Forging Ties in Different Pathways: Developing Iranian-Asian Relations in the Aftermath of the JCPOA

The Islamic Republic of Iran is rapidly embarking on a new phase in its post-sanctions era. Upon the International Atomic Energy Agency (IAEA)’s confirmation that Iran has fulfilled the relevant requirements under the Joint Comprehensive Plan of Action (JCPOA, or the Iran Nuclear Deal), on January 16, 2016, all nuclear sanctions on Iran were lifted by the United Nations, the European Union, and the United States, excluding the latter’s primary sanctions on Iran. Amidst the ongoing debate in the US presidential election campaigns on the validity and efficacy of the Iran Nuclear Deal, Iran is gaining momentum by steadfastly moving towards forging closer bonds with countries around the world – particularly Asian countries – that would best serve its interests.

Iran Talks. Abschluss Iran Verhandlungen. UNO. Wien, 14.07.2015, Foto: Dragan Tatic

With more than 70 percent of the total population of approximately 79 million born after the Iranian Revolution of 1979, the Iranian public today yearns to be part of the global economy after enduring the long period of sanctions. The opening of the Iranian economy is rapidly changing Iran’s nexus of bilateral relationships with Asian states, by attracting countries such as South Korea, which had once upon a time retained good and stable relations with Iran, but had let go of the ties due to sanctions, and maintained minimal interaction with Iran for oil imports at the permitted level under sanctions. Post-JCPOA, foreign competitions for access to the Iranian market are intensifying, and the development of economic relations between Iran and Asia has been remarkably fast-paced. The Iranian economy that is free of sanctions opens many doors for Asian countries, and provides significant security and economic implications for Iran.

For Iran, reestablishing or building ties with Asian neighbors is in its best strategic, economic, and geopolitical interests. Strategically, Iran has a strong preference to bolster ties with Asian countries, because it finds the relationships with Asia less troublesome, as Asian countries do not meddle with Iran’s domestic affairs. Iran’s relations with Asia do not necessarily suffer from clashes on Iran’s religiosity, its human rights violations, its intra-regional conflicts, or its aggressive strategies in foreign affairs. Economically, Asian states provide the key to Iran’s economic revival, as they enable Iran to secure strong Asian clientele for its abundant oil and gas supply. Six months past the implementation of the JCPOA, Asia’s Iran oil imports jumped 47.1 percent (year-on-year), to a four-year high. The main four Asian buyers of Iranian oil – China, Japan, South Korea, and India, imported 1.72 million barrels per day (bpd) in June 2016. Geopolitically, Iran can gain leverage and global influence by getting on board with China on its global initiatives via the Asian Infrastructure Investment Bank (AIIB) and the One Belt One Road initiative (OBOR). The extra bonus in getting up close and personal with Asia is the ridding of Iran’s tarnished sanctions era image, by projecting Iran’s blueprints for the future via active outreach to the outside world, beyond the troubled conflicts of the Middle East.

Asian states have their own stakes in Iran, but have chosen varied pathways toward reestablishing ties with Iran. Countries of Northeast Asia – China and South Korea, in particular – were very proactive in approaching Iran once sanctions were lifted. China envisions the most ambitious goals with regard to Iran, and was the very first state to tilt toward the sanctions-free Iran. President Xi Jinping headed to Iran in the final leg of his three-country visit to the Middle East on January 22-23, 2016, after visiting Saudi Arabia and Egypt. During his trip, Xi secured 17 agreements for cooperation on energy, trade, and industry, and signed an agreement that would increase bilateral trade to $600 billion in the next decade as part of China’s OBOR initiative, which would create networks of railroads and port routes connecting China to Central Asia, South Asia, the Middle East, and Europe. China’s interests in cooperating with Iran is not solely confined to strategic and economic interests, but also extend to its domestic interests, as Iran’s Muslim population is largely Shiite, and therefore in line with the Chinese state’s disapproval of Sunni Muslim insurgents in China’s Xinjiang province. Based on China’s longstanding historic ties with Iran as its supplier of arms during the Iran-Iraq War and as the main economic partner during the sanctions period, China’s instrumental role in finalizing the JCPOA and forthcoming attitude toward Iran post-sanctions is not a surprise.

South Korea is also seeking all the opportunities it can seize from Iran’s opening. President Park Geun-hye’s visit to Tehran from May 1-3, 2016 was accompanied by a large delegation of more than 230 business executives, along with cabinet members, to hold meetings with Iranian President Hassan Rouhani and other officials. During the summit, South Korea signed onto a range of joint development projects with Iran on railways, road construction, and energy cooperation. Having retained a strong bilateral relationship with Iran since 1962 prior to sanctions, South Korea jumped at the opportunity of reestablishing ties with Iran for strategic and economic reasons. Because Iran has been a longstanding ally of North Korea, and the two countries have been under the suspicion of cooperating on nuclear weapons development, South Korea requested during the meeting for Iran’s help in implementing the UN Security Council resolutions on North Korea and its nuclear disarmament.

