On February 3, the administration of U.S.

President Donald Trump enacted new sanctions on

Iran. The measures are partly in reaction to Irans January 29 test of a medium-range missile.
Based on Trumps decision, the U.S. Treasury Department will apply sanctions on 25 individuals
and companies connected to Irans ballistic missile program and those providing support to Irans
Islamic Revolutionary Guard Corps Force. The sanctions list includes three separate networks
linked to supporting Irans missile program, which the U.S. opposes.

The new U.S. sanctions come at a time when most Iranians, according to a poll released in
December 2016, are not positive about Iran-U.S. relation. A majority of respondents believed
that the United States would live up to its obligations under the Joint Comprehensive Plan of
Action (JCPOA), the deal reached between Iran and other world powers to limit Tehrans nuclear
program. The new sanctions are not surprising given the fact that during the campaign, Trump
harshly criticized the Iran deal. He told the American Israel Public Affairs Committee in March
that the JCPOA was catastrophic for America, Israel, and the whole of the Middle East. He
added, My first priority is to dismantle this disastrous deal on Iran.

When the news of the sanctions broke, many Chinese assumed that it was bad news for Iran,
but good news for China. The sanctions, many believed, gave China an opportunity to enhance
its relationship and trust with Iran, as well as expand its economic cooperation with Iran.

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This positive evaluation of the impact the sanctions will have on Chinas interests is largely
based on the worry that after JCPOA, Chinas long-held dominant economic and investing
position in Iran is being challenged by the companies from Western states, especially those from
France and the United States. The Iranians, while valuing Chinas economic relations with their
country during the past few years of intense sanctions, now hope to establish new connections
with the West to get more advanced technology and management skills. China, in Iranian eyes, is
still a state that lacks needed technology and management experience.

Against this backdrop, some Chinese believe the new sanctions will create valuable opportunities
for Chinas interests in the Middle East. On the one hand, politically, the new U.S. sanctions on
Iran will worsen the Iran-U.S. relationship, pushing Iran further into the anti-U.S. camp. On
the other hand, the new sanctions, according to some Chinese, may deter further possible
economic cooperation between Iran and the West. Some believe that, with these sanction and the
possibility of more sanctions in the future, China may become the only reliable economic partner
for Iran Irans only choice.

However, the new U.S. sanctions on Iran actually challenge and may harm Chinas interests in
not only Iran, but also in terms of Chinas One Belt One Road initiative (OBOR). The most
direct challenge is economic. Chinas economic relations with Iran were largely untouched by
the series of U.S. sanctions adopted by Trumps predecessors over the past decade. Now, one of
the three networks sanctioned by the United States includes Chinese individuals and their
companies. Chinese actors may serve as a logical target for undermining Irans ballistic missile
tests due to a documented history of disguising and shipping equipment to Iran that bolsters its
missile program and which, under current international restrictions, Tehran cannot acquire on its
own.

Besides the economic challenge for China, the more serious and long-term challenge is political.
Given the geopolitical rift and competition between the Shia camp led by Iran and the Sunni
camp led by Saudi Arabia, the new sanctions amplify the political contest in the Middle East,
rather than alleviate it. For the sake of Chinas OBOR initiative, it is important for Beijing to stay
neutral and develop fair relationships with all Middle East states, regardless of the different
ideologies and political rifts in the region. However, one of the most important premises for
OBORs success in the Middle East is a relatively peaceful region. The United States new
sanctions may further accelerate the turmoil of the Middle East and widen the contrasts in the
region; it will be a challenge for China to decide whom to support.

On the other hand, given the fact that the new sanctions will see U.S.-Iran ties deteriorate, China-
U.S. relation may also face challenges. Although Trump criticized China during the election
campaign by labeling China as a currency manipulator and later promised to strengthen U.S.
relations with Taiwan, China is not on top of Trumps criticism list. Trump has criticized
Germany, Japan, Mexico, or even Australia more pointedly than he has China. However, an Iran
full of increasing anti-U.S. sentiments after the new round of sanctions may push China into an
embarrassing international position. For example, Iran is one of the possible candidates for the
enlargement of Shanghai Cooperation Organization (SCO), which is one of the most important
multilateral mechanisms that China leads. If a more anti-U.S. Iran, which has already been an
observer state of the SCO, successfully becomes a full member, it is quite likely that the SCO
would turn from a neutral international group (as China hopes), to an anti-U.S. regional
organization. This would put China in an awkward spot.

Trumps new sanctions on Iran represent a slight escalation compared to the Obama
administration, which in the wake of signing JCPOA preferred to target Iranian proxies and allies
like Hezbollah or Syria rather than Iran itself. For China, the U.S. sanction may become big
challenges, not only to China-U.S. relation, but also to Chinas relations with Iran and to the
OBOR initiative in the Middle East.

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