from a position of strength and not with an unresolved conflict he started, alongside Israel, two months ago, which may now be giving the Chinese side an advantage. With the Iran war hanging over the summit, the meeting will may fall short of the expected outcomes in seeking a reset to the US-China bilateral relations.

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The post Iran War Overhangs Trump-Xi 2026 Summit appeared first on Politact.

Context

The saga of the Iran-Pakistan Gas Pipeline project is a stark illustration of how geopolitical complexities can impede critical infrastructure development, even when the need is dire. For Pakistan, a country grappling with chronic energy shortages, this pipeline has long represented a beacon of hope for economic stability and growth. Yet, for decades, it has remained tantalizing out of reach, a victim of international pressures, regional rivalries, and economic challenges.

The story begins in 2010 when Pakistan, facing an escalating energy crisis, signed a landmark deal with Iran to construct a 2,750-kilometer pipeline. Initially valued at $7.5 billion, the project promised to be a game-changer for Pakistan’s energy sector. The potential impact was significant: according to a USIP report, Pakistan’s persistent power crisis was trimming off about 2 percent of the country’s annual domestic product[1]. Furthermore, a World Bank study estimated that power shortages in developing countries like Pakistan could reduce business profitability by up to 40 percent[2]. These figures underscored the critical nature of the project for Pakistan’s economic well-being and future growth prospects.

Economic and Geopolitical Realities

From its inception, the project has been shadowed by the looming threat of U.S. sanctions. Unlike India, which received exemptions for its involvement in Iran’s Chabahar port, or Afghanistan, which was granted allowances for trade through Iran, Pakistan has consistently faced stern warnings from Washington about the consequences of proceeding with the pipeline. This disparity in treatment reflects the complex web of U.S. strategic interests in the region. India is viewed as a potential counterweight to China’s growing influence, while for Afghanistan Chabahar represents and alternative for its dependence on Pakistan. Pakistan, with its complex relationship with the U.S. and close ties to China, finds itself in a less favorable position.

The US policy towards Pakistan, Iran, and India have different ambitions. The situation demonstrates the complexity of international relations, where strict policy adherence often gives way to strategic exceptions based on broader geopolitical goals. The American approach has been criticized for its inconsistency, but from the U.S. perspective, it reflects a nuanced balancing of various strategic interests in the region. Using exceptions and restrictions as tools allows U.S, to influence foreign policy choices of regional players.

The geopolitical landscape has further complicated Pakistan’s position. Historically, tensions between Saudi Arabia and Iran meant that Gulf Cooperation Council (GCC) nations were hesitant to support a project that could increase Iran’s influence and decrease Pakistan’s financial dependence on them. Especially because Iran’s influence in the Middle East has consistently been increasing. China and Iran also signed $400 billion-dollar strategic economic agreement in 2021.

While the Chinese facilitated Saudi-Iran détente reached in 2023 offered a glimmer of hope, it has not significantly altered the dynamics surrounding the pipeline project. This hesitation from traditional allies has left Pakistan in a precarious position, caught between its energy needs and its diplomatic relationships. Moreover, the October 7, 2023, Hamas attack on Israel has further hardened positions against Iran.

Pakistan’s economic instability has added another layer of difficulty. The country’s frequent need for IMF bailouts and its struggle to finance large-scale infrastructure projects have made the pipeline’s completion seem increasingly elusive. As years passed, the project’s costs escalated, and the global political and security environment became even more convoluted, making it more challenging for Pakistan to move forward. In August 2023, Pakistan announced the suspension of the project due to the threat of U.S. sanctions, highlighting the ongoing pressures and uncertainties surrounding the initiative.

The failure of alternative energy projects has exacerbated Pakistan’s predicament. Initiatives like TAPI (Turkmenistan-Afghanistan-Pakistan-India pipeline) and CASA 1000 (Central Asia-South Asia power project) have stalled, often citing security concerns in Afghanistan and Baluchistan. Consequently, Pakistan remains heavily reliant on expensive Independent Power Producers (IPPs), a situation that undermines the competitiveness of its exports in the global market. This dependence on costly energy sources creates a vicious cycle, hampering economic growth and making it even more difficult for Pakistan to invest in long-term energy solutions.

