As the United Arab Emirates and Israel agreed to establish diplomatic ties, Iran and China’s 25-year, $400 billion deal lurks in the background. The nearly finalized Iran-China Deal provides potential for equal or greater regional consequence. Iran, weakened by sanctions and Covid-19 impacts, has turned East to find both economic and military support. China and Iran have a history of deals and arrangements, but does this partnership’s trade and military components pose strategic concerns for the West? Other Iranian allies like Syria, Iraq, and Lebanon reportedly are lining up to negotiate similar pacts. Does this alliance, in providing a foothold in the region, benefit China with leverage in Middle East affairs?
Whether or not sanctions against Iran are renewed, how will the United Nations or the United States respond to an Iran-China arms deal? Will the lessons learned by countries that have entered into Belt and Road Initiatives be instructive as new agreements are forged? What should the West’s response be and what is the range of options?
Hon. Dov S. Zakheim, Senior Fellow, CNA
Brigadier General (Res.) Prof. Jacob Nagel, Senior Fellow, Foundation for Defense of Democracies
Bryan Smith, Senior Fellow, George Mason University National Security Institute
Moderator: Matthew R.A. Heiman, General Counsel & Corporate Secretary, Waystar Health
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Dean Reuter: Welcome to Teleforum, a podcast of The Federalist Society's Practice Groups. I’m Dean Reuter, Vice President, General Counsel, and Director of Practice Groups at The Federalist Society. For exclusive access to live recordings of practice group teleforum calls, become a Federalist Society member today at www.fedsoc.org.
Greg Walsh: Welcome to The Federalist Society's teleforum conference call. This afternoon's topic is titled “Iran Turns East with China Partnership: Should the West Respond?” My name is Greg Walsh, and I am Assistant Director of Practice Groups at The Federalist Society.
As always, please note that all expressions of opinion are those of the experts on today's call.
Today we are fortunate to have with us the Honorable Dov Zakheim, Senior Fellow at CNA; Brigadier General Professor Joseph Nagel, a Senior Fellow at the Foundation for Defense of Democracies; Mr. Bryan Smith, a Senior Fellow at George Mason University National Security Institute; and moderating is Mr. Matthew R.A. Heiman, General Counsel and Corporate Secretary at Waystar Health.
After our speakers give their opening remarks, we will go to audience Q&A. Thank you all for sharing with us today. Matthew, the floor is yours.
Matthew Heiman: Thank you. And I want to thank our three speakers for being with us today. We’re fortunate to have a panel of true experts to talk about the topic. Just by way of giving a little further bio on each of our speakers, Brigadier General Jacob Nagel, is, as Greg mentioned, a Senior Fellow at the Foundation for Defense of Democracies. He’s a visiting professor at the Technion Aerospace Engineering Faculty. And he previously served as Prime Minister Benjamin Netanyahu’s acting National Security Advisor and head of the National Security Council of Israel.
Bryan Smith, as Greg mentioned, is a Senior Fellow at the National Security Institute at the Scalia Law School of George Mason University. He also provides strategic advisory services to the defense and intelligence companies today. During his career, Mr. Smith held senior resource management positions in the Office of Management and Budget at the Office of Director of National Intelligence and the National Reconnaissance Office. He also served as a professional staff member for the House and Senate Intelligence Committees.
And finally, Dov Zakheim is, as was mentioned, a senior advisor at the Center for Strategic and International Studies. He’s the vice chairman of the board for the Foreign Policy Research Institute. He was Under Secretary of Defense acting as the Comptroller and Chief Financial Officer for the Department of Defense from 2001 to 2004 and a Deputy under Secretary of Defense from 1985 to 1987.
So with those bios, you can tell that we genuinely have a panel of experts. And the topic today is discussing the continued or deepening apparent engagement between China and Iran, and what does that mean for the Middle East, and competition between the U.S. and China. And so to lead us off in this discussion, I’ll turn it over to Bryan Smith.
Bryan Smith: Well, thank you, Matthew. And it’s a pleasure to be here. Matthew had asked me to briefly cover what the deal envisions. It would amount to $400 billion of Chinese investment over 25 years, $280 billion in crude oil and natural gas infrastructure, and $120 billion in production and transportation infrastructure, banking, telecommunications, including railroad, ports, 5G, and also allow for potential surveillance technology.
It mentions over 100 projects and specifically calls out port development at the mouth of the Strait of Hormuz at Jask and further east at Chabahar. There is also military cooperation as an aspect of the deal.
Now, the Chinese have reacted in a very circumspect manner, whereas the Iranians have been touting this. So it’s not at all clear just what will eventually emerge, but we do expect something along these lines.
So I wanted to just make a few observations, and my focus will be on this deal in the context of China’s Belt and Road Initiative since I recently produced a tutorial on it. The first point I would make is that there was extensive Belt and Road cooperation prior to this agreement, and it was actually spurred by the removal of sanctions. So following the January 2016 trip of President Xi to Iran, the two countries established a strategic partnership with the goal of developing trade relations worth $600 billion in total.
