(EST PUB DATE) CHINA'S STAKE IN THE IRAN-IRAQ WAR

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• Case Number: F-2019-01482
• Publication Date: July 1, 1987

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IN:veto:ate of op Mt
' t Intelligence
China's Stake
in the Iran-Iraq War
An Intelligence Assessment
�Tep-Secret�
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July 1987
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Directitente at
China's Stake
in the Iran-Iraq War
An Intelligence Assessment
This _paper was written by
Office of East Asian Analysis. Comments
and queries are welcome and may be directed to
the Chief, Ch1 ivision 0EA, o
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(u)
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Key Judgments
Information available
as of 10 July 1987
was used In this report.
China's Stake
in the Iran-Iraq War
Unless international pressure increases markedly, Beijing is unlikely to
stop its highly lucrative arms sales to the Persian Gulf. We estimate
Beijing's arms sales to Iran and Iraq add up to roughly $7.5 billion-75
percent of China's total arms sales since 1981�and that the proceeds have
been used to augment a defense budget constrained by economic modern-
ization priorities. Beijing's sales to Iraq were far greater than those to Iran
through 1985, but China has become Iran's main supplier of weapons, and
sales to both nations were over $1 billion in 1986. The Chinese decision in
late 1985 to begin major sales to Iran was probably in large measure
stimulated by the precipitate drop in Iraqi military purchasesn 1983 and
1984 and possibly Iraq's inability to pay on contracts.
Chinese leader Deng Xiaoping time and again reportedly has overruled
opposition from the Foreign Ministry on arms sales and probably sees the
Persian Gulf sales as contributing to Chinese national interests in several
ways beyond financial gain:
� Beijing probably perceives it has helped limit Soviet influence in the
Persian Gulf by reducing Iraqi dependence on Soviet arms and providing
politically isolated Iran with an alternative to Moscow.
� Beijing has exploited the warming relations with Iran to open a new
dialogue on Afghanistan that may lead to bilateral cooperation in support
of the Afghan insurgents.
� Iraq and Iran are, in effect, testing new Chinese weapons under actual
battlefield conditions, providing Beijing invaluable information for future
improvements in these systems.
� China's use of Saudi Arabia as an intermediary for arms deliveries to
Iraq has increased bilateral contacts despite Riyadh's continued refusal
to switch recognition from Taipei to Beijing
Beijing is, however, extremely sensitive to international opinion, and the
recent criticism of its HY-2 (Silkworm) missile sales to Iran has raised the
stakes for Beijing of continued arms sales. Senior Chinese officials have
responded to US criticism of Iranian sales with public statements of
feigned surprise at the allegation, continued denials, and whispers that
other nations�such as North Korea�have resold Chinese arms illegally
to Iran. Beijing is also attempting to deflect the increased negative
publicity by focusing world attention on the "superpower buildup" and
rivalry in the Persian Gulf.
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In our judgment, Chinese leader Deng Xiaoping may consider ending
China's Iranian sales only if he is convinced that continued sales might
have one or more of the following effects:
� Severely Disrupt Chinese-US Relations. Beijing values the deepening
relations with Washington both for the technological and economic
benefits as well as for the political leverage they provide in Sino-Soviet
negotiations. The Chinese are almost certainly deeply concerned about
the dangers inherent should a Chinese-built missile strike a US naval
combatant.
� Ostracize Beijing From the Internatic ial Community. A 27 June
commentary in People's Daily showed a concern in Beijing that US
charges are convincing other nations that Beijing's arms sales are the
source of the recent heightening of tensions in the Persian Gulf. To
combat this, the Chinese are supporting the new UN Security Council
resolution calling for a cease-fire--but have not agreed to link it to
mandatory sanctions�and will take every opportunity to declare their
support for an early end to the war.
� Lead to an Iranian Victory. We believe Beijing wants no winner in the
Persian Gulf war, and, if China is convinced that a particular weapon
sale or continued sales are tipping the balance, it almost certainly will re-
ject new arms transfer agreements.
� Expand Soviet Influence in the Gulf Kuwait's agreement to accept
Soviet assistance is probably perceived in Beijing as a dangerous signal
that the more moderate Arab states might be willing to allow the Soviets
to play a security role in the Persian Gulf. If Deng sees this as an
opportunity created for Moscow by Beijing's sales to Tehran, he may veto
future sales as counterproductive to China's efforts to minimize Soviet
influence in the region.