Meanwhile, regional dynamics have shifted dramatically. India has made significant strides in enhancing its connectivity to Central Asia through the Chabahar port, effectively bypassing Pakistan. In May 2024, India signed a 10-year agreement to develop and operate Iran’s strategic Chabahar Port, committing $120 million, along with an additional $250 million loan credit facility for related projects. This development not only provides India with strategic advantages but also highlights the opportunities Pakistan is missing due to its inability to complete the pipeline project. The Chabahar port offers India an opportunity to reestablish its presence in Afghanistan and enhance its access to Central Asian markets, areas where Pakistan could have played a pivotal role had the pipeline project moved forward.

The Opportunity Cost

The opportunity cost for Pakistan is substantial and multifaceted. Economically, the completion of the Iran-Pakistan Gas Pipeline could have significantly reduced Pakistan’s energy import bill. Conservative estimates suggest that access to Iranian natural gas could have saved Pakistan billions of dollars annually in energy costs[3]. This reduction in energy expenses would have had a cascading positive effect on the economy, potentially boosting GDP growth by 1-2% per annum[4].

Moreover, the availability of reliable and affordable energy would have been a boon for Pakistan’s industrial sector. Many industries, particularly textiles – a key export sector for Pakistan – have suffered due to inconsistent power supply. With a steady supply of natural gas, these industries could have operated at full capacity, potentially increasing export revenues by 15-20% annually[5].

The pipeline could have also played a crucial role in reducing Pakistan’s dependence on the IMF. By stabilizing energy costs and boosting industrial output, Pakistan could have improved its foreign exchange reserves and reduced its current account deficit. Economic projections suggest that over a 10-year period, the pipeline could have contributed to reducing Pakistan’s external debt by 20-25%, significantly altering its financial landscape and reducing the need for frequent IMF interventions[6].

Furthermore, the project had the potential to transform Pakistan into an energy corridor, linking Iran to the vast markets of South Asia. This role could have brought in significant transit fees and positioned Pakistan as a key player in regional energy dynamics. Conservative estimates put potential transit fee earnings at $500 million to $1 billion annually, a substantial boost to Pakistan’s foreign exchange earnings[7].

The environmental impact is another overlooked aspect. Natural gas, being a cleaner fuel compared to oil and coal, could have helped Pakistan meet its climate change commitments more effectively. The shift to gas could have reduced carbon emissions by 15-20% in the power sector alone, contributing to global climate goals while also improving local air quality[8].

Navigating the Future

As Pakistan grapples with these lost opportunities and ongoing challenges, it finds itself at a critical juncture. The country must navigate the escalating great power rivalry between the United States and China while addressing its pressing energy needs. In this context, Pakistan could consider a multi-faceted approach to move forward.

Firstly, Pakistan should intensify its diplomatic efforts with the United States, emphasizing the project’s importance for regional stability and economic development. Framing the pipeline as a crucial element for broader international goals in the region might help in securing exemptions or finding a middle ground. This approach could involve highlighting how energy security in Pakistan contributes to overall regional stability, a key U.S. foreign policy objective. A more economically stable Pakistan could be a more effective partner in fighting extremism and promoting regional security.

Engaging with Iran through economic projects could provide more diplomatic leverage for the international community in negotiations over Iran’s nuclear program. While the pipeline would benefit Iran, it would also make Iran more dependent on its neighbors for economic stability, potentially increasing leverage in nuclear negotiations.

Secondly, Pakistan could leverage the improved Saudi-Iran relations to garner support from GCC countries. This diplomatic outreach should be coupled with a renewed focus on diversifying energy sources, including accelerating the development of domestic resources and exploring alternative gas import options. The recent geopolitical shifts in the Middle East offer a unique opportunity for Pakistan to reposition itself in regional energy dynamics.

Thirdly, Pakistan should consider a phased implementation of the pipeline project, starting with sections less likely to trigger immediate sanctions. This approach could be complemented by exploring technical solutions that might mitigate sanctions risks, such as processing Iranian gas at the border. By breaking the project into smaller, more manageable phases, Pakistan might be able to demonstrate progress and build momentum while navigating complex international regulations.

Furthermore, Pakistan needs to reduce political polarization and strengthen its economic foundations through structural reforms. Improving the investment climate to attract foreign investment in the energy sector and reducing dependence on external financial support would put Pakistan in a stronger position to pursue its energy security goals. These reforms could include streamlining bureaucratic processes, enhancing transparency in the energy sector, and developing a clear, long-term energy policy that prioritizes sustainable and affordable energy sources.