A key catalyst was the removal of sanctions after the JCPOA deal, and I think this is often ignored in the recent narrative that the U.S. maximum pressure campaign is what is driving Iran into China’s hands now. So the fact that this was a key catalyst is clear from a lot of Iranian writings at the time. There were Belt and Road energy and rail projects prior to 2016, but things really picked up in 2017. And in one week alone, China promised $35 billion in loans for water, energy, and transportation projects to Iran from three separate Chinese financing entities. And Iran was particularly focused on expanding and modernizing its rail network and connecting it to neighboring countries.
Second, the deal that was leaked generally aligns with typical Belt and Road arrangements, but there are some wrinkles. So it entails typical transportation infrastructure projects and no-strings financing from China. It opens up additional trade routes. It provides access for China to a growing market of Iranian middle class, especially once sanctions are lifted. It creates additional potential naval access to strategic ports that China would develop for Iran. It gives China long-term contracts in return for discounted oil and gas. And it also involves the telecommunications and finance sectors.
The explicit reference, however, to cooperation and weapons development and joint military drills, this directly contradicts the rhetoric that Xi has cultivated so carefully for the Belt and Road. He’s branded it as a harmonious world, a community of shared destiny, certainly nothing that would smack of real politique.
This deal could also provide some financial mechanisms to help circumvent U.S. sanctions, gives China the potential to play off Israel and Gulf States against Iran. And there is, perhaps, the salutary effect that I’d be interested in the other panelists’ views on this. It’s really not in China’s interest to have nuclear proliferation get out of control in the Middle East, so might China be able to use its leverage as a moderating influence on Iran’s nuclear ambitions?
Three, these big numbers, I think, are highly realistic if you look at both the $600 billion total trade from 2016 and the $400 billion being talked about now in Chinese investment. So just look at the numbers. Total trade in 2014 between the countries was $50 billion, and it plunged to about $15 billion now is expected in 2020. So we’re looking at a 40-fold increase if the trade volume is to be realized. Then the $400 billion in Chinese investment would be essentially a third of all Chinese Belt and Road investment through 2027.
Now, it’s a different time period, but you get a sense of what that magnitude would mean. And it’s hard to believe that the Chinese would allocate about a third of their Belt and Road total to Iran. It would be a gross misallocation of capital, given its interest in the world.
There are some real-world constraints, political relationships that China has with Saudi Arabia, other Gulf States, and Israel, very important to China that this jeopardizes. There’s grass roots opposition in Iran. The size of China’s four currency reserves are the ultimate constraint on Belt and Road, and those are being eroded with the decline of the dollar. And then there’s just been a lot of normal program slippage in Belt and Road projects, much of it due to corruption. And finally, of course, U.S. sanctions is the biggest near-term constraint. That’s kind of a topic on its own.
Despite these limitations, there are real geographical advantages that Iran has in terms of China’s Belt and Road Initiative. Iran is really at the center of everything, geographically. It’s connected to South and Central Asia, the Middle East, and Europe through land and sea routes. And Iran provides land routes to Europe via Turkey without going through Russia, so that’s another advantage that China would see. And of course, Iran sitting astride the Strait of Hormuz shipping lanes gives the Chinese navy potential access to Iranian ports at Jask and Chabahar that influences [inaudible 10:46].
Finally, India’s potentially the biggest loser in this deal. When Prime Minister Modi visited Iran in 2016, he signed a deal to develop Iran’s Chabahar port and to construct a railway that would connect that port city to the eastern city of Zahedan. And the rail network would link India to landlocked Afghanistan and Central Asia. And no doubt, India saw this Chabahar project as an able counterweight to China’s presence at the Gwadar port in southwest Pakistan that it developed. So it was a major turnabout when Iran dismissed India from the project and brought in China and said it no longer considered China a suitable partner, that it was delaying the project due to U.S. pressure.
So I think the bottom line is that Iran’s China for India swap further advanced China’s containment of India and Central Asia. And I think Dov will talk about how that added additional pearls to China’s string in the Indian Ocean.
So over to you, Matthew, for the next panelist.
Matthew Heiman: Thank you, Bryan. Jacob, your thoughts on this potential deal, this leaked deal?
Prof. Jacob Nagel: Yes. First of all, thank you for inviting me to this podcast. Now, I heard what Bryan said. Of course, my view will be a little bit wider or different coming from the Israeli point of view. Now, this conversation is because of this so-called leaked deal. Now, we don’t know if this deal will be or not, or maybe it was leaked by one of the parties in order to gain some points. And we can think on every one of them.
Now, we have to remember one thing. First of all, we cannot differentiate between this deal and the sanction relief that Iranians got from the 2015 flawed deal with JCPOA. And then Rouhani and Xi met and they talked about this deal. So one thing that I said -- so with Bryan that I don’t agree. The only way to not making this deal is to continue the maximum pressure because this deal is coming from the sanction relief end.
