Context: Recently, Iran and China have quietly drafted a sweeping economic and security partnership that would clear the way for billions of dollars of Chinese investments in energy and other sectors.
Key Points

• The partnership would vastly expand Chinese presence in banking, telecommunications, ports, railways and dozens of other projects.
• In exchange, China would receive a regular and heavily discounted supply of Iranian oil over the next 25 years.
• The proposed agreement also describes deepening military cooperation, potentially giving China a foothold in a region that has been a strategic preoccupation of the United States for decades.
• It calls for joint training and exercises, joint research and weapons development and intelligence sharing — all to fight “the lopsided battle with terrorism, drug and human trafficking and cross-border crimes.”

Issues

• The partnership undercuts U.S. efforts to isolate the Tehran government because of its nuclear and military ambitions.
• It represents a major blow to the Trump administration’s aggressive policy toward Iran since abandoning the nuclear deal reached in 2015 (Joint Comprehensive Plan of Action).
• Renewed U.S. sanctions, including the threat to cut off access to the international banking system for any company that does business in Iran, have succeeded in suffocating the Iranian economy by scaring away badly needed foreign trade and investment.
• But Tehran’s desperation has pushed it into the arms of China, which has the technology and appetite for oil that Iran needs.
• Iran has been one of the world’s largest oil producers, but its exports, Tehran’s largest source of revenue, have plunged since the Trump administration began imposing sanctions in 2018; China gets about 75% of its oil from abroad and is the world’s largest importer, at more than 10 million barrels a day in 2019.
• It would create new and potentially dangerous flashpoints in the deteriorating relationship between China and the U.S.

Significance of the move for both the countries 

• Iran has been one of the world’s largest oil producers and exports are its largest source of revenue which have plunged since the US administration began imposing sanctions in 2018.
• China gets about 75% of its oil from abroad and is the world’s largest importer, at more than 10 million barrels a day last year.
• Iran and China both view this deal as a strategic partnership is not just expanding their own interests but confronting the U.S.

Concerns for India

• India’s concerns have increased exponentially due to expanding Chinese presence in the Gulf and the Indian Ocean through economic engagements, construction of ports and pipelines because all its energy imports from the Gulf and Africa
• Chinese closer ties with oil producers can bring governance and energy security issues for India.

Conclusion

• India may increase its dependency on oil imports from Saudi Arabia and the United Arab Emirates (UAE).
• In addition, US shale production can offer India a reprieve.
• India also needs to improve its domestic production.