In the broader context of great power rivalry, Pakistan should maintain a balanced approach between the U.S. and China. Leveraging relationships with both nations, while also exploring multilateral forums like the Shanghai Cooperation Organization (SCO) and potentially BRICS, could open new avenues for support and cooperation on energy projects. This balanced approach could involve positioning the pipeline project as part of a broader regional connectivity initiative that benefits multiple stakeholders, potentially making it more palatable to international partners.

The Iran-Pakistan Gas Pipeline project remains a symbol of unfulfilled potential in regional cooperation and energy security. Its completion could catalyze a transformation in Pakistan’s economic landscape, potentially adding 2-3% to annual GDP growth, creating hundreds of thousands of jobs, and significantly reducing the country’s carbon footprint. The ripple effects would extend beyond Pakistan’s borders, fostering regional integration and potentially contributing to stability in a volatile region.

As Pakistan continues to navigate the complex interplay of domestic needs and international pressures, the path forward requires astute diplomacy, economic resilience, and strategic foresight. By addressing these challenges head-on and adapting to the evolving geopolitical landscape, Pakistan may yet find a way to turn this long-delayed project into a reality. The stakes are high – not just for Pakistan’s energy security, but for its economic future and its role in an increasingly interconnected region.

The coming years will be crucial in determining whether Pakistan can overcome the hurdles that have long delayed this project. Success would not only secure a more stable energy future for its people but could also redefine Pakistan’s position in the regional and global economic order. The Iran-Pakistan Gas Pipeline, therefore, represents more than just an energy project; it is a test of Pakistan’s ability to navigate complex geopolitical waters and emerge as a key player in the changing dynamics of South and Central Asia.

References:

[1] United States Institute of Peace (USIP) report on Pakistan’s energy crisis (2023)

[2] World Bank study on power shortages in developing countries (2022)

[3] Asian Development Bank (ADB) report on South Asian energy trade (2021)

[4] International Monetary Fund (IMF) country report on Pakistan (2023)

[5] Pakistan Bureau of Statistics, Annual Export Data (2023)

[6] Economic projections by Pakistan Institute of Development Economics (PIDE) (2022)

[7] Estimates from Pakistan’s Ministry of Energy (Petroleum Division) (2021)

[8] Pakistan’s Nationally Determined Contributions (NDCs) to the Paris Agreement (2021)

Related Links:

Iran-Pakistan Cross-Border Clashes And Deep-Rooted Challenges

Great Power Rivalry And China’s Deepening involvement In South Asia, Gulf States

The Future and Politics of Iran-Pakistan Gas Pipeline Project

The post The Iran-Pakistan Gas Pipeline Project: Economic and Geopolitical Realities appeared first on Politact.

Context

Voting began on April 19^th in India and the results will be announced in the first week of June. With over 986 million eligible voters, elections in India have been described as the largest democratic exercise in the world. However, despite all the fanfare, the results of the Indian balloting seem all but a foregone conclusion. Prime Minister Modi has perfected the art of turning India into an ethno-majoritarian state over his past two terms in office. Modi continues to subjugate the minorities, while simultaneously working to turn India into a powerful Hindu state.

Modi is now seeking to secure a third term in office using the same playbook which enabled him to secure a landslide victory in 2019, namely by stifling dissenting voices, undermining the political opposition, terrorizing religious minorities, and acting tough against neighboring China and Pakistan.

Under Modi, India has rapidly undermined its credentials of being a secular democracy. Just because the country holds elections regularly, and its military does not intervene in politics, does not make the Indian polity automatically tolerant. In recent years, Modi has expedited economic growth, but inequality remains a major problem since the top 10% of the population now owns 77% of the nation’s wealth. Modi deflects economic disgruntlement of the masses by infusing in them a xenophobic sense of Hindu pride, which undermines the rights of all other religious minorities.

The inauguration of the Ram temple on the site of the razed mosque in Ayodhya, and the operationalization of the controversial Citizenship Amendment Act of 2019, have become overt symbols of Modi’s continued desire to repress India’s sizeable Muslim population. The Supreme Court’s decision this past December to endorse Modi’s revocation of Kashmir’s autonomous status has further boosted his image as a decisive leader who will not allow any insurgent movement, especially one spearheaded by Muslims, to threaten India’s territorial integrity.