If the United States will leave, no matter if it’s going to be a Republican President or Democratic President to continue the maximum pressure to not to do again this horrible deal from the JCPOA or the JPOA with Iran, then the Chinese will not be able to go ahead with this deal because we have to remember, we have to look into this Chinese. It’s amazing, but until now, relatively, they are not violating the U.N. or the world sanctions, at least not in public, because they are waiting for the new U.N. resolutions, or maybe lifting some of the sanctions. And of course, they are waiting for directions in the United States.
So talking about the deal itself and the deal connection to the JCPOA, I see it a little bit differently. This deal is a child of the JCPOA. And without the JCPOA and without a deal with Iran, the Chinese will not go to a different deal. And we can see it from where this deal was born.
Now, I want to extend a little bit my position as I was being asked about the Chinese investment in Israel because we have to talk in the same voice, okay, not ask one side to do one thing and to do another thing. Now, not everyone in Israel agrees with me. And I am standing on this position also when I was the National Security Advisor. And three years later, my position became even stronger. Fortunately, more and more people from Israel understand now, and the COVID-19 crisis helped us to understand what should be and what should not be, the relations with China.
Now, after the ordeal that we have, and some of my friend experts know it, I believe it was 15 years ago between United States and Israel concerning our relations with China. In Israel today, there is a big, big, big difference. And this difference is totally agreeable, totally understanding. No one is violating it. It is the difference between military relations with China and civilian. And to military, we had all the dual use things. So in this area, when there is a question, there is no question.
So the problem is that you were asking us, and this is something connected to the deal, is it really that big? Now, you cannot differentiate between military or semi-military or dual use and civilian. And one example that corona gave us is that if there is an AI, artificial intelligence, algorithm for medicine or fintech, now you can adapt it very, very, very easily to military. So the problem is that if you allow China to invest in Israeli companies in very, very deep high tech, very sensitive high tech areas, then they can take civilian technologies and develop it to military ones.
This is why I am in the position saying that we don’t supposed to allow China to invest in Israel in high tech, sophisticated high tech, of course, not in the critical infrastructure. But we don’t say that we don’t want China to invest in Israel, Chinese money in low tech or other areas. It’s very, very good if the Chinese will invest in Ahava materials from the Dead Sea, or they will invest in Tnuva food chain, or they will invest in other relative like this areas, no problem. But they cannot invest in critical infrastructures, and they cannot invest in high tech.
Now, of course, in Israel, there are talks about it. And also, we in the FDD, we came up with a proposal of putting on an ops-tech operation on technology that’s going between the United States and Israel to advance cooperation in very, very sophisticated, sensitive high tech. We can do it only after everyone in the United States will be sure that technologies that United States and Israel are developing together are not leaking to the Chinese. And now with this leaked deal, maybe they were leaked to Iran. No one wants it. So this is exactly the future technology cooperation between the United States and Israel. It’s dependent on making sure that it won’t leak to China and, of course, not to Iran.
Now, I want to explain one thing, and we don’t have too much time, but what is going on now because of the embargo so-called listing that is supposed in October now in the United States today. And I hope it won’t be a matter of who is going to be the President. It’ll be the same. The United States now put on the table very, very, very wisely the snapback from the JCPOA, not mentioning all the brutal violations of Iran about the JCPOA and others. And now, if this snapback begins legally, if the snapbacks will be, then the embargo of arms sales ending three of the embargos, missile sales won’t go away.
If we will do it, everything will be connected. And if everything will be connected, the snapbacks, the sanction wall, everything else, what we have to do -- well, first of all, to stand firm, the United States, mostly, stand firm between behind this snapback — never mind that everyone in the Securities Council want to be against it, even the Europeans — and again to build a sanction wall based on human rights proliferations.
So never mind who is going to be the next President in the United States. This sanction wall cannot be deterred. And also, a Biden administration will leverage from this sanction wall. And of course, we have to either -- the United States and every other ally should stand really, really, really firm behind the IEA.
Even so, Iran won the last round by so-called, okay, you can visit to sites. I’m not going to go into it. It would take most of the time. But they made sure that the outputs from this visit would be after the elections, and probably they are building on an administration that won’t opt to pressure Iran. It cannot happen.
And again, if we want Chinese-Iran deal not to come, not to be, we need to be firm on this one. We can learn from the last five years that Chinese companies understand better than the Chinese government or administrations that if they will do business with Iran, they are not going to do business with the United States. I hope not. Also with Europe. And they are not doing it.
And the last thing I want to say about the type of weapon system that is written in this leaked deal, I don't know what exactly will be there, so I’m not sure I can follow it back. They can also buy from the Russians. They can buy from others. Some of them are not obeying the current embargo of the weapon system. The Chinese are obeying. The Russians are not.
So if I want to summarize is that the problem against Iran now against China is not new. This new deal is really threatening, but I think that if the United States will follow right, it will much be -- it will be better than catching two birds in one shot. It will be catching even three birds in one shot, and we can have the win/win/win situations.
Biden and Trump both agree that China is the main problem, so we have to make sure that they are all working together to make sure that the China-Iran deal because everyone sees the same about Iran for sure. The Iranians’ behavior suggests and proves to us that we cannot do a deal, at least not the one that we have now with the Iranians. Thank you.
