Since the discovery of oil in the Middle East, the US has always tried to hold its influence over Iran. From 1921 to 1979, first Raza Shah and later his son Muhammad Shah governed Iran with the support of the US. America has always asserted that its presence was meant to ensure peace and stability but the main purpose was to protect its own interests. The era of the Pahlavi dynasty came to an end when the supreme leader returned to Iran after 14 years of exile in France, which marked the Islamic Revolution of 1979.
Since 1979, the relationship between the US and Iran has faced confrontation and sanctions. The freezing of Iranian assets and the failure of major diplomatic efforts like the 2015 nuclear agreement pushed Iran to search for new economic partners. For this purpose, in 2021, Iran and China signed a 25-year cooperation agreement. It has been argued that the US diplomatic engagement with Iran led to eventual failure, and that Iran has leveraged China’s Belt and Road Initiative (BRI) to navigate decades of Western sanctions and reinforce its strategic autonomy within an evolving multipolar world order.
Sanctions are a major diplomatic tool for major powers to pressure the state and use as “coercive diplomacy” to change the behavior of the state. Similarly, the sanctions against Iran were imposed after the hostage Crisis in 1979. The main goal of these sanctions was to weaken Iran’s economy, increase unemployment, and inflation. However, these sanctions became harsher to the Iranian economy when Iran’s undeclared nuclear program was revealed. Under all these situations, the Iranian leadership did not surrender to US and Western pressure.
After the global financial crisis in 2008, the major Western powers-initiated negotiations to seek economic recovery and new trade opportunities. This effort led to the Joint Comprehensive Plan of Action (JCPOA), a nuclear agreement between Iran and the US, UK, France, Germany, Russia, and China in 2015. After the agreement, the relationship between the US and Iran shows signs of good relations. However, their progress was reversed in 2018, when President Donald Trump called it a bad agreement and claimed that Iran was still destabilizing the Middle East by supporting different militant groups.
When the US sanctions were re-imposed in 2018, Iran’s GDP fell sharply due to the loss of Western trade, which led to unemployment, inflation, and shortages of foreign currency. To tackle this situation, Iran adopted the “sanctions resistance model” aiming to boost domestic production, grow regional trade, and use the alternative banking system, and also used alternative trade methods to bypass Western-controlled systems.
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For this purpose, Iran emphasized the “Look East” policy and started reconnecting with global markets through Beijing’s Belt and Road Initiative (BRI). To achieve this, China and Iran signed a 25-year Strategic Cooperation Agreement in 2021. It involves around $400 billion in investments in energy and infrastructure projects. In this way, Iran’s economy started growing, and GDP growth reached 3.4% in 2023, recovering the negative figures recorded during the 2018-2020 period.
Through this partnership, Iran became an active member of the SCO 2023, AIIB, and EAEU. These institutions strengthened Iran’s diplomatic choices and gave the country both economic and strategic stability. Similarly, Iran also became part of several BRI corridors, including the Chabahar–Zahedan Railway connectivity, the Tehran–Mashhad high-speed rail upgrade, the North–South Transport Corridor, and various energy-sector projects.
The most significant point of BRI is that it strengthened Iran’s geopolitical and economic position by making it one of the shortest routes connecting Asia to Europe. BRI projects, such as the North–South Transport Corridor connecting Mumbai to Moscow, have reduced shipment time from nearly 40 days to 20 days, and the Tehran–Mashhad railway upgrade has cut travel time from 12 hours to about 6 hours. Similarly, the development of the Jask Oil Terminal has further allowed Iran to export oil directly from the Gulf of Oman, enabling it to bypass the vulnerable Strait of Hormuz.
All these infrastructures boost the economy of Iran. As we have seen, in 2020 the exports of Iranian crude oil were 0.3million barrels per day, which has now increased to 1.3 million barrels per day in 2023. All these infrastructures showed how Iran’s economy boosted and how BRI-linked corridors and alternative financial channels helped it to maintain its energy trade despite Western sanctions.
Overall, Iran’s policy towards BRI and the east helped to reduce the economic pressure caused by US sanctions. It further strengthens its economic and diplomatic options, improving regional connectivity, and participating in non-Western organizations like the SCO and EAEU. This shift has enabled Iran to reduce its dependence on Western markets and strengthen its economy by deepening strategic and economic ties with China.
*The views expressed in this article are the authors’ own and do not represent TDI. The contributor is responsible for the originality of this piece.
Ahmad Hassan
Ahmad Hassan is a research intern at the Institute of Strategic Studies, Islamabad, and is currently enrolled in the School of Politics and International Relations (SPIR), Quaid-e-Azam University. He can be reached at m.ahmadmastoi7890@gmail.com
