Beyond Geopolitics: A Geoeconomic Perspective of China-Iran Belt and Road Initiative Relations/Jeopolitik Otesi: Cin ve Iran'in Kusak ve Yol Girisimi Iliskilerine Jeoekonomik Bakis.

• Author: Madani, Seyedashkan

Introduction

In September 2013, Chinese President Xi Jinping proposed the revival of the ancient Silk Road in Kazakhstan. In October of the same year in Indonesia, he proposed the Maritime Silk Road Initiative (MSRl), calling these two projects "One Belt, One Road (OBOR)". (1) The new project would start with a network of highways, railways, and pipelines extending from Xi'an in central China to the Chinese city of Urumchi near the Kazakhstan border, and from there to Iran, Iraq, Syria, and Turkey. The BRI connects to Bulgaria, Romania, the Czech Republic, Germany, and Venice in Italy from Istanbul, Turkey. The sea route is a network of ports and coastal infrastructure that connects South and Southeast Asia to East Africa and the North Mediterranean. In all, the BRI covers 148 countries, from Asia to Europe and Africa (Figure l).

Figure 1. Number of Countries of the Belt and Road Initiative (BRI) across Continents Sub-Saharan Africa 38 Europe& Central Asia 34 East Asia& pacific 25 Middle East& Nort Africa 17 Latin America& Caribbean 18 South East Asia 16 Note: Table made from bar graph. By implementing the BRI, China is pursuing significant goals in the international economy such as expanding its sphere of influence into various regions, gaining access to global markets, and creating more cost-effective communication and transportation networks. It also aims to advance the Silk Road Economic Belt project to improve China's western infrastructure. Based on studies published by international economic organizations and research centers, $2.9-6.3 trillion will be needed every year to invest in infrastructure development. (2)

China has taken practical measures to fill the gap relating to insufficient investment in infrastructure. In November 2014, China established a $40-billion Silk Road fund. In April 2015, Xi Jinping proposed a $46-billion investment plan in Pakistan. China also signed a $30-billion deal with Kazakhstan, a $15-billion deal with Uzbekistan, a $3-billion deal with Kyrgyzstan, and a $1.4-billion deal with Sri Lanka for the reconstruction and development of the Port of Colombo. Beijing has significantly promoted BRI diplomacy and increased hopes, especially among developing countries. However, several challenges are hindering the BRI's implementation. In particular, some infrastructure projects such as railways, highways, and power plants mainly rely on continuing and substantial government support. Nevertheless, several countries, like Pakistan and Myanmar, suffer from frequent political turmoil, destructively influencing policy sustainability. Likewise, many of these countries lack a transparent and efficient judicial system. Their legal and regulatory systems may also be incomplete and unproven to be able to handle foreign investments.

Despite the obstacles mentioned above, the literature mostly focuses on China's motivation for the BRI initiative rather than the significant challenges and prospects. (3) Political, security, and economic challenges in the host countries might potentially jeopardize the successful realization of the BRI. Moreover, as an important country involved in this initiative, Iran's roles, opportunities, and challenges are still unclear. Iran has been the second-largest recipient of China's investments in the Middle East since 2014, one year after President Xi formally announced his new initiative. (4) China is fully aware of the geoeconomic significance of Iran as a node for connections between Europe, Central Asia, and the Middle East.

This study's orientation provides a framework for assessing the risks and challenges associated with Iran's BRI projects. By establishing a theoretical framework, the study also explains why China's investment in Iran is significant, even though the country's business environment is not particularly favorable to foreign investment. This study is divided into two sections to address the research question. Initially, the BRI faces unique obstacles in Iran, and the research examines investment risks in Iran in three economic, political, and geopolitical sectors. Further, survey research was designed to compile data from investment and trade experts in Iran and China. This study analyzed this data to evaluate the risks associated with BRI projects in Iran. (5) To this end, purposive sampling was used to send questionnaires to 86 experts on Iran-China economic and trade cooperation. Since the results obtained in this study are qualitative in nature, conducting a questionnaire data analysis can offer an important perspective in measuring the accuracy of the issues raised in this research.