Matthew Heiman: Thank you. Dov, your thoughts on the situation?
Hon. Dov Zakheim: Yes. Well, I’ve just heard an awful lot. I tend to agree with Bryan a little more than I agree with Jacob, partly because I think he’s misreading the United States. Not so much that we -- certainly, the Trump administration would like to push snapback, and it certainly will, but nobody else will.
And I think if you buy the premise — and I’m not entirely sure it’s accurate — but even if you buy the premise that this whole Chinese-Iranian relationship is a function of the JCPOA, well, Biden is pretty much committed to trying to reopen that. He’ll have no way of doing that if he has a snapback in place. The Germans, the French, the Russians, the British -- maybe not so much the British. Germans, French, Russians, and, of course, Chinese are not going to follow the snapback. And even the British didn’t support Pompeo on that. So that one -- clearly, this is on Israel’s wish list, but that doesn’t mean that it’s actually going to work out that way.
Now, if you look at the actual deal, it’s true that it’s kind of an updating of the previous one, but it puts a lot of flesh on the bones of the previous one. That’s number one. Number two is China’s demand for energy supplies is insatiable. I wrote a piece that pointed out that Russia had signed a deal with China that no one thought would come into being because it involved shipping 360 million tons of crude to China, and they’re pretty much going to have that all shipped by 2021. Things accelerate, and I think Bryan pointed that out as well. Trade between China and Iran has accelerated.
There’s also the other side of it, which is while Israel has been very much more tough on military projects, and to some extent on dual use, but then you take a look at how China’s managing Haifa Port and Ashdod Port — and those, of course, are also the ports where the Israeli navy operates from — there’s a problem that we in the United States have, and that Israel doesn’t seem to have solved yet, which is Chinese investments in greenfields. In other words, these are projects that are so early on that you don’t really know how they’re going to play out. But China’s heavily invested in that, and that’s greenfields in the high tech sector. To say that China’s not involved in the high tech sector, I think, again, that’s part of Israel’s wish list.
There’s clearly opposition in Iran to the deal, but that’s coming from Ahmadinejad. The Supreme Leader Khamenei supports it. Obviously, Rouhani supports it. Ahmadinejad ran basically an insurgent campaign to be president in the first place, and he’s maneuvering to become president again. But I think as long as the Supreme Leader wants this deal to happen, the deal is going to happen.
What will it do for China? Well, apart from getting the oil that it wants, if you look at how they’ve operated Belt and Road, they tend to essentially dominate the economies of the countries they invest in, and particularly weaker economies, to the point where if you look at Sri Lanka, they were so much in debt to China that essentially the Chinese were able to take over that port and run it as if it were its own. This is going to be another pearl in the string of pearls that China has running from Sri Lanka into the Gulf in the Indian Ocean, including, by the way, Djibouti with their base there.
And the Chinese have always been low profile in the Middle East. In other words, they always say, “We’re not going to be out front. We’re not going to try to do what the United States does. We’re not mediators.” That is true, but in fact, if Chinese investments continue in Israel, and I don’t see that stopping, quite frankly, and this deal goes through, and I do believe it’ll go through in some form, China now has what you might call the ability not so much to mediate but to prevent by turning around to both of these countries and saying, “Look, we invested in both of you. Don’t get involved in a war that’s going to cause us, Beijing, losses.”
And I think the more the United States continues to threaten to withdraw from the Middle East -- and certainly if Mr. Trump is President, he might well do that. We don’t know what he would do. He’s talked about cutting a deal with Iran as well. Nobody knows what he’ll do from one day to the next. I suspect he doesn’t know himself in some cases. But, clearly, he’s determined to get out of the Middle East. And the more that we do that, the more the door is open for China.
But again, China does share with us one common -- well, there are a number of common interests they share with us, but one of them in the Middle East is stability. We want it. They want it. And it may well be that that might turn out to be a vehicle for cooperation.
So all in all, I do think this deal is going to go through. I think that it’ll go through pretty much according to the lines that have been leaked. It probably was leaked by people like Ahmadinejad and his supporters who oppose it. But as long as the Supreme Leader wants it, he’s going to get it.
And as far as sanctions go, as I say, I don't know that just because the United States wants them -- I mean, there was a huge rebuff in the Security Council. It hasn’t really happened very often, and it’s clear that from the other countries that signed on to the JCPOA want to keep it alive and are simply going to do whatever they want to do in order to do so.
And that means that if China cuts a deal with Iran, I’m not sure there’ll be too much protest from these other countries. Certainly not from Russia, but not even from Europe; possibly Germany because of the Navalny attempted assassination. But even then, Germany hasn’t walked away from the Nord Stream gas pipeline. So when it comes to economics, it’s not clear the Europeans are going to go the way of the United States.
That pretty much sums up what I wanted to say. I think my two fellow panelists have outlined pretty clearly both the nature of the deal and their own views. I guess mine is closer to Bryan’s than to Jacob’s, but I’ll be interested to hear what people have to ask about. Thank you.
