The Role of the United States in the Relation between Iran and China as Two Key Members of the Asian Global Supply Chain

Abstract

With the birth of Fordism and the expansion of the markets beyond the states’ borders, national supply chains have evolved into international and global supply chains. Some countries fared much better than others in becoming an irreplaceable part of the said chain. For instance, one could mention Iran due to its rich oil reserves and geopolitical position on the globe, China with its cheap human capital and high-profit margins, and the US with its massive reach all around the world. This study examines the US’s mediatory effect on Iran-China’s relations. Consequently, a derivative of the gravity model has been devised to test the said hypothesis. The dependent variables to test this hypothesis are China’s imports from Iran and China’s exports to Iran. The model controls the two states’ currency value, their inflation rate, and the price of crude oil. Furthermore, the signing of the Joint Comprehensive Plan of Action in 2015 and the US’s Maximum Pressure Policy in 2017 are the main variables of interest in the model in form of two dummy variables. The study employs a novel multidisciplinary approach both on the methodology front by introducing an abstract conception of distance and on the epistemology front by combining international economics literature with that of the international relations. According to the results, the US’s foreign policy has a significant buffering effect on the trade between Iran and China. In other words, the United States acts as a distancing factor between the two states of Iran and China. This distancing effect, however, is stronger for China’s imports from Iran in comparison to China’s exports to Iran.