Nonetheless, despite once being considered an international pariah for his role in the Gujrat communal massacre, Modi now rubs shoulders with the most powerful leaders in the world. Under his leadership, India became the first nation to land a spacecraft on the south pole of the moon. To top it all, Modi is now actively working with the US to help contain Chinese influence across South Asia. With these impressive credentials, most political pundits agree that Modi is likely to make a comeback in the next round of elections.

Pakistan-India Rapprochement

With India most likely remaining under the grip of Modi’s ultranationalism for another five years, and Pakistan struggling with multiple domestic security and economic challenges, as well as a crisis of political legitimacy, it is worth taking stock of how these two largest South Asian countries may respond to each other in coming years.

In the emerging geopolitical environment due to the ongoing Gaza crisis, the future of Pakistan India ties appears more challenging. Learning from Israel, India may also take on more heavy-handed policies and unilateral approaches.

The new leadership in Pakistan has at least demonstrated its intent to attempt rapprochement with India. The foreign minister appointed by the Sharif brothers recently hinted at the possibility of resuming trade with India, even though the Foreign Office then quickly reiterated Pakistan’s stance of not resuming trading with India till its government restores Kasmir’s special status. Despite these mixed signals, trying to improve trade relations with India is plausible. Cross-border tensions have not flared up between the two neighboring rivals since the past three years.

Pressure from Gulf States

The Gulf states, especially Saudi Arabia and the UAE, which have strong ties with both India and Pakistan, also seem keen to help mend ties between these neighboring rivals. The UAE, is reported to have helped broker the 2021 ceasefire between India and Pakistan, and it has also been engaging in backchannel diplomacy to help improve ties between India and Pakistan.

The Saudi Crown Prince has also explicitly stressed the need for an India-Pakistan dialogue, during Prime Minister Shabaz Sharif’s visit to Saudi Arabia, in the bid to secure more Saudi financial support and investments. In addition to the desire to broker a dangerous conflict between two close allies, the Saudis want Pakistan to focus on economic growth and regional cooperation, instead of expending further energies on contending with India’s growing military might.

Kashmir and Cross Border Militancy

Indian repression in Kashmir continues to persist, and Pakistan has little chance of pressing India to walk back on its Kashmir policy, even if this mistreatment of Kashmiri Muslims remains a major source of friction. Moreover, on the heels of Canadian and American accusations of India sanctioning targeted killings of Sikh dissidents on their soil, Pakistan has also accused India of engaging in extraterritorial killings of Kashmiri and other extremist militants based within Pakistan.

The fact that India has moved swiftly to build ties with the Taliban regime in Afghanistan, and its suspected ability to continue aiding Baluch insurgents and TTP terror attacks on Pakistani soil via Afghanistan, also remain issues of major concern for Pakistan  While its recent hostilities with Iran did not escalate, Pakistan does need to focus more on its western border to prevent cross-border militancy to spark another crisis with Iran. Due to the broader insecurity emanating from the Israeli war on Gaza, Iranian sensitivity regarding the activities of Jaysh ul-Adl (formerly Jundallah) have increased tremendously.

On the other hand, regional experts have warned American policy makers to be wary of exacerbating Pakistani insecurities in the bid to bolster Indian military capabilities meant to stand up to China. The US is no longer considered a neutral arbitrator by Pakistan, which increases the risk of another cross-border crisis between India and Pakistan escalating into a catastrophic conflict. The danger of a terror attack in India, which is blamed on Pakistan, could quickly re-escalate tensions between the nuclear armed neighbors.

Economic Dimension

Besides these emergent security challenges on its other borders, which would make it very difficult for Pakistan to simultaneously cope with renewed tensions with India, the Pakistani economy is also experiencing major problems. Improving economic conditions in the country may in fact be the biggest priority for the country’s establishment and politicians, due to which resuming trade with India has become a more palatable option.

Pakistan was importing around $2 billion worth of Indian imports and exported neared $500 million worth of goods back in 2018. The countries suspended trade in 2019 after the suicide attack on Indian soldiers in Pulwama district which led India to revoke Pakistan’s most favored nation status – granted back in 1996.

Pakistan then cut trade ties completely after India revoked Kashmir’s special status a few months later. Thus, formal trade between the two countries came to a grinding halt and all cross- border goods must now be funneled through neutral places like Dubai, which significantly increases costs. Research by entities such as the World Bank suggests that fully opening up trade with India could increase Pakistani exports by as much as 80 percent, which could do wonders for its slugging economy.