Matthew Heiman: Thanks to all the panelists. We’ll go to audience questions in a moment. But as we do that, I wanted to ask each of you a question that’s sort of a thought experiment. And that is, for Bryan and Dov, if you were asked to advise President Trump, or if in early February you were asked to advise President Biden, if that is the outcome, as to what should the President do in the wake of this deal, assuming it does come to fruition, what would you be advising the President? And then I’ll let you each speak to that.
And then, Jacob, if I could ask you the same question. If you were back in your old job as the National Security Advisor to the Prime Minister of Israel, what would you be advising him to do in the wake of this?
So maybe we’ll go in the same order. Bryan, any thoughts on how you’d advise the President to respond to this?
Bryan Smith: Yeah, interesting question, Matthew. I think the advice that I would give would depend on the particulars of the military aspects of the deal. Now, I haven’t even been able to find the 18 leaked pages. I’ve just seen the press accounts of it. But if it is not an acceleration of the cooperation that already exists there, and it’s quite a bit, I’m not sure I would pull out a whole new set of sanctions as Secretary Pompeo’s talked about.
The economic part of the deal, as Dov said, it pretty much fleshes out a lot of the prior deal, which didn’t prompt any kind of special sanctions. I would, however, advise that we close ranks with Israel, Saudi Arabia, and other Gulf States, Oman, to make clear to China that there are some things we would tolerate and things we wouldn’t. And Dov may have more particulars on that, and he may have a different view. So I’d be interested in what he and Jacob Nagel have to say.
Matthew Heiman: Jacob, you’re advising the Prime Minister, again. You’ve just got the news that --
Prof. Jacob Nagel: First of all, it’s not a joke, but you know I would prefer to advise the Iraqi state president. It’s much, much easier and simpler. But I won’t avoid your questions.
But I will start with the United States here with your permission, and I’d like to add a little bit to what Dov said. Again, it’s not logical what he said. And it’s not that -- I understand exactly what he said because he thinks that we have to go back to JCPOA. But the only way to make sure that this agreement between China and Iran won’t happen is if the United States will continue sanctions on Iran because you cannot on one way free Iran and say everything’s okay. And now, as he said, Russia won’t oppose, Europe won’t oppose, and probably the United States won’t oppose the deal because it will be under the JCPOA.
As we see, you cannot say there is a problem of this deal, so there is no -- and the other thing that is going on here is that there is no chance that it all happened what was said that China will be a mediator between Israel and Iran. For this to happen is to not understanding the way that the Israel leadership, no matter what political group you are, of course, not what the public view is. And Israel understands.
And now what I’m going advise my Prime Minister. First of all, I will tell him make sure that your best allies from the United States will continue pressuring Iran. But, please, try to understand what your previous National Security Advisor, one guy called Nagel, told you four years ago that in Chinese -- there are some problematic Chinese investments in Israel. You have to make it so everyone is talking about Haifa Port. I’m not going into details. I wrote a paper saying that we have to reassess it. It’s there. I’m telling you it’s one of the least problematic ones. I know it from the under guard in Tel Aviv under some of our main communication systems.
But people need to try to understand -- so you as the Prime Minister have to understand the danger is in those Chinese investments in Israel. Of course, to the connections that we have in the United States, the deepening of the technological cooperation that we want to do with the United States on military, on high tech, on AI, on quantum, on high power computer and others, but it’s also hurting Israel [inaudible 35:39].
Now, there is an opposition to this government in Iran, not only Ahmadinejad, because they understand the way Chinese are walking. They are coming to our country. Iran don’t want to be a third world country, so they’re getting money from China. And suddenly, they found themselves that China owns them. We have Haifa Port. There are very many ports in the United States that are run by Chinese.
Now the United States very, very wisely had CFIUS and FIRRMA. But sometimes it’s after the horse has left the stable, whether they are doing it in the right way. We have to do it the same either. So, please, Prime Minister Netanyahu, make sure that you have to understand who is your allies and who is not. Then you cannot eat the cake and leave it full. And of course, we have all of our friends in the Gulf, Emirates, Saudis maybe, Bahrain, Kuwait, others. We have also to make sure that we all fight against Iran, not against each other. Thanks.
Matthew Heiman: Thank you, Jacob. Dov, you’ve been invited to the White House to give some advice. What’s the advice?
Hon. Dov Zakheim: Well, first of all, I never said that China should mediate. I simply said that China doesn’t want to, so it’s not going to happen.
Prof. Jacob Nagel: Okay, Dov.
Hon. Dov Zakheim: So I want to make that clear. And I certainly would agree with Jacob’s advice to the Prime Minister that if Israel really wants to get into the cutting edge technologies coming out of Silicon Valley and elsewhere, they have to do something about the kinds of Chinese investments. And it’s very hard.
Let me be very clear about it. Even if you look at FIRRMA and what CFIUS does, and I’ve been involved with that for years, there are certain things that are very hard to track when you have shadow corporations, when you have groups of investors and you don’t know who the investors really are. It’s very, very difficult. And it’s hard for the United States, and it’s hard for Israel. I fully understand that. But there is a problem there, and I think his advice to the Prime Minister is right on target in that regard.
