Will China care about being hit by additional US tariffs for trading with Iran? | DW News

Key Concepts

• Iranian Protests: Widespread unrest in Iran triggered by economic hardship.
• Inflation & Currency Devaluation: Hyperinflation and a drastic decline in the value of the Iranian Rial.
• US Sanctions: Economic sanctions imposed by the US impacting Iran’s oil exports and overall economy.
• China’s Role: China’s strategic interests in Iran, particularly regarding oil imports and the Belt and Road Initiative.
• GDP & Export Reliance: Iran’s heavy dependence on oil revenue for its GDP and export earnings.
• Belt and Road Initiative: China’s global infrastructure development strategy.

Economic Crisis and Unrest in Iran

The report focuses on the ongoing unrest in Iran, stemming from a severe economic crisis. Over 3,000 deaths have been reported in protests, with some estimates being significantly higher, following demonstrations sparked by the country’s failing economy. The core issue is the inability of Iranians to afford basic necessities due to rampant inflation and economic mismanagement.

Specifically, inflation in November reached an annual rate of 72%, with some goods, like bread, experiencing price increases of 113% and overall food inflation at 72%. The Iranian Rial has experienced a catastrophic devaluation, falling from approximately 43,000 Rials per US dollar in December to nearly 1 million Rials per dollar – a more than 2,200% increase. This currency collapse led to the resignation of the head of the Iranian central bank in December, but the economic situation remains critical. A middle-class Iranian citizen interviewed described the inability to afford even basic meals, highlighting a lack of future prospects, jobs, water, and electricity.

Impact of US Sanctions and Iran’s Economic Structure

The economic woes are heavily linked to US sanctions, particularly those targeting Iran’s oil exports. Oil and gas exports constitute Iran’s primary source of income, accounting for roughly a quarter of the country’s GDP and 60% of government revenue, as well as nearly all export earnings. Sanctions, initially imposed in 2012 over the nuclear program, have severely restricted Iran’s ability to export oil, squeezing the economy. While Iran possesses a relatively diversified economy compared to Venezuela, it remains heavily reliant on oil revenue for survival.

The report notes that Iran is unable to export anything beyond oil and gas, exacerbating the economic strain. The sanctions have created a situation where Iran is struggling to stabilize prices and exchange rates.

China’s Strategic Interests and Response

The report then shifts to analyzing China’s position regarding the situation. US President Trump responded to the high death toll in Iran by announcing additional tariffs on countries continuing to do business with Iran, primarily targeting China, a major purchaser of Iranian oil.

DW reporter and China analyst Cliff Kunan argues that China is unlikely to be significantly affected by these tariffs, stating, “I don’t think they take them seriously.” He points out that Trump’s announcement of 25% tariffs hasn’t been fully enacted, remaining largely a threat. Kunan emphasizes China’s strategic interest in Iran, describing it as being “on China’s doorstep” and a crucial part of its “strategic sphere of influence” through the Belt and Road Initiative.

This initiative involves significant rail and infrastructure projects, creating strong economic ties between the two countries. China is actively circumventing sanctions by importing Iranian oil through third countries and re-exporting it under different names. Kunan predicts China will adopt a “balancing act,” offering political support to Iran while attempting to maintain stability in the region. He also notes China’s increased leverage, referencing the trade war with the US and China’s control over rare earth minerals.

Regime’s Accountability and Potential for Change

The report addresses whether the Iranian regime can legitimately blame the economic crisis on US sanctions. While the regime could attempt to deflect blame, Kunan argues that a series of issues, including protests over women’s rights and general economic discontent, have contributed to the unrest. The dramatic increase in prices, particularly bread (113%) and food (72%), coupled with the collapsing currency, has left Iranians without sufficient purchasing power, fueling further protests.

The report concludes that people feel things are “not working” and are demanding change. Kunan doesn’t foresee direct intervention from China beyond political support, but anticipates China will resist bending to US pressure.

Notable Quotes

• Cliff Kunan: “I don’t think they take [US tariffs] seriously.” (Regarding China’s response to potential tariffs)
• Interviewee (Iranian Citizen): “I was in Iran a few months ago, and I just couldn't believe how my middle class family could not even simply afford a basic meal.” (Illustrating the severity of the economic crisis)
• Cliff Kunan: “It’s very difficult to see how [China] could [directly support the regime]. They’re going to try this balancing act.” (Regarding China’s likely approach to the situation)

Synthesis

The situation in Iran is a complex interplay of economic mismanagement, US sanctions, and strategic geopolitical interests. The economic crisis, characterized by hyperinflation and currency devaluation, is the primary driver of widespread unrest. While the Iranian regime may attempt to blame external factors, the underlying issues are deeply rooted in economic policies and a reliance on oil revenue. China, with its significant economic ties to Iran and strategic interests in the region, is likely to pursue a cautious approach, balancing support for Iran with a desire for regional stability. The future remains uncertain, but the report highlights the urgent need for economic reform and a resolution to the ongoing crisis.