From Russia to Iran: China and the Dilemmas of a Biased Neutrality

Is this shift, highlighted by the telephone call between Wang and Araghchi, fully representative of China’s official line or its strategic thinking? No, of course not. Officially, there is Chinese humanitarian aid to Iran - announced in two installments, for paltry sums ($200,000 USD on 18 March, explicitly intended for children who were victims of a US bombing of their school), and 58 tonnes of medicines in April. But this remains an exercise in extreme caution. As for the rest, and in particular dual-use technologies, spare parts or weapons, we are even more in the dark than in the case of Chinese help to Russia.

On the one hand, the opening in 2025 of a direct, high-speed rail link connecting Tehran to China via Central Asia allows for all suppositions. This line was notably targeted by Israel in eastern Iran. But above all, we are entirely dependent on information from American sources that are leaked - sometimes conveniently - into the public domain. Yet, in their complex game with China, the United States - regardless of what administration is in power - may just as easily withhold such information as release it at the opportune moment.

This pattern was accompanied by unofficial denials, according to which China had not been warned by Putin prior to the invasion, and did not approve of it, as well as by minor counter-gestures: a telephone conversation in March 2023 between Dmytro Kuleba, Ukraine’s then-serving Minister of Foreign Affairs, and his Chinese counterpart, Qin Gang, who has since been ousted, followed by a visit by Kuleba to Beijing in July 2024, and finally a single telephone conversation between Xi Jinping and Volodymyr Zelensky on 26 April 2023 (which some claim was a way of thanking President Macron for his comments on Taiwan).

There are other counter-arguments to the theory of Chinese strategic restraint. Firstly, of course, many voices on social media and among official intellectuals denounce the inconsistency of the US initiative and predict its failure in the face of an Iranian regime for which this war is existential. Among those closest to the Chinese intelligence apparatus, Trump is instead credited with a strategy based primarily on control of global oil supplies, albeit underpinned by the cases of Venezuela and Greenland. This echoes the old theory that George H.W. Bush launched the war against Iraq primarily to seize its oil. And as with the war against Ukraine, the idea of a potential American quagmire is highly appealing to the Chinese perspective.

There are, however, major differences in the two situations. China has much more important economic interests with the Gulf countries or with Saudi Arabia than with Iran. It has boasted of having been the key broker in an agreement to restore diplomatic relations between Saudi Arabia and Iran, concluded in March 2023. On that occasion, it made its policy towards the region more ambitious, whereas previously it had confined itself to opportunistic relations with all parties. China had navigated its way through the previous Gulf Wars, for example securing an exemption from US bans on Iranian oil exports, or extracting from the Yemeni Houthis a practical (and unique) immunity for Chinese ships in the Red Sea.

But whereas China signed and ratified the Budapest Memorandum in 1994, giving Ukraine security "assurances" in exchange for abandoning military nuclear capabilities, it has no such commitments towards Iran (or its Arab neighbours). Only more or less detailed agreements exist: a 25-year "comprehensive strategic partnership" with Iran, as well as with Saudi Arabia, the United Arab Emirates and Bahrain - the three other Gulf states having only simple "strategic partnerships".

China has supplied dual-use technologies and anti-ship missiles to Iran: from the Silkworm (HY-1) fired by Hezbollah in 2006 against an Israeli frigate, to the more sophisticated models used in the current conflict. But China has also sold, since the Deng Xiaoping era, intermediate-range ballistic missiles to Saudi Arabia, followed by a large number of drones. These drones, also co-produced locally, were in fact used by the Saudis against the Houthis in Yemen. China also sells them to the United Arab Emirates. Finally, in the 1990s, it benefited from military technological cooperation with Israel before the United States put a stop to it: in the long term, China is genuinely ecumenical in the Middle East.

One benefit at least is undeniable: the de-dollarisation, at least temporarily, of China’s payments for the oil it imports from the region. Until now, the biggest obstacle to the rise of the renminbi in transactions with the region was that the region had nothing to sell in exchange for its purchases from China, apart from oil, for which payment was made in dollars. Sanctions against Iran had already opened a breach, which is now widening. This prospect, which delights monetary economists who believe in the rise of the yuan as a reserve currency - and even in the liberalisation of China’s capital account - is undermined by a few figures: China's accumulation of dollar reserves has never been more significant, as economist Brad W. Setser has shown on several occasions.

We cannot predict the future - although it would be logical for the US dollar to lose ground in a fragmenting world. However, this is not yet the case. In the short term, on the other hand, Chinese growth depends increasingly on the strength of its exports, particularly in terms of volume to Europe and to economies demanding Chinese goods and inputs. Without revisiting increasingly well-known and popularized figures, let us simply explain that a drop in external demand would extinguish the main engine of Chinese growth - which has not resolved its other problems, from the real estate crisis to the mistrust of Chinese savers.

A month ahead of the planned meeting with the United States in Beijing, this risk is certainly being weighed up by Chinese leaders. Whatever the potential gains - public diplomacy promoting ‘stability’ and verbal assurances to the ‘Global South’, a financial respite for Russia, or a precedent in the Strait of Hormuz for a possible blockade of Taiwan - these gains are merely formal and rhetorical.

While Chinese leaders certainly appreciate these face-saving gains, they are realistic enough to see that their economic stakes far outweigh the fate of a severely weakened Iranian partner.

Copyright image : Athit Perawongmetha / POOL / AFP
Xi Jinping and Foreign Minister Wang Yi.