Hi, welcome to the China Angle. I’m Simone Gao. China and Iran are in the final stages of signing a $400 billion deal, one that would challenge U.S. sanctions currently imposed on Iran. This deal is happening at a time when The People’s Liberation Army of China has conducted multiple drills with large military dispatches on the South China Sea and Bohai sea and Chinese military aircraft have frequently been operating in airspace near Taiwan. What are the Chinese Communist leadership’s intentions in this area? Does the U.S. have the will and capability to deter the CCP and their actions in the South China Sea and Taiwan? We will explore these questions in today’s episode of the China Angle.
We begin with China’s interests in Iran. Iran’s foreign minister recently confirmed that the Iranian government is in the final stages of review on a proposed 25-year agreement between Tehran and Beijing involving a $400 billion Chinese investment. A leaked document provided more details on the agreement, including China’s $280 billion investment in Iran’s oil and gas industry and $120 billion in production and transportation infrastructure. China will also develop 5G infrastructure in Iran and establish closer cooperation on defense and intelligence sharing. In turn, Iran will give China access to supplies of crude oil and gas at discounted prices for the next 25 years. The result would be what the two regimes are calling a “strategic partnership.”
Why would the CCP suddenly choose to invest $400 billion in Iran?
To answer that question, we need to consider their economic dealings with the United States. In 2018, Trump withdrew the US from the Iran nuclear deal and re-imposed sanctions on Iran. The sanctions were put in place to dissuade Iran from developing nuclear weapons capability and furthering its sponsorship of terrorism and widespread human rights abuses. According to the Iran Sanctions Act, the sanctions also applied to all countries purchasing oil from Iran. Countries like China, Japan, and India were given a six-month exemption from these sanctions, and while Japan and India did cut their imports of Iranian oil completely, China did not. In July 2019, the US government sanctioned the Chinese firm Zhuhai Zhenrong Company Limited and its chief executive for knowingly purchasing or acquiring oil from Iran after the sanction waiver had expired.
For decades, the Chinese regime has been Iran’s top trading partner and a key market for Iranian crude oil exports. The CCP has also facilitated Iran’s military modernization and aggressions in the Middle East through arms sales and defense cooperation. Yet, these actions had previously been done behind the scenes.
Should this new deal be finalized, it would publicly announce China as the key investor in Iran’s nuclear development and directly challenge the US sanctions. The question is: Why now?
Here’s what I think. The proposed deal may be the CCP’s latest attempt to expand from a regional hegemony to a world power willing to directly challenge the US. As an isolated country locked in conflict with the US, Iran is the CCP’s perfect partner. This deal would also expand China’s influence in the Middle East. And the deal fits the framework of the Belt and Road Initiative, positioning China to help Iran develop a major port near the mouth of the Strait of Hormuz, where most of the world’s oil exports pass.
Sound familiar? The CCP’s ultimate goal will not end at trade or economic benefits. The Communist regime often invests heavily in countries they know will not have the means to pay back the investment. When that inevitably happens, the CCP takes a port or a territory as payment. Whether that will happen in this case is unknown, but the possibility that they may be able to control the Iranian coast and have more strategic leverage in the area is enough for them to justify the investment.
This leads me to our second topic today: The South China Sea. What might the China-Iran deal have to do with the South China Sea?
It may tie directly to China’s militarization of islands in order to control shipping channels. Most of China’s crude oil imports from the Middle East pass through the region’s main gateway, the Malacca Strait. This vital maritime choke point is an essential economic artery for China. Naturally, as China relies more on Iranian oil, the regime will do whatever is necessary to consolidate more power over the South China Sea in order to “safeguard” this shipping lane. This means imports and exports from the Persian Gulf passing through the South China Sea could be regulated by a reinforced Chinese presence. Chinese military bases positioned near the Indo-Pacific nations eliminate those nations’ ability to block Iranian oil tankers, even if that is a direct violation of the US sanctions.
