A deep strategic partnership with Iran appears to work for Beijing at both the regional and the global strategic landscapes. The fact that the deal has been announced at a time when the China Pakistan Economic Corridor (CPEC) has re-gained pace in Pakistan shows that Iran is very much China’s next link in its BRI connectivity project, and that Iran will become the linchpin for BRI’s further expansion into the Middle East, namely, Iraq, Syria, Lebanon. 

This expansion will have further implications as China’s increasing expansion will further decrease US dominance of the world’s most energy-rich region. 

With an uninterrupted supply of energy being a major driver of China’s foreign policy, China’s strong presence in the region and the absence of competitors such as India and the US, will put it in the driver’s seat. 

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How Beijing is securing its core interests is evident from the way it’s billion-dollar deal with Iran has already forced an Indian exit from projects directly linked with the Chabahar, a port that was not long ago India’s crown jewel in its own “look East” policy. It was to be an engine of growth for India and a key element in its own geography of trade which was meant to directly connect it with Central Asia and Afghanistan, allowing it to bypass Pakistan for trade and ensuring strategic autonomy in what Indian policy makers often describe as a “hostile neighborhood.”

The Chabahar-Zahedan railway line, which China will build, is a 500-kilometre line that goes up to the Afghanistan border and would have allowed India to send goods and bypass Pakistan completely. This, however, will no longer be the case.

The Iran-China deal and India’s exit has reified the global and regional alignment where Iran will partner China and India will look to the US to counter China, although it remains to be seen how deep and how strong and effective an India-US partnership will be.

India’s loss of role in fully developing the Chabaharport-linked geography of trade has massively deepened its strategic problems. After the loss of a role in developing the Chabahar rail project, India is all set to lose its role in developing the Farzad-B gas project as well. India's Ministry of External Affairs in a statement on last Thursday confirmed that Tehran would develop the Farzad-B gas field in the Persian Gulf region "on its own" and might engage India "appropriately at a later stage".

Indeed, one crucial reason for India’s “dropping out” is the US’ aggressive Iran policy and the former’s decision to toe the US line and follow its unilateral sanctions. China, on the contrary, took an exactly opposite position and not only continued its purchase of Iranian oil but also defied US sanctions. For Iran, therefore, China readily becomes a preferred strategic partner. 

According to the Iran-China deal, Chinese presence in Iran’s banking, telecommunications, ports, railways and dozens of other projects will increase manifold, proportionately reducing those of other countries, such as India. In exchange, China would receive a regular, and according to an Iranian official and an oil trader, heavily discounted supply of Iranian oil over the next 25 years.

There is a strong military aspect to the deal as well. Although it is unlikely that Iran will have a Chinese military port or naval base, the deal does call for joint training and exercises, joint research and weapons development and intelligence sharing. 

Even if India stays ‘relevant’ in Chabahar port and continues to have some operational rights, China’s plans in the region are likely to make this port irrelevant. 

Of particular importance in this regard is another port that China will be developing in Iran at Jask. Located next to the Gulf of Hormuz, it is one of seven maritime choke-points across the world. Billions of dollars of goods and oil moves through this choke-point every year. If China builds a port at Jask, it’ll be the first time in the world’s strategic history that China has a leverage over one of the seven key choke points in the world. 

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Not only will a Chinese port mean Chinese control of a chokepoint, the fact China will be sitting right next to the Gulf of Hormuz means that region’s strategic balance will shift massively to Iran’s favor and its control and dominance of the Gulf will see a major boost. The passage is of critical strategic importance to the United States, whose Navy’s Fifth Fleet is headquartered in Bahrain, in the gulf.

For the Iranians, the arrival of China means an end of US dominance of the region. Indeed, this was the conclusion that an Iranian naval commander reached after a joint naval exercise in December 2019. To quote Hossein Khanzadi, the exercise showed “the era of American invasions in the region is over.”

The Iran-China deal also means that India’s ambitions have also come to an end due mainly to its obsession with the US and inability to chart an independent course of foreign policy.