Geopolitical developments in the Middle East and Central Asia are encouraging China and Iran to develop stronger political and economic ties. The growing cooperation between Beijing and Tehran has the potential to boost new trade routes that hasten the flow of Chinese goods to European markets. It also provides Iran with a potentially huge market for its natural resources, as well as an important diplomatic ally.

A major factor in the expansion of Chinese-Iranian relations is a shared concern about US "unilateralism." Both Chinese and Iranian officials have expressed concern about possible "encirclement" by US forces, which are now based in Iraq, Afghanistan, Kyrgyzstan and Uzbekistan. [For background see the Eurasia Insight archives]. In particular, the US-led offensive to oust Iraqi dictator Saddam Hussein prompted Beijing and Tehran to coordinate their diplomatic positions. During the Iraq offensive, top Chinese and Iranian officials held regular diplomatic contacts.

Now, both countries advocate a greater United Nations role in promoting Iraq's reconstruction. Tehran "attaches importance to China's role on the Iraq issue, given that China is a permanent member of the UN Security Council," the official Chinese Xinhua news agency reported April 20. For China, Iran's allure is twofold: Tehran provides diplomatic leverage in the geopolitical maneuverings in the Middle East and Central Asia; and can serve as an important source of energy for Beijing's burgeoning economy, as well as an export outlet for Chinese goods.

Over the three years, a series of top-level meetings Æ including visits by Iranian President Mohammad Khatami and Iranian Parliamentary Speaker Mehdi Karroubi to Beijing, and former Chinese President Jiang Zemin's visit to Tehran -- have helped lay the foundation for stronger political and economic ties.

The value of Chinese-Iranian trade was $4.5 billion in 2002, and is projected to climb to $5 billion this year, stated Lui Zhentang, the Chinese envoy to Iran. Currently, over 40 Chinese companies are participating in large Iranian energy, industrial and construction projects, including the construction of the Neka-Tehran oil pipeline, a US $400-million project that is designed to expand Iran's oil swap deals with Kazakhstan and Turkmenistan. The expansion of Tehran's metro system is another major Chinese project.

On May 10, Liu Zhentang met with Tehran's Governor-General Ali Akbar Rahmani to explore ways to expand technical cooperation, as well as agricultural and commercial ties, the Iranian news agency IRNA reported. Iranian officials agreed to consider a Chinese proposal to open a chain of consumer-goods-oriented stores in Tehran, which accounts for 40 percent of the domestic consumption market in such wares.

China also is aiming to enter the Iranian automobile market. In the first such venture for a Chinese automaker in a foreign market, SAIC Chery Automobile Co. announced in late February that, in partnership with an Iranian auto company (SKT), it would start producing cars in Iran. According to a Chery spokesperson, Li Huiyou, Chery intends to build a plant in northeastern Iran with an annual production capacity of up to 30,000 cars. Chery, which is based in China's eastern Anhui Province, will also provide "technology and components" to its Iranian partner.

China is far from being a major player in the international auto industry. However, the Chery venture in Iran could put Chinese automakers on track to eventually enter the international market. Over the near term, Iran's under-satisfied auto market will offer a unique opportunity for growth to Chery, whose market in China has come under pressure in part because of competition from Japanese, South Korean and American automakers. "We are feeling a sense of crisis about China's car market," Li, the Chery official, said in February.

Growing Chinese-Iranian ties could provide critical momentum for the development of a trade route known as "the North-South corridor." [For background see the Eurasia Insight archive]. The North-South corridor would link India, Iran and Russia, creating trade and transport routes that would be designed to rival the Suez Canal route. Beijing's participation could provide the heft that makes the North-South route viable.

At the time of Jiang's visit to Tehran in April 2002, Iranian political observers said development of the North-South corridor was a top priority in bilateral relations. Some see it as not only an engine for economic growth, but also as a diplomatic vehicle that could restrain US unilateralism.

"The most important issue on the agenda of Iran and China is paving the way for all-around cooperation among Tehran, Beijing, Moscow and New Delhi," said a commentary by the Iran News web site. "No doubt, at a later stage, other development countries will join the four-nation association for attaining peace, stability and prosperity."

During the 1990s, China's nuclear cooperation with Iran was a major source of concern for the United States, which feared such exchanges could help Tehran develop nuclear weapons. Under intense US pressure, Beijing agreed in 1997 to curtail its nuclear assistance programs with Tehran. In its April 2002 commentary, Iran News said the two countries "have no cooperation for the production of weapons of mass destruction."