India now has a much larger economy, and it is well integrated with other South Asian states, so it also has less need to normalize trade ties with Pakistan. Yet, given that India could significantly increase its exports by trading with Pakistani’s burgeoning market is also a reasonably attractive incentive. Currently, Modi is too preoccupied with the elections, but he may be willing to try improving ties with Pakistan under the Sharifs again, as was attempted during the last Nawaz Sharif premiership, over a decade ago.

Critical Pathways to Improving India and Pakistan Ties

In the prevailing geopolitical environment, India is unlikely to bolster the economy of its arch-rival without a wider rapprochement with Pakistan which would include Kashmir. Irrespective of who is to blame, the cross border threats from non-state actors to Pakistan, India, Iran, and Afghanistan – pose the single most potent risk to the region – and to the mutual ties of these nations. The recent spat between Pakistan and Iran involving Jaysh -ul-Adl, attack on a music concert hall in Russia in March linked to ISIS-K, and Tehreek-e-Taliban Pakistan (TTP) affiliated strikes in Pakistan, are prime examples.

In the context of great power rivalry, there seem to be two significant mutually exclusive pathways – with one leading to the improvement in Pakistan-India ties and the other towards deterioration.

1 The continuation of CPEC and Iran Pakistan Gas Pipeline Projects are unlikely to produce improvement in Pakistan-India ties – unless there is US-China detents of some sorts.

2. In the aftermath of the on-going Gaza conflict, the future of Abraham Accords is uncertain. However, if the two-state solution prevails – pressure on Pakistan will likely increase in the future to recognize Israel. With the close trade ties between GCC and India, this will likely improve chances of India-Pakistan détente as well.

However, if there is a direct conflict between Iran and Israel and the Abraham Accords dismantle, the pressure will increase on the GCC and Arab nations to either side with Iran or Israel. This quandary will be the same for Pakistan and India. However, the role of China and Russia would become paramount to preserve the Saudi-Iran détente reached in March this year. This is the context which makes the upcoming visit of the Iranian President Ebrahim Raisi to Pakistan all the more consequential.

The post Indian Elections, Future of Pakistan-India Ties And Centrality of Iran appeared first on Politact.

Guest Analyst Muhammad Siraj ul Huda Khan assisted in researching and developing this article.

Context

PoliTact periodically invites leading regional and global experts to understand the changing geopolitical situations and significant emerging themes. One such theme is the budding China-Iran economic and security partnership.

China and Iran are entering a $400 billion 25 year economic and security deal that would lead to enhanced military and trade relations. The agreement ensures Chinese investment in Iranian telecommunication, transportation, and military fields. The military cooperation includes exercises, intelligence sharing, and joint research and development of weapons. China will also procure its energy needs from Iran on discounted price for over next 25 years.

On July 28, 2020, PoliTact held a webinar to discuss the potential China-Iran economic deal and its impact on the China-Pakistan Economic Corridor (CPEC). The panelists analyzed the major developments taking place in the South Asia and Middle East regions and provided perspectives on the evolving situation. The theme has taken on added significance in the aftermath of US elections and with additional Muslim states, such as UAE, Bahrain, Sudan, and Morocco officially recognizing the state of Israel.

CEO and Chief Analyst of PoliTact, Arif Ansar, moderated the panel discussion. The opening remarks were made by Ikram Sehgal, who is a Chairman of the Karachi Council on Foreign Relations, CEO of Pathfinder Group, and member of the East West Institute’s Board of Directors.

The panel included:

• Ambassador Mustafa Kamal Kazi – Senior Vice Chairman at the Karachi Council on Foreign Relations, former Foreign Secretary and Ambassador of Pakistan to the Russian Federation, the Kingdom of Netherlands, Republic of Indonesia and Republic of Iraq.
• Khaled Almaeena – Former Editor-in-Chief of Arab News and Saudi Gazette, CEO of a PR Firm, and Saudi Television news anchor.
• Claude Rakisits – Honorary Professor at the Asia Pacific College of Diplomacy at the Australian National University. He is also a Director at PoliTact and covers the South Asia and Middle East region.