Obviously, if you’re Israel, you want the snapback sanctions to bite. I would simply say that I don't know that Biden, in particular, would go for that for the very simple reason that unlike the Trump administration, he cares about what the allies think and wants to get closer to them. Trump plays hot and cold with the allies. And the allies, frankly, neither trust nor believe the United States these days. They just don’t. And when I talk about the allies, I mean the European allies, obviously. We’re a lot more popular in parts of the Middle East. We’re a lot more popular in Asia. We’re actually very popular in Africa. But I’m talking about the JCPOA European allies there.
My advice to a President would be, look, if you want to reopen the JCPOA, it’s got to be a JCPOA plus. And Biden seems to have talked about this. It’s got to take account of Iran’s wider activities throughout the region. It’s hilarious that they talk about antiterrorism when they support -- when they are the biggest supporters of terrorism.
We have a massive problem right now — to some extent, Israel does too — that we’ve got the wild card in Turkey that wasn’t there when the JCPOA was signed, or at least it wasn’t as obvious as it is today. But to simply go back to the JCPOA, personally, I don’t think that would make sense. I don't think it would be in the American interest to do so, and so I would certainly advise the President in that regard.
With regard to the actual deal itself, obviously, if we want to have any kind of impact on Iran, we can’t have snapback sanctions at the same time unless what you want to do is essentially throw the Iranians and the Europeans in each other’s arms. The Chinese are not going to stick to this. The Russians clearly already haven’t.
But one area where I think it is important, and Bryan talked about that, is the military cooperation. I think that it would, clearly, given China’s investments in Saudi Arabia, given China’s investments in the Emirates, clearly, I think, Israel, the Gulf States, and the United States jointly, and frankly, even the Europeans might go for this, could turn around to China and say, “Look, military cooperation is out. You want to do what’s called PASSEXs, which are basically harmless exercises in the middle of nowhere, go ahead and do that. But that’s about as far as you can get.” And the Chinese have already done PASSEXs with the Iranians, so there’ll be nothing new there. But any kind of higher level military cooperation I would certainly advise the President, whichever President it is, to take the strongest possible stance.
Matthew Heiman: Thank you all. Greg, I think we’re ready for some questions from the listeners.
Greg Walsh: Perfect. We will now go to the first caller.
Mark Meirowitz: Excellent discussion. Two questions. Name is Mark Meirowitz from New York. First, the U.A.E. is real deal. The question has been are Arab states being reluctant to go on board with this deal? Do you think that Iran’s position is bolstered in a sense that with China backing it, even with all of the issues that you raised, but still there’s a profoundly important deal, do you think that other Arab states will now be more cautious or worried about Iran?
And secondly, what about Turkey? It was mentioned briefly. How do you think this affects Turkish-U.S. relations in the sense that if Iran is bolstered and becomes more powerful, maybe Turkey becomes more valuable to the United States as an ally? And we’ve had some issues with Turkey. Maybe that can improve now if Iran is bolstered. Thank you very much.
Matthew Heiman: Thank you for the questions. So questions about the knock-on effects with regard to the other Gulf States and then Turkey. Who wants to try and tackle that?
Hon. Dov Zakheim: I’ll take a crack at that. I don't think that the issue of the Arab states getting closer to Israel is going to be impacted one way or another by a China-Iran deal. If anything, it’ll move the Arab states closer to Israel. The reason they’re holding off has nothing to do with China or Iran. The reason they’re holding off is they want to know who the next President is. And everybody’s basically holding their fire. The Chinese are holding their fire. I suspect that’s why that deal hasn’t gone through yet.
Obviously, there will be a very, very different attitude if Mr. Biden -- and it’s not just Biden; it’s who are his advisors? I’ve argued for years that the reason Israel and the Arabs got really close was thanks to President Obama because he basically seemed to be ditching them in favor of Iran. They hated the JCPOA, and it brought them even closer together than they were before. And they’ve been working, particularly the Emirates, have been working together with Israel for decades.
I don't think they’re holding off for that reason. They’re holding off also because of different countries. And you cannot lump them all together. Different countries have different investments in the Israel-Palestine debate. For example, Morocco, which really has fostered better relations with Israel for an awfully long time, but Morocco heads the Jerusalem Committee, or the king does. And so unless something is done about Jerusalem that allows him to say, “Okay, I’m for this,” that prevents him from crossing the goal line. The Saudis are the inheritors. They call themselves the protectors of the Two Holy Mosques, the king does.
Again, there are limits to how far they can go. Look, they just allowed an El Al flight over Saudi Arabia, so they’re inching closer. But again, they won’t go over the goal line. And they’re waiting to see who the next President is. Bahrain will not do a thing unless Saudi Arabia agrees. All you have to do is visit Saudi Arabia or Bahrain and go across the causeway there and you’ll see why Bahrain has to be very careful about alienating the Saudis. The Qataris are totally in lockstep with the Turks and the Muslim Brotherhood, so they’re on the wrong side of this anyway for different reasons. And the Kuwaitis won’t touch it. So I hope that answers your questions, sir.
