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China tilts to Iran as Xi caps visit with 17 accords (JMD on CNBC)

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China is deepening economic engagements with Iran just a week after international sanctions were lifted against the country but the closer ties risk infuriating Saudi Arabia, the mainland's largest oil supplier in the Middle East, analysts say.

Chinese President Xi Jinping, the first international leader to head to Iran after the trade restrictions were removed, capped his visit to Tehran with 17 agreements for cooperation in areas including energy, trade, and industry, reported Iran's Islamic Republic News Agency.

During Xi's visit, the two countries also agreed to increase bilateral trade more than 10-fold to $600 billion in the next decade as China pursues its One Belt One Road project, an ambitious network of road, rail and port routes that will connect China to Central Asia, South Asia, the Middle East, and Europe.

With Iran at the end of the Asian road before it heads into Turkey andEurope, China is likely targeting to build numerous infrastructure facilities in Iran, said Jean-Francois Seznec, a non-resident senior fellow at the Atlantic Council.

But the warmer ties will irritate oil giant Saudi Arabia whose already fraught relationship with Iran has worsened after Saudi Arabiaexecuted a well-known Shiite cleric earlier this month. Xi visited Riyadh and Egypt before heading to Tehran.

"China loves Saudi Arabia as far as the oil is concerned because they love (state-owned oil producing company) Saudi Aramaco as a very reliable supplier, but otherwise from a political standpoint, Iran is going to be the favorite child of China in that region," added Seznec.

With Iran not a U.S. ally, China will secure energy security with the country as the Asian country is dependent upon the Middle East for its oil imports.

"It's the only country in the region that is not allied with the United States for the most parts," said Michael Singh, managing director of think tank The Washington Institute for Near East Policy.

James Dorsey, a senior fellow at S. Rajaratnam School of International Studies noted that Iran is also majority Shia rather than Sunni-dominated, as is the case with Saudi Arabia and China's troubled Xinjiang region in the northwest, home to the Muslim Uighur ethnic group. Chinese authorities have blamed separatist Uighurs for terrorist attacks that have killed hundreds of people in recent years.

As for Iran, various factions in the country are likely to be more united in accepting China over the U.S. or Europe as a partner, said Seznec.

Iran's Supreme Leader Ayatollah Ali Khamenei met with Xi on Saturday where he expressed the country's distrust of the United States and Europe.

"The government and nation of Iran have always been and [still] are looking for the expansion of relations with independent and reliable countries like China and on this basis, the agreement between the presidents of Iran and China for [promotion of] 25-year strategic relations is totally correct and endowed with wisdom," Ali Khamenei 's website quoted him saying.

"The Western [governments] have never been able to win the Iranian nation's trust."

TEHRAN, IRAN - JANUARY 23: Chinese President Xi Jinping (C) meets with Supreme Leader of Iran Sayyed Ali Khamenei (R) in Tehran, Iran on January 23, 2016.

Supreme Leader Press Office | Anadolu Agency | Getty Images

China is already Iran's largest trade partner with bilateral trade surpassing US$50 billion in 2014 – up 31.5 per cent from the year before.

While China traditionally maintained a stance on non-interference in domestic politics, harmony and economic corporation, this would likely change in the future as the Middle East regards China as a superpower and expects the country "to step up to the plate", said Dorsey.

"China has huge interest in the Middle East. It has huge investments; it has large number of Chinese nationals here and it will have to protect them," he added.

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