We believe the Chinese may have leaked news of an embargo on new arms
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Ter Stet
In our judgment, Chinese military sales at current levels have not given ei-
ther side a definitive advantage�although they certainly are of greater
importance to Iran than Iraq�but have increased the danger to nonbellig-
erents. The Chinese claim antiship missiles, being installed on the Strait of
Hormuz by Iran and delivered to Iraq for use from B-6D (TU-16) bombers,
have a 70-percent chance of hitting an unprotected medium-to-large-size
ship. In comparison with other antiship missiles used in the Gulf, the HY-2
warhead is three times larger than the Exocet's and seven times larger than
the Italian Sea Killer's, making it far more likely to sink a tanker. The
HY-2 travels to its maximum range of 95 kilometers in five minutes. Ships
protected by active or electronic defense systems may be able to defeat a
single HY-2 but could have trouble defending against two or more
approaching at once.
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Contents
Page
Key Judgments
Beijing's Agenda
The Financial Gains
Political Links
2
Battlefield Testing
2
A Controversial Policy
3
Impact of Demarches
4
Regional Relations
5
Iraq: Smooth Sailing From the Start
5
A Common Cause With Riyadh
6
Iran: A Far More Turbulent Relationship
7
A Breakthrough in 1985
7
Cooperation on Afghanistan
8
Impact on the War
9
Looking Ahead
9
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China
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China's Stake
in the Iran-Iraq War
Beijing's Agenda
China historically has been a minor actor in the
Persian Gulf, but soon after the Iran-Iraq war erupted
in September 1980 an officially neutral China began
promoting its political, economic, and strategic inter-
ests in the Gulf by selling arms to both sides. China
has obtained some $5.3 billion in contracts with Iraq
and $2.2 billion in contracts with Iran, accounting for
roughly 75 percent of China's total sales since 1981.
Beijing's sales to Iraq were far greater than to Iran
through 1986, but in the same year China also
became Iran's main supplier of weapons and sales to
both nations were over $1 billion
The Chinese deliver a wide variety of conventional
equipment to both sides, most of it dependable,
durable, but dated hardware of 1950s design. In 1983,
Beijing sold two batteries (eight launchers) of Silk-
worm antiship missiles to Iraq and has probably
delivered five of 12 batteries of the same antiship
missile to the Iranians since April 1986. In addition,
Iraq has received four bomber aircraft equipped with
C-601 missiles as well as fighters from China, while
Iran has received surface-to-air missiles (SAMs) it
uses to defend major cities. Long-range field guns and
ammunition have gone to both warring states, and
Iraq has received over 1,000 antiaircraft guns. Main
battle tank sales to Iraq alone�over 2,500 tanks,
have made China
second only to the Soviet Union in tank exports in the
1980s
The Financial Gains
The outbreak of the war coincided with Beijing's
decision to enter the world arms market to finance
defense modernization at a time of fiscal retrench-
ment
China's leader Deng Xiaoping initiated China's arms
sales policy in 1980, stating that, if Warsaw Pact and
NATO countries could sell arms, there was no reason
China could not sell them too. Defense spending had
been hit particularly hard by economic retrench-
ments, and its share of the state budget allocated by
1
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Table 1
Chinese Arms Agreements
With Iraq and Iran,
1981-86
Million US $
Iraq
Iran
1981
2.200
50
1982
1,300
7
1983
282
448
1984
53
62
1985
20
430
1986
1,400
1,200
Total
5,300
2,200
Beijing has been declining steadily from nearly 18
percent in 1979 to only 8.3 percent in 1987. Accord-
ing to Chinese Government statistics�which we be-
lieve are accurate barometers of the trends but dis-
close only about half of actual levels of defense
spending�since 1981 the defense budget has re-
mained fairly static
Arms exports have become an important source of
revenue for the military, because the military is
allowed to retain a portion of the profits from sales
abroad. We estimate last year's sales to Iran and Iraq,
for example, are equal to 20 percent of the actual
defense budget. Moreover, because each component
retains a share of its own profits there is intense
competition among the various elements of the de-
fense establishment. For example:
� The Chinese General Staff is on of the principal
beneficiaries of this windfall of hard currency earn-
ings. Baoli�known in English as Poly Technol-
ogies�a company owned and operated by the Gen-
eral Staff
Baoli is run by Chinese leader Deng Xiao-
ping's son-in-law and uses its earnings to acquire
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Political Links
Another�albeit secondary�factor in Chinese think-
ing on arms sales to Iran and Iraq has been Beijing's
desire to expand Chinese and limit Soviet influence in
Southwest Asia. The outbreak of the Iran-Iraq war,
coming as it did on the heels of the Islamic fundamen-
talist revolution in Iran against the anti-Soviet Shah
in January 1979 and the Soviet invasion of Afghani-
stan in December 1979, heightened longstanding Chi-
nese concerns that Moscow would exploit regional
insta extend Soviet influence in the region.