On Turkey, we’ve got a real complex issue here. Turkey right now is at odds with Israel, with Lebanon, with Greece, with Cyprus, with France, to some extent with Italy, with Egypt. These are all American allies. These are all countries that are -- some of them are NATO members like Turkey. Some of them are E.U. members. The E.U. is on the other side of this with Turkey. Cyprus is an E.U. member, and of course, the Turks are at odds with Cyprus. Mr. Erdogan is just -- it’s almost like he’s replaying the Ottoman Empire, and particularly Suleiman the Magnificent. It’s almost like he would like to be at the Gates of Vienna.
And so it’s a real difficult issue for NATO in particular because it’s one of the biggest NATO armies and they have been a key ally in NATO. But on the other hand, they’re totally at odds with many of our close allies, including Israel. So I’ll stop there.
Prof. Jacob Nagel: If I wanted to add one thing about the U.E., first of all, I’m really glad. I really think that, really, we have to thank Obama that makes our relations with most of the Arab countries better by really doing this JCPOA and because we are all against Iran, so we all together. Really think about it this way. I think it’s a terrible point because I think there will be more countries after U.E. joining -- it’s not -- they don’t have any connection between China-Iran.
The typical connection to Iran because everyone wants to fight Iran, I think it’s Sudan, Bahrain, and Morocco. I hear that the Saudis are still educating probably the difference between King Salman and this. Now, it’s not the first time. Remember that the Saudis agreed -- gave the Indians, Air India, permission to fly over Saudi on their way to Israel, so something that happened two or three years ago.
About Turkey, I agree totally with Bryan. They are crazy. They are not part of this area. It’s like -- I don't know. What do you want to be again, Genghis Khan or someone? But he is against everyone. So Turkey is totally not part of Israel. I totally agree with Bryan saying that Turkey cannot be an ally of the United States. Even so, there are very important neoclassic places there. But the way that the Turks are walking today, we don’t want to be, in Israel, to be the enemies of Turkey, but we are not going to be their friends.
Matthew Heiman: Thank you, Jacob. Bryan, any thoughts on the caller’s question?
Bryan Smith: Just a footnote, perhaps. China, I believe, needs the Gulf countries and Israel more than they need Iran. Someone once described Iran as the distressed asset that China is picking up at a discount here. Saudi Arabia exports about 17 percent of China’s crude. And Angola, Brazil, Kuwait, Oman all export to China several times more than Iran did, even before the sanctions. And China’s invested more in those Gulf countries than they have in Iran.
So the more open and formal the cooperation becomes between Israel and these other states that China needs in the Gulf, I think the more effective they can be in drawing potential red lines on cooperation between China and Iran. And so it’s kind of the opposite effect to the one that Mark, the caller, had possibly hypothesized.
Matthew Heiman: Thanks, Bryan.
Bernie Groveman: Yes, this is Bernie Groveman. I’m not sure if the listeners on this call are aware of this, but the silver lining in this deal for China is that they are able to purchase huge quantities of hydrocarbons from Iran at a one-third discount from the then prevailing rate. If you connect the dots to the petrochemical industry, any of you who understand that, plastics and other petrochemicals, China would have, given that that feedstock is a large percentage of the cost, the dominant position in the global petrochemical industry. And that would have deleterious effects on one of the industries in the United States that is growing very well as a result of us having cheap feedstock as a result of energy independence. I’m interested --
Greg Walsh: I’m sorry, caller, would you mind getting to your question? We have other people in the queue.
Bernie Groveman: Yeah. The question is very simple. What are your -- I’m surprised this was glossed over, and if the gentlemen who were speaking before could comment on this and the implications of this.
Matthew Heiman: Thank you. Bryan, do you want to take a crack at that? What does it mean for the energy industry globally and the U.S. energy industry specifically?
Bryan Smith: I don’t see it as significant as the caller, I guess, because for one, Iran at the peak was producing something like four million barrels a day, and they’re at half of that or so now. And the amount of that that’s going to China is more than a trickle, but I think it’s only about -- it’s less than one percent of what China imports now.
Now, in order for them to -- Iran to ramp up to provide a significant amount of crude to China, the sanctions have to fall off. That could well happen in a Biden administration, but even if the Trump administration doesn’t impose new sanctions, and I’m suggesting they shouldn’t unless the arms cooperation ramps up, the existing sanctions China has pretty well abided by. In fact, there were secondary sanctions slapped on Cosco, the big Chinese shipping company, because of violating sanctions. And then they backed off and the sanctions were lifted. So they’ve been very effective in minimizing Chinese import of Iranian crude.
Matthew Heiman: Great. Dov or Jacob, any comments on that, the energy question?
Prof. Jacob Nagel: I’m --
Hon. Dov Zakheim: -- Well, I would simply say -- oh, go ahead, Jacob. I’ll go after you.
