Iran’s political leverage in the region emanates from its historical, cultural, and economic ties (as an example, over half of electricity consumed in Iraq originates from Iran, either as gas sales to Iraq which is used in power generation or direct electricity sales). All this is not lost on the Chinese leadership. Indeed, the MOU underscores the importance of joint cooperation in “third countries” (indicating Iraq, Syria, Lebanon, Afghanistan, Pakistan, Turkmenistan, and Azerbaijan) as one of the pillars of the partnership, as well as the establishment of a Shiite pilgrimage circuitry extending from Afghanistan and Pakistan all the way to Iraq and Syria.

Thus, the emphasis that is often placed on China’s interest in Iran’s oil and gas resources, which is undeniable, tends to mask the greater game that is at play. Given this statement of Chinese strategic interest, we must now ask: what is the Iranian interest?

FROM AN Iranian perspective, there is a clear sense that not all that glitters is gold. Although the MOU with China contains no monetary figures, an independent source puts the estimate at $400 billion investment over a twenty-five-year period, in five-year stages. Given that Chinese investment in Iran is meagre (although there is trade to a tune of $25 billion a year), the question is why doesn’t Iran go for it, especially in view of continued rebuffing from Biden administration officials and the lethargic reaction from the Europeans?

Considering that the document in question is an MOU and not a prescription of executable projects—and the ambiguity about the extent to which China would actually implement it while the U.S. sanctions regime on Iran stands—the fundamental fact is that Iran would much rather cut a deal with the West than the East. This is the case for three main reasons.

First, the conservative political class in Iran fears encroachments from China that would threaten Iran’s sovereignty. On a number of occasions, hardliner parliamentarians likened the MOU to the 1828 Treaty of Turkmenchay, in which Iran forked over sovereign land in the Caucasus region to Russia.

Second, from an Iranian perspective, China is not considered a reliable strategic partner. China has tended to treat Iran as a bargaining chip in its global diplomacy. Mohsen Aminzadeh, a former deputy foreign minister of Iran under President Mohammad Khatami, has noted numerous occasions when China resorted to double-dealing or reneged on its commitments to Iran in the last four decades—that is, during the entirety of the lifetime of the Islamic Republic of Iran, including cancellation of a commitment to build an enrichment facility—and gives voice to Iran’s worry: China has so much at stake in a functional relationship with the United States that it will not hesitate to tear up and toss away whatever deal it makes with Iran to mend that relationship. Lending credence to this view, China is notorious for its wheel and deal approach towards Persian Gulf politics. Iran’s hardliners have not overlooked the fact that China has helped Saudi Arabia expand its nuclear program (and that Riyadh is the biggest crude supplier to China) or that Chinese investment has tripled in Israel’s technology sector in the last five years.

But even if the core issues of sovereignty and double-dealing were to be sufficiently resolved, China’s burgeoning BRI investments have proven perilous for some countries—such as Sri Lanka and Djibouti—who have accumulated extreme amounts of Chinese debt such that key pieces of national infrastructure and territory have been used as repayment. China has denied that it engages in “Debt-trap diplomacy,” but Iran’s leadership will be wary of any possible efforts on the part of Beijing to control key strategic port facilities (e.g., near the Strait of Hormuz).

For these reasons, Iran would much rather cut a deal with the West than commit to Beijing. From a Chinese perspective too, the strategic relationship with Iran is ambiguous at best given that, as Seyed Hossein Mousavian, a former Iranian diplomat, noted in February, “Beijing does not know if Iran’s relation with China is a function of its conflict with the West or [a genuine interest in China].”

Be that as it may, from an Iranian perspective, no deal is not an option. If diplomacy with Washington fails, Beijing will suffice. Despite the pitfalls of the MOU, a strategic partnership with Beijing will nonetheless garner more concrete investments to help Tehran revive its failing economy. Iran and China both stand to gain from the formalization of a long-term partnership which organizes their bilateral relations.

