By Mazdak Razi | 2023-09-25

China's recent withdrawal from two oil field projects in Iran comes despite Iranian president Ebrahim Raisi's ongoing efforts to court Chinese investment, and calls into question the viability of Iran's "Looking East" policy, analysts said.

The withdrawal comes despite the comprehensive 25-year agreement signed in 2021 between Tehran and Beijing for economic, military and security co-operation, and Raisi's three-day visit to Beijing in February.

Though officials of the two countries signed 20 cooperation documents while Raisi was in China, none of them pertained to the energy sector.

Prior to the trip, there were reports that China's Sinopec had withdrawn from a development project at Iran's Yadavaran oil field near the border with Iraq, which reportedly has the capacity to produce some three billion barrels of oil.

A few weeks after Raisi's return from China, Iran's state news agencies reported that "development operations at the Yadavaran oil field will be carried out by Iranian companies", indirectly confirming China's withdrawal.

The Iranian government separately confirmed the Chinese have left another oil field project that was focused on Iran's Azadegan oil field.

"The Chinese have reportedly used the fact that Iran is under sanctions as an excuse, saying that Iran's situation is not normal, and the project must be delayed," according to an analysis by domestic news outlet Ensaf News.

"They even made signing off on the second phase subject to Beijing's political approval -- using the same excuse. Meanwhile, they have ignored the Iranian Oil Ministry's calls to start work on the oil field."

Contrary to the optimism expressed in hardline circles about the success of Raisi's "Looking East" policy, Beijing does not intend to invest work or money in the oil field, the outlet said.

The projects to develop Yadavaran and Azadegan fields were inaugurated while former Iranian president Hassan Rouhani was in office, but the Chinese company never started working on them.

Chinese caution

Since 2018, China has decided to adopt "a more cautious approach in areas that might provoke the US," National Iranian Oil Company (NIOC) director of investment and business Fereydoun Kord-Zanganeh told Oil Price in April.

"This approach included modifying its operations on major oil and gas projects in Iran," Kord-Zanganeh told the website.

"The United States re-imposed sanctions on Iran in 2018, almost at the same time as the US-China trade war heated up, prompting Beijing to change course from working on major development projects in Iran to smaller contract projects," he said.

"This concerns fields in Iran that Beijing has an interest in –- including fields west of the Karun River and several other fields that share reservoirs with Iraq," he added.

Iran became a full member of the Shanghai Cooperation Organization (SCO) in July, on the heels of the 25-year and 20-year strategic agreements signed between Iran and China, and Iran and Russia.

Economists and others have referred to these agreements as "selling Iran."

'Looking East' failure

With China's withdrawal from the Yadavaran project, the illusion of the success of the "Looking East" policy that supporters of the Iranian government have clung to has been destroyed, analysts said.

Beijing has only its own interests in mind, they added, and easily turns its back on the Islamic Republic whenever necessary -- despite the rhetoric about alliances and common interests, and even despite signed agreements.

China pays no mind to the agreement it has signed with Iran, and is after only Iran's oil, which it buys at a very low price, Germany-based Iranian economist Saeed Mehdizadeh told Pishtaz.

"China has no inclination to compromise its own economic and energy security by falling into the trap of Iran's sporadic adventurous policies," he said.

"This is exactly why Iran should cut its major economic ties with China."

"For China, extending and expanding cooperation with the region's Arab countries are much more important than its projects in an unstable and risky country like Iran," he explained.

Some say Iran's membership in the SCO is not reason enough to believe Beijing would fulfill its commitments, as there are stipulations about the restrictions of doing business with Iran due to the sanctions imposed on it.

"Despite Iran's relentless state-owned and regime-affiliated propaganda, membership in the SCO benefits Moscow and Beijing by providing them free and cheap access to Iran's resources and markets," Mehdizadeh told Pishtaz.

It does nothing to help Iran's crisis-stricken economy, he added.