Japan has been the least proactive among the three Northeast Asian economies in approaching Iran after the JCPOA. The Japanese Prime Minister Shinzo Abe’s postponement of his visit to Iran until after the US presidential election demonstrates Japan’s cautious approach to Iran, as it continues to observe the lingering sensitivities in the US with regard to Iran, and the possible renewal of the Iran Sanctions Act of 1996 in November before its expiration on December 31. At the same time, Japan is carefully eyeing the direction of Iranian domestic politics. Although Mahmoud Ahmadinejad, the hardliner politician, will not be running for the 2017 Iranian presidential elections, the Iranian Supreme Leader Ayatollah Khamenei has questioned the US commitment of the Iran Deal and does not see eye to eye with President Rouhani, a moderate and potential candidate for the upcoming elections, on the management of the Iranian economy. Japan has, like other Asian countries, lifted all sanctions on Iran and has dramatically increased the volume of Iranian oil imports, and Japanese private companies such as Mitsubishi Heavy Industries, have scored a big deal with Iran post-sanctions for the purchase of 20 regional jets for use on Iran’s domestic routes. But the Japanese government treads very lightly in its diplomatic relationship with Iran, mainly owing to its continued reliance on the US-Japan alliance and the uncertainties of US-Iranian relations. Japan’s reluctance to sudden structural shifts toward embracing Iran and preferred adherence to its commitments to the US alliance structure has been manifested in Japan’s enthusiasm in building a cooperative relationship on renewable energy and internet of things with Saudi Arabia – traditionally a long-time US ally and a diplomatic opponent of Iran – via the announcement of the Joint Saudi-Japanese Group for Vision 2030.

On Southeast Asia, Iran made the first move toward rapprochement. Iran proactively reached out to Southeast Asian states, via President Rouhani’s 6-day trip to Vietnam, Malaysia, and Thailand from October 3-9, 2016, and his intent for cooperation was well received by the three states. Because Tehran does not have profound relationships with Southeast Asian countries, Tehran’s interest in engaging with the region is very preliminary at this stage and primarily based on economic interests. Iran is at the beginning of a series of learning experiences in engaging with Southeast Asia economically, diplomatically and academically. As much as economic cooperation was emphasized, the role of bilateral Joint Economic Commissions in strengthening bilateral ties was highlighted throughout Rouhani’s Southeast Asia trip. Iran’s strategic approach to Southeast Asia proved to be largely successful. Rouhani’s trip to Vietnam resulted in a $2 billion boost in trade and development of banking ties. Like Iran, Vietnam is a country that has also had strained relations with the US for a long period of time, but has sought to come out of its shell with a vibrant, growing market, abundant workforce and an economy that is also rich in mineral resources. Malaysia, the second leg of Rouhani’s trip, has a growing Iranian population living in the country and aspires to cooperate with Iran on energy and automobile manufacturing. Thailand, Rouhani’s final stop in Southeast Asia, is looking toward increasing the value of trade and mutual investment with Iran up to $1.2 billion, and bolstering bilateral cooperation on energy, tourism, and cultural exchanges.

As much as the Iranian market is a very attractive destination for investment, the forging of ties between Iran and Asian states is occurring at a very rapid pace, albeit in varied pathways. However, as much as there is speed in the building of relationships, there are also cautionary warnings. The JCPOA is still in the preliminary stage of implementation, and US primary sanctions on Iran –which are focused on human rights violations and support of terrorism – remain largely in place. For this reason, major international banks are still weary of cooperating with Iran, and the signed agreements would be meaningless without the role of banks. Iran’s continued aggressive approach toward the Syrian crisis and the conflict in Yemen is also a concern for foreign investors.

In conclusion, Iran’s clever intent to go further and reach out to countries outside the Middle East is clearly understood, but the forging of strong relationships between Iran and Asia hinges on the solid implementation of JCPOA, and upon the outcome of the US presidential election. As much as there are prospects, countries must abide by the rules of the game and keep in mind that all bilateral partnerships could be in jeopardy either in the event of the violation of the JCPOA, or shifts in the global order at the whim of great powers amidst the complexities of geopolitical interests in the Middle East and East Asia. To develop sustainable relationships between Iran and Asian states, a method of clear communication and indication of interests in diplomacy and economic bargaining must be pursued by all sides in the implementation of the JCPOA.