In addition, a cursory glance at Iran’s macroeconomic indicators (high inflation and unemployment, exchange rate depreciation, and a poverty level at 55 percent), not to mention two successive social revolts that rocked the system (2018 and 2019), and devastation from COVID-19, make it abundantly clear why no deal is not an option.

Also significant, given that Iran’s leadership has thus far recoiled at the prospect of striking an entirely new deal with a party it sees as having unfairly reneged on a previous deal, and that the Europeans too lack the political appetite for JCPOA+ type deal, the most likely outcome of a “no-rush” approach will be a permanent Iranian posture towards Beijing. It is no surprise that hardliners in Tehran are seriously eyeing a revival of Iran’s “look East” policy that was the guiding principle of Mahmoud Ahmadinejad’s presidency. Now as then, the policy entails robust cooperation with China in security, trade, technology, and infrastructure in order to reduce the stranglehold of the West’s sanctions. In an environment characterized by growing rivalry between the United States and China, a Beijing-aligned Iran would present a graver threat to U.S. interests.

In view of the Sino-Iranian strategic context, we may now ask: what ought to be the United States’ policy towards Iran?

CHINA HAS become the grand organizing principle of world geopolitics, much like the Soviet Union was during the Cold War era. The Sino-U.S. rivalry has manifested in trade, the science and technology sectors, intellectual property espionage, cyber and outer space, as well as the more traditional military issues of maritime expansion in the South China Sea and the bolstering of regimes in North Korea, Syria, and Iran. But as National Security Advisor Jake Sullivan noted, the Cold War analogy is not entirely accurate. China represents a far more challenging competitor. Its economy is more diversified, flexible, and sophisticated than the Soviet Union’s ever was.

Indeed, what is most concerning from the standpoint of U.S. global leadership is that China’s continued rise signifies the advent of a new Sinocentric political-economic order. China’s successful development into a major superpower represents an alternative to the Western model of democratic market economy. Instead, Beijing has illustrated that a combination of authoritarianism and oligarchic central economic planning can produce outstanding results in terms of generating growth and alleviating hundreds of millions from poverty. At the same time, the West is plagued with a sense of existential angst about its own ability to generate growth, innovate, prosper, and resolve issues relating to class, race, gender, and climate change.

Tellingly, during his Senate confirmation hearing, Secretary of State Antony Blinken explicitly stated that China seeks to become “the leading country in the world, the country that sets the norms, sets the standards, and to put forward a model [that] … countries, and people will ascribe to” and that crucially, it was the responsibility of the United States “to make sure that our model is the one that carries the day.” Interestingly, Sullivan concurs on the centrality of the rivalry with China, writing in late 2019 that there is “a growing consensus that the era of engagement with China has come to an unceremonious close” and then making the case for a “clear-eyed coexistence on terms favorable to U.S. interests and values.”

WHATEVER THE short- and medium-term steps towards Iran are, the long-term outlook is that either Iran will be in the camp of the West as a stumbling block to China’s Eurasian agenda, or it will be a part of that camp which will exacerbate the United States’ China containment policy. Therefore, the most prudent course of action is to view the Iran problem as part and parcel of the China problem. Under this view, as Sullivan has noted, “we are going to have to address Iran’s other bad behavior, malign behavior, across the region” at a later time, and that “from our perspective, a critical early priority has to be to deal with what is an escalating nuclear crisis.” The critical logistical issue is to determine who takes the initial steps. Does the United States lift sanctions before Tehran complies or the other way around?

Speaking in early February, State Department spokesperson Ned Price said to reporters that, “if Iran comes back into full compliance with its obligations under the JCPOA, the United States would do the same.” Taking the opposite view, Iran’s former Foreign Minister Javad Zarif urged for the United States to lift sanctions first, stating in his February CNN interview, “if we are away from strict limitations of the nuclear agreement it’s because the United States tried to impose a full economic war on Iran,” adding that “now if it stops that, we will go back into full compliance.”