Second, while the BRI can be analyzed in terms of cost-effectiveness, it should be viewed from a geoeconomic perspective. Unlike popular discourse, which views the Chinese initiative solely through geopolitical, political, or economic lenses, this study demonstrates that geoeconomics plays a much more significant role in the dynamics of China's investment relations with Iran. Although few studies have examined the challenges to the BRI's implementation in Iran in detail, to the author's knowledge no study has examined geoeconomics and its effects on the dynamics of Iran-China BRI relations. (6) In other words, this is the first time a geoeconomic framework has been used to analyze China's BRI investment behavior in Iran. Few recent studies have provided a more descriptive assessment of the current state of Iran-China relations in the context of the BRI. (7) Several other articles attempted to explain the BRI relationship between Iran and China using a conventional geopolitical approach. (8) However, no previous studies have analyzed Iran's relations with China from a geoeconomic standpoint. The present study systematically reviews previous studies to facilitate theory development and uncover new areas requiring more in-depth research.

The paper proceeds as follows to develop and illustrate a geoeconomic analysis of China-Iran BRI relations. Initially it reviews the existing literature on geoeconomics as an analytical tool for studying international relations. The critical point to emphasize in this section is the distinctions and similarities between geoeconomics and geopolitics. Second, geoeconomics analyzes the international systems power relations by emphasizing economic factors and integrating them with geography and economic security. After establishing the analytical framework, Iran's significant political, economic, and geopolitical risks are examined. Finally, the paper investigates how Iran's geoeconomic significance influences BRI relations between Beijing and Tehran, even though Iran's foreign investment environment is fraught with difficulties and risks.

Literature Review

Geoeconomics: Power through Economic Means

Although economic tools have long been used in politics, "geoeconomics" was increasingly introduced in domestic and foreign policies as a new method of governance after the Cold War and globalization, when economic approaches attracted more attention. (9) The term was first coined by Luttwak, although it failed to attract much attention. (10) Luttwak and his successors considered economic power in the post-Cold War era as an essential factor in developing the countries' strategic goals. Geoeconomics highlight economic vulnerability and state that countries pursue strategic and security goals relying on economic measures. (11) While competition is still a significant factor in the analysis, competition in the international arena is not solely based on military and political power. The economy can considerably affect the external behaviors of governments. (12)

Indeed, the term "geoeconomics" has come to the forefront amidst the diminishing importance of military power and increasing importance of economic power. (13) Unlike geopolitics, which is conducted through military force and political power, geoeconomics shows how countries in the international arena rely on economic instruments to pursue their national interests. In this context, Hsiung defined geoeconomics as shifting attitudes from military concerns to economic security concerns. (14) "Geoeconomics" is defined in international relations as the strategic application of economic power. As a result, countries employ geopolitical and geoeconomic tools to accomplish their regional and international strategic objectives.

Governments shape foreign policy by acting rationally in the international arena, using criteria such as "cost-benefit analysis" and "relative gains." In an ideal world, states would use economic tools to influence other international actors' behavior to achieve relative gains. Moisio classifies economic instruments of power that are exercised in international relations into four categories. (15) Economic sanctions, on the top of the list, are used to exert pressure on other governments. The second significant category is a state's economic interests, precisely its trade policies. Thirdly, global and regional economic powers can influence a government's behavior by implementing a package of economic assistance and foreign investment policies. Finally, natural resources, trade routes, and infrastructure can help a country improve its geoeconomic position to preserve or alter regional relations. (16)

Balance of Power: China's Geoeconomic Approach to the BRI

China's economic rise and its leaders' determination to leverage its economic potential internationally have increased the importance and credibility of the geoeconomic analysis. Insofar as economics is used to project Chinese power internationally, geo-economy is critical as a concept encompassing geography, power, and economic security. From one perspective, China's economic miracle results from integrating its economic system into global capitalism. From another perspective, its economic miracle stems from the country's integration into global capitalism. (17)

The BRI reflects China's foreign policy...