The Webinar explored the following key questions:

1. What are the implications of the China-Iran economic and security deal on the China Pakistan Economic Corridor (CPEC)?
2. Assessing Chinese influence in the Middle East region and does the China-Iran deal represent a Chinese pivot to the Middle East? Moreover, how does Chinese sway play out against that of India, Israeli, and the US in the region?
3. How the does the China-Iran treaty correlates with the Quad and Indo-Pacific strategy?
4. Will China use the Iran deal as a leverage in its dealing with the US, just as Russia has done?
5. History informs that Muslim nations or empires have often sided with one or the other global power – and then fought directly with each other. What can be done to prevent such an outcome in the framework of the present regional and global geopolitics?

Implications of the potential China-Iran Deal on China Pakistan Economic Corridor (CPEC)

There are multiple angles to review this connection; that of Pakistan and Iran, and one cannot ignore the positions of China and the US.

Pakistan sees no negative impact of the potential China-Iran deal on CPEC. Former foreign minister Sartaj Aziz once stated that the Chabahar Port was not competing with the Gwadar port, in fact they were seen as complimentary. Media reports have also indicated that a road was to connect the two closely located ports at some point.

On the other hand, Iran is likely to see the Chinese deal as a blessing in disguise. Fearing US sanctions, Pakistan has been dragging its feet on the Iran Gas pipeline project for years, and India has also been slow in developing the Chabahar Port. In all likelihood, once the deal is finalized, Chinese investments will start flowing in quickly and provide immense relief to the much-penalized Iran. More importantly, the China-Iran deal would provide the strategic counterbalance to the American, Israeli, and Arab pressure.

According to Ambassador Kazi, the US withdrawal from the Iranian deal of 2015, and mismanagement of the multipolar world, is one of the reasons China-Iran economic and security partnership is coming to fruition.

However, for China, the treaty with Iran diversifies the Belt and Road Initiative (BRI) providing it with another tributary. This is especially true if the CPEC route runs into trouble, or if the work slows down considerably due to the American, Indian, and Arab pressure on Pakistan.

Chinese Pivot to the Middle East and American, Israeli and Indian Coalition

China has been building strategic ties with the Middle East for some time now – in addition to the Asia Pacific, Middle East represents its other flank. Khaled Almaeena pointed out that the Saudi ties with China got underway in the 90s, as the Gulf region started to balance ties between China and the US. On the other hand, Dr. Claude Rakisits noted that the Chinese push westward is not necessarily a pivot, irrespective, the Iran deal will be seen negatively in both Saudi Arabia and the US.

Speaking at the Saudi embassy in China in July on the occasion of the 30 anniversary of the establishment of diplomatic ties, Saudi Ambassador Turki M. A. Almadi commented: “our relations are all-round, multi-field, not only about bilateral trade and mutual investment, but also extended to cooperation in the fields of culture, science and technology, and health.”

Zhai Jun, China’s special envoy on Middle East affairs indicated at the occasion that the bilateral trade volume between the two nations stood at $78.04 billion at the end of 2019. He added Saudi Arabia was the largest supplier of crude oil to China, and also the Arab nations largest trading partner.

Through its Belt and Road Initiative (BRI), China has become an active player in the Middle East with strategic ties with a number of regional players, to include Saudi Arabia. As its influence increases gradually, it could become an active interlocutor between Israel and the Palestinians, and other conflicts of the Middle East. However, it is not clear if China aspires to get involved in the security affairs of the region, like Russia has in Syria.

Chinese analysts present a case that the nation wants to be more active in providing economic support than engaging in security affairs of the Middle East. Nonetheless, China has amicable political and military relations with both Iran and Israel. As part of BRI, China has been extending its trade relations with Israel and lately US has objected strongly to some of them citing security concerns – such as the Chinese company Shanghai International Port Group (SIPG) running a container terminal at the Port of Haifa – near an Israeli naval base that is frequently visited by the US Sixth Fleet.

If the China-Israeli economic ties continue to strengthen uninhibited, overtime China will be able to build leverages that can potentially undercut US primacy in the affairs of the Middle East. The Israelis disagree on this possibility, stating that the nature of its ties with China and the US are of totally different nature. Nonetheless, the push under President Trump to normalize ties between Israel and the Arab nations can be seen as an attempt to counter China becoming an influential Middle Eastern player in the future.

