As Trump’s trade war with China begins to weaken the American economy, it has become clear that—contrary to what the president said—trade wars are neither good nor easy to win. Meanwhile, China is strengthening its position by teaming up with another adversary that Trump has antagonized.
China is planning to invest $280 billion in Iran’s oil, gas, and petrochemical sectors that are being affected by US sanctions, according to Petroleum Economist magazine…
According to the magazine, Beijing also pledged to invest $120 billion in Iran’s oil sector and industrial infrastructure…
In return, Iran will grant Chinese companies the priority right to participate in tenders for any new, frozen or incomplete projects to develop oil and gas fields, as well as all petrochemical projects, including the provision of technology and staff to implement these projects…
The agreement also permits China to purchase oil, gas and petrochemical products at low prices, with the right to delay the payment of these prices for two years in the Chinese national currency (Yuan) or other “easy currencies” with which Beijing makes profits, through its projects in Africa and the former Soviet republics, without resorting to transactions in USD.
That’s actually a pretty good deal for both countries, while devastating to the interests of the United States—as well as that of Israel and Saudi Arabia. Iran just landed an expanded market for their fossil fuels, along with a substantial investment in their infrastructure. In return, China gets those fossil fuels at a greatly reduced price and access to the development of new projects.
To put this move in historical context, it is important to note that the reason Iran came to the table to negotiate a halt to their nuclear weapons program was that the United States finally convinced Russia and China to join the global agreement to impose sanctions on Iran, which happened in 2010. Max Fisher explained how the Obama administration accomplished that.
Economic concerns may also be key for China’s decision to join in sanctions…Though China and the U.S. may experience periods of diplomatic tension, the fact is that the two states’ economic ties are essential for both economies. If China felt it had to choose between the benefits of U.S. trade and the unwanted international precedent of Security Council-led sanctions, the former likely won out. While China was happy to join with Russia in opposing sanctions, Medvedev’s months of cooperation with the West and his supportive signals on sanctions plausibly made it clear that China would have to stand alone or follow Russia’s support.
In other words, China prioritized the benefits of trade with the U.S. over Iran. With all of the major global players on board, the sanctions were so severe that Iran agreed to negotiations. That was one of the most significant examples of how the Obama administration used partnerships to gain leverage in addressing our foreign policy goals.
As we know, Donald Trump likes to go it alone when it comes to foreign policy. So he pulled the U.S. out of the nuclear weapons agreement with Iran and started a unilateral trade war with China. Now those two countries have deepened their partnership, dealing what might be a fatal blow to any leverage the United States has in dealing with either country.
In addition to the economic benefits of the partnership for both countries, Simon Watkins points out how it changes the balance of power at the U.N. Security Council.
Russia, tangentially included in the new deal, also holds a seat, alongside the US, the UK and France…”In order to circumvent any further ramping up of sanctions—and over time encourage the US to come back to the negotiating table—Iran now has two out of five UNSC votes on its side. The fact that [Iran foreign minister Mohammad] Zarif showed up unexpectedly at the G7 summit in August at the invitation of France may imply it has another permanent member on its side,” [a source] adds.
Even prior to this agreement between Iran and China, Max Boot explained why Trump’s “coalition of one” approach wasn’t working.
The premise behind President Trump’s “America First” foreign policy is that the United States is so powerful that it can achieve its objectives simply by flexing its muscles — and that previous presidents failed to do so because they were globalists and losers…
Trump’s confrontations with Iran and China show the sharp limits of what American unilateralism can achieve. Trump has demonstrated he can blow things up, but (ironically for a professional developer) he hasn’t shown any ability to build anything better…
So it turns out that it wasn’t a lack of will, or a lack of loyalty to the United States, that kept previous presidents from simply extorting massive concessions from other countries with unilateral action. Trump’s predecessors knew something he doesn’t: The United States isn’t omnipotent, and while allies can be a pain in the neck, we act far more effectively with them than without them.
It is this delusion about the omnipotence of the United States that forms the basis of Trump’s nationalistic tendencies, which are not only ineffective, but dangerous. When it becomes clear that economic unilateralism won’t work, the president will have two choices: (1) concede (and perhaps simply call it a victory), or (2) escalate to military unilateralism. To his credit, Trump has been hesitant to engage in the latter. While preferable to war, concessions give adversaries like China and Iran the upper hand, much as we’ve already seen with North Korea.