This imbalance in regional power and control over shipping channels has caused significant harm to international trade. Yet, western democracies have previously allowed the CCP to unlawfully assert its sovereignty in the region. The US has finally realized the impacts of these practices, recognizing that the freedom of Asean nations and even the future of international order is at risk. Secretary of State Mike Pompeo declared that Beijing’s claims to offshore resources across the South China Sea are unlawful. He reaffirmed that “America stands with its regional allies in defense of freedom of the seas… and opposes any attempt to use coercion or force to settle disputes.”
Recently, both the US and China held military drills on the South China Sea. While their actions are similar, their intentions are likely very different.
For the US, these drills align with the Trump administration’s stated intention: to directly confront an aggressive Chinese regime and defend the sovereign rights of US allies to offshore resources protected under international law.
For the Chinese Communist Party, these drills serve two purposes. First, to more fully assert their control in the region and over the passage of trade and, second, to blockade Taiwan. As social media videos demonstrated and Chinese state media later confirmed, the CCP did so with an overt show of force, including the use of amphibious tanks, infantry fighting vehicles and self-propelled artillery, from July 24 to August 2 in Guangdong Province, close to the South China Sea.
What does all this mean? Could President Xi Jinping be preparing to take Taiwan by force? I believe that war in the Taiwan Strait is a likely decision for Xi Jinping.
In fact, Xi’s ambition to subjugate Taiwan can be traced back to the 2015 Chinese PLA reform. Despite its public portrayal as an anti-corruption campaign, the reform was clearly aimed at restructuring the PLA in order to create a leaner military force with improved joint operations capabilities. Drawing from the US military structure, the reform centered on establishing a military structure capable of international conflict by 2020.
In addition, the Chinese government recently hardened its rhetoric towards Taiwan. In Premier Li Keqiang’s annual work report this year, he did not reference a “peaceful reunification” as did previous premiers. This change of tone reflects the stronger stance the Chinese top leadership are adopting in tackling the Taiwan issue. That means “peaceful reunification” is no longer a popular opinion in the communist leadership, especially after the CCP-backed KMT candidate Han Kuo-yu lost in the 2020 Taiwan election.
Though frequent military drills—including the Bohai Sea drill in May, the Xisha Islands drill in July, or the latest one in the Leizhou Peninsula—might not seem like much on a surface level, all of them were carried out near Chinese coasts, providing just enough access to deploy military forces and mobilize armors.
How so? It would be impossible to carry out an amphibious attack on Taiwan in secret. Such a battle would require mobilizing forces of at least 100,000 soldiers. In order to be more covert with their intentions, then, the CCP deployment of troops under the guise of military drills was necessary. Judging from the frequency of the latest exercises, it is highly likely that Xi Jinping has decided to resolve the Taiwan issue by force during his term.
One such exercise, carried out on July 17, involved eight Chinese fighter jets flying over a key military base in the disputed Xisha Yongxing Island. At least four of them appeared to be J-11Bs. These jets were likely deployed during the Xisha military drill in July. Their presence points to growing mobilization of Chinese forces in the South China Sea, as well as visible military pressure on Taiwan. If pointed west, these forces could confront the US on the South China Sea, and if pointed east, they could threaten Taiwan’s southwest airspace.
What triggered the Chinese regime to ramp up its military presence? A key factor may be the Trump administration’s recent, striking change of tone. For the past 40 years, the CCP has been involved in international exploitation for its expansionist plan through soft means: diplomatic, psychological, informational, and economic warfare. And they have gotten away with it. Now, the Trump administration is not only demanding accountability for this unfair behavior but is also hardening its resolve to defend Taiwan. Given this, there are likely to be elements within the CCP leadership that are very concerned that action needs to be taken now.
I believe the Trump administration is starting to establish a more coordinated strategy to defend Taiwan. There is no doubt that more must be done. It is likely that the Chinese Communist Party will respond by becoming more confrontational towards the US, as evidenced in the forming of a strategic partnership with countries like Iran and Pakistan. Are we going to see the road to the Axis powers during the world war II. That’s probably the next thing to watch out for. This has been the China Angle. I’m Simone Gao. Thanks for watching,, and see you next time.
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