When it comes to the Indian alignment with Israel and its growing ties with the Gulf nations, a different question is raised. How do these relations undercut the traditional support Pakistan has generated from the Gulf region?  In November 2018, PoliTact collaborated with the Middle East Institute to examine the political, security, and economic interconnections between South Asia and the Gulf States, and one of the subsets, Pakistan and Gulf Cooperation Council (GCC). The report pointed out to how India was strategically undermining Pakistan, a risk that has matured now.

Commenting on this during the webinar, Khaled Almaaena stated that Pakistan’s position has been undermined by the negative economic and security news consistently emanating from the country. And this has been occurring at a time when India has positioned itself as an information technology and economic powerhouse, and by investing in Saudi Arabia that brought jobs to the Kingdom. He further added, the younger leadership of KSA do not hold the same kind of affinity towards Pakistan as past leaders had.

Irrespective, we can see an attempt to undermine both the Chinese and Pakistan connections in the Middle east as they compete with the American, Israeli and Indian interests.

China-Iran Deal and Quad Strategy

Answering the moderator, and as noted above, Dr. Claude Rakisits noted that the Chinese push westward does not represent its pivot to the Middle East – and how this relates to the Quad strategy is a different angle.

Dr. Claude added that Quad is meant to “keep China within its borders”. And as a counter, China is pushing US away from the first island chain by building artificial islands in the South China Sea. Moreover, China-Iran deal counteracts Quad and the Indo-Pacific strategy by providing China with a key footprint in the Indian Ocean, which together with Gwadar and Djibouti, enhances Chinese naval potential.

While Quad would desire to box-in China, conversely China wants to limit the Indian role in the Indian Ocean and the Pacific, by keeping it busy within its borders. This dynamics can be witnessed by the present tensions and skirmishes on the Line of Actual control (LAC) and the Ladakh region.

Biden’s Middle East Policy, Iranian Sanctions, and Chinese Leverage

A related inquiry has to do with sanctions on Iran and how will China navigate them? Previous European attempts to build trade relations with the nation hit numerous roadblocks. As soon as Trump administration took oath in January 2017, within almost a year and a half of signing the Iran nuclear deal (July 2015), US started to build pressure on western companies attempting to build trade relations with Iran. As a result, even the $20 billion aircraft deal Boeing had signed with Iran had to be scrapped.

Under President Elect Biden’s Iran Policy, will these sanctions be eased if US rejoins the treaty? This will all depend on how the Biden administration re-engages Iran. Recently Biden has indicated that it will want to renegotiate the Iran deal to include its missile program, and wider behavior in the region; these were widely seen as major weaknesses of the 2015 deal.

This, however, will likely be a non-starter for Iran. The country has expressed it would not enter fresh negotiations with the US when even the terms and guarantees of the 2015 agreement were not kept.

A parallel concern is, with the ‘Outside In’ approach to the Middle East Peace Process so far along resulting in the Abraham Accords, will President Elect Biden be able to reverse it and thus jeopardize the present Arab-Israeli normalizing process? A more likely approach would be that the normalization process would have to incorporate the two-state solution under Biden – including a more transparent give and take by the Israelis – of the type that is frequently hinted by the Saudi leadership.

Irrespective, Dr. Claude was of the opinion that China will continue its dealings with Iran, despite the sanctions, and will push back on any efforts to restrict the ties between Iran and China. It is also possible that China will use the Iran deal as a leverage in its dealing with the US, just as Russia has done in the past. On several occasions when Russian ties stumbled with the West, it threatened to supply Iran with modern weaponry that could help it withstand any attack on its nuclear program.

The US Iran policy has circled around two approaches recently: the negotiated settlement was adopted by President Obama by signing the JCPOA in 2015, which sidelined the aggressive route against Iran propagated by Israel and Saudi Arabia. Trump took on the more militaristic alternative – moving away from the two-state solution, with wider recognition of Israel from the GCC and Arab States. The assassination of two top Iranian officials recently, Major General Qassim Soleimani and nuclear scientist Mohsin Fakhrizadeh, are linked to this approach.

The challenge is that a military solution towards Iran would be unacceptable for both China and Russia. Similarly, the reenactment of the JCPOA, along with potential China-Iran deal, will make China a stronger player in the Middle East. It could possibly utilize its clout to bring about Israeli-Palestinian agreement, which US has not been able to do alone.

On the one hand this cooperation between China and the US would be an immensely positive development that can bring about peace in the Middle East. However, this directly contradicts with what is transpiring in the Asia Pacific and resulting Indo-Pacific and the Quad strategy. And this also does not factor in Russian role in the whole scenario – and the interplay of the Muslim Middle powers, such as Turkey, Iran, Saudi Arabia, and Pakistan.