Prof. Jacob Nagel: No, no, go ahead. I just want to say that I’m not an energy expert. I would like to comment later on the European [inaudible 52:21] if we will have time. But on energy, Dov, please, for you.
Hon. Dov Zakheim: Well, I would say I tend to agree with Bryan. Look, the Chinese had this huge deal with the Russians, and it didn’t make really much difference in the price of oil or the Chinese role in the petrochemical industry either worldwide. I think what’s going to make far more of an impact will be if Mr. Biden is elected and then goes ahead and stops fracking. That, I think, will have a far greater impact than anything Iran and China do.
Matthew Heiman: Great. Greg, we may have time for one more quick question.
Greg Walsh: Well, we have one caller left. Let’s go to them now.
Caller 3: First, I’d really like to thank the panelists. And my question has to do with the other countries that reportedly want to strike the same kind of deal. So if it is announced and there are one of three or four other countries that also come to the table, what would be the effect? Which of these countries would be the most dangerous and/or what kind of leverage, if this really is kind of a matter of China gaining a foothold in acquiring these interests in Iran, what other countries would be considered a liability to the West or a threat or more strategically important to China if they also join in?
Prof. Jacob Nagel: If I can answer, then I can get to what I wanted to say about the Europeans. It’s a very, very good question because it’s a dangerous one. It’s dangerous. I call it a slippery slope. If the deal between China and Iran will go forward, it’s very bad for the United States and also for its allies like Israel in the Gulf and others, but not only because of the Chinese-Iran. It’s coming to the way that the Europeans -- okay, I [inaudible 54:34] what happened before. They’re not really relevant. Always really calling the shots is the United States.
I hear what Dov is saying that in a new agreement, we have to add terror and missiles and others. But first of all, we have to make sure that Iran is not going to continue marching very, very, very, very easily and very definitely to a nuclear bomb.
Now, it is a poker game. The Europeans, at the end, they will say whatever they are saying. But we found it before the Europeans, especially their companies. And also the Chinese. And also other countries that are looking on what is going to happen between the United States and Iran, and then Iran-China, and then the slippery slope of others. They are going to look what is going to happen, and at the end, they are going, if the United States will stay firm, no matter if it’s Trump or Biden, they are always going to prefer the American economy and not the Iranians or the others. So they will grumble, they will shout, they will grievance, but at the end, they will obey the sanctions. See, the Chinese aren’t here today. They are obeying the sanctions.
Now, you won’t be able to control the Chinese against the Iranians, so other countries, according to your questions, if you are not going to be against the Iranians. If you are going to give the Iranians sanction relief and other relief, you won’t have anything to say to the Chinese or other countries that would like to be able to have the same agreements with Iran.
Hon. Dov Zakheim: Well, I’ll simply say this. First, as I mentioned earlier, if you were on the call earlier, Mr. Trump did reach out to the Iranians. They rejected him. And who knows if he’ll do it again? He might. That will change the entire equation right there.
Now, if Mr. Biden is elected, it very much depends on who his advisors turn out to be because there’s this clear division amongst his advisors. There are those who basically take the position that I would take or that I think Jacob would take that if you’re going to reopen the JCPOA, you need to broaden it to take account of all the other bad things that Iran is doing. But there are those who just want to go right back to the JCPOA with nothing else and say, “Well, maybe we’ll negotiate something on the side in addition to but not as part of.”
Now, if that happens, then you’re in a completely different place because then I think the Europeans will go their own way. They’ll simply say, “Look, you’re renegotiating the JCPOA all over again. Fine. That’s what we want, and now we’re going to trade with Iran.” So I think it very much depends on the one hand whether Mr. Trump himself remains hardline and does Mr. Pompeo, for instance, stay Secretary of State because he’s been the one running the -- leading the charge on this one. But what if Mr. Trump changes his position? And of course, if Mr. Biden becomes President, who exactly is advising him, and which way does he go?
Matthew Heiman: Bryan, last word? It’s got to be quick.
Bryan Smith: Well, in terms of what countries I worry about with Chinese Belt and Road interest, I actually worry most about some of the southern European countries. Look at what Greece has done with China’s Cosco in their Athens port. It has given China a major foothold that it has used for political leverage. And it’s just -- there’s more opportunity for China in Spain and Portugal, and even elsewhere in Europe.
Prof. Jacob Nagel: If I could add one -- okay, never mind. Okay.
Matthew Heiman: Okay. Well, thanks to the panelists. It was a great conversation. Dov, Bryan, Jacob, we really appreciate your time. And with that, Greg, I’ll turn it back to you to close us out.
Greg Walsh: Yes, sir. On behalf of The Federalist Society, I want to thank our speakers for the benefit of their valuable time and expertise today. We welcome listener feedback by email at email@example.com. Thank you all for joining us. We are adjourned.
Dean Reuter: Thank you for listening to this episode of Teleforum, a podcast of The Federalist Society’s Practice Groups. For more information about The Federalist Society, the practice groups, and to become a Federalist Society member, please visit our website at www.fedsoc.org.