Islamic World and Global Power Tussles

In the past Muslim nations or empires have often sided with one or the other global power – and then fought directly with each other. And the question becomes what can be done to avert such an outcome in the framework of the present regional and global geopolitics.

Replying to the moderator, Khaled Almaeena pointed out that the Organization of Islamic Conference (OIC) is unable to fulfill this role. He added this requires strong Islamic leadership to prevent being exploited, commitment to their citizens, and rule of law. Moreover, he stated that ‘if Iran suffers, the Arabs will suffer too’. In his opinion CPEC can play a constructive role by being a bridge, ‘good economics makes good politics,’ he stated.

On the other hand, Ambassador Kazi was critical of the role the GCC nations have played in this regard and pointed to the infighting between the Arab nations. He noted that ‘what happens in the Arab world, impacts the Islamic world’.

Meanwhile, Ikram Sehgal added the role of Turkey is important, and one should not forget the Regional Cooperation for Development Organization (RCD) formed between Pakistan, Iran, and Turkey in 1964, and replaced by Economic Cooperation Organization (ECO) in 1979. He emphasized that Russia and China have good ties with Pakistan, Turkey and Iran, and that ‘constructive engagement can be a harbinger of peace’.

Conclusion

While Saudi Arabia has delayed recognizing the statehood of Israel, and while Qatar remains closer to Turkey, the shifting alliance of most GCC and Arab nations towards Israel and the US, represents a decisive shift in the balance of power. Adopting the threat perception that centers on Iran, and without any clear give and take from Israel in the context of Abraham Accords, is likely to revitalize the message of non-state actors.

While China has made an economic entry in the Middle East, it has not decided to influence the security affairs – other than under the umbrella of UN and for maritime security purposes. In Syria too, it has adopted a non-interventionist approach and has supported the Assad regime.

However, economic leverages will eventually lead to influences in other areas. And China would have to utilize its sway – especially when it has the most to lose if a conflict breaks out in the region. One measure of if matters are heading in that direction would be the establishment of military bases, like the one in Djibouti, and potential militarization of Gawadar and Chabahar port. And in this context, the China-Iran economic and security deal takes on an added emphasis.

In the long run, US would want to create a wedge between China and Russia. Since attaining self-sufficiency in its energy needs, the US interests in Middle East is primarily to prevent nuclear weapons from falling in the hands of rogue states, or non-state actors, and this this a goal it shares with Israel. At the same time, US would not want to lose its primacy in the Middle East, but to exploit the existing fault lines to further extend its reach – to the detriment of China and Russia.

At the same time, under President Elect Biden, there is an opportunity to move away from the zero-sum approach to world affairs – by reaching out to China for a wider détente and cooperation – and the geopolitics resulting from the Coronavirus related pandemic especially necessitates this. Reaching that stage, however, would require first a smooth transition of power in the US.

The post Biden’s Middle East Policy, China-Iran Ties, and CPEC appeared first on Politact.

Chinese foreign ministry spokesman Liu Weimin stated, “China is opposed to one country imposing unilateral sanctions on another country in accordance with domestic law, let alone imposing sanctions on a third country.”

Washington had announced that the seven emerging economies that are heavily dependent on Iranian export would not be penalized, if these countries make some amount of reduction. The countries exempted from sanctions are India, Malaysia, South Africa, South Korea, Sri Lanka, Turkey and Taiwan. Japan and some European Union countries were also added to the list in March.

Quoting unnamed US officials, media reports in Pakistan indicate that the countries’ import of oil from Iran is too low to be considered for sanctions. However, the Iran Pakistan (IP) gas pipeline project will be subject to sanctions.

The post US To Penalize China, Pakistan For Iran Energy Dealings appeared first on Politact.

China is seeing Markel’s visit as an opportunity to diversify its foreign reserves and to strengthen China-EU partnership. On the other hand, Germany has appealed for a level playing field for German firms operating in China, which have complained of restricted market access and barriers to entry in promising industries.

Germany has also asked China to influence Tehran as it relates to its nuclear program. However, Beijing has criticized EU’s unilateral sanctions on Iran, saying it is against China’s foreign policy to settle disputes with military actions or extreme sanctions.

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