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We believe the Chinese calculated that Tehran's
alienation of the West over the US Embassy hostages
left the Iranians vulnerable to Soviet pressure when
the Iran-Iraq war broke out. Chinese media reports in
1980 warned that Moscow's "covetous eyes" were
focused on Iran as well as Afghanistan
At the same time, the Chinese expanded rela-
tions with Baghdad by filling the gap in Iraqi arms
supplies created by the Soviet embargo against Iraq
during the first year of the war,
Battlefield Testing
An added bonus for Beijing is the battlefield testing of
new weapons, many developed with the funds provid-
ed by arms sales and some of which will ultimately be
deployed with China's own forces. China's main
battle tank was among the first weapon systems
modified as a result of Iraqi combat experiences. The
tank has been reconfigured with armored side skirts
and standoff armor around the turrets�an Israeli
innovation�to protect against light antitank weap-
ons. Additionally, the Type 531 armored personnel
carrier, which was among the first pieces of Chinese
equipment sold to Iraq, is now equipped with an air-
cooled engine to avoid overheating in the high tem-
peratures of the Gulf, and new variants have been
developed as command vehicles and armored ambu-
lances
2
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Table 2
Major Military Equipment
Sold by China to Iran and Iraq a
MISSileS
HY-2 antiship missile b
HN-5 SAM
HQ-23 and HQ-2K SAMs
C-60I antiaircraft missile
Aircraft
F-7 and F-7M (M1G-21) fighters
13-613 (TU-16) bomber
Armor
Type 59/69-11 main
Type 63/Type 531 armored personnel
carriers
battle
tanks
Artillery
Type 59-1 130-mm field gun
Type 60 122-mm field gun
Type 54 122-mm howitzer
Type 66 152-mm howitzer
Type 83 152-mm howitzer
Artillery not further identified
Aircraft artillery
Type 59 57-mm antiaircraft gun
Type 55 37-mm antiaircraft gun
The B-6D, China's first indigenously built bomber
with air-to-surface antiship missiles�an upgraded
version of the Soviet TU-16 Badger�has been de-
ployed with Chinese forces_antv_sinee_toes..u.dus._
battle tested in Iraq
all four oomoers sold by the Chinese
have been delivered to Iraq, along with at least 28
C-601 air-to-surface antiship missiles, a variant of the
Silkworm missile that flies at high subsonic speeds at
low altitudes. Although both aircraft and missile are
of 1950s technology, the missile, with its 500-kilo-
gram warhead and 97-kilometer range, is China's first
guided missile, and the Gulf war is Beijing's first
opportunity to test its performance under actual com-
bat conditions
Beijing has also sold newly developed artillery systems
to Iran and Irao�even before deploying them with
Chinese forces.
the Iraqis have received China's new, extended-range
152-mm towed howitzer. Despite the fact that this
howitzer has been in production fnr at lesict twn %IPA
The Chinese copy of the Soviet SA-7 shoulder-fired
SAM�acquired by the Iranians�has been combat
tested against Soviet helicopters and bombers in
Iraa's inventory
Chinese antitank weapons used by the
Iranians are tested against Soviet 1-72 tanks, while
Chinese tanks sold to Iraa face I IS TOW migeitec
3
A Controversial Policy
The decision to sell arms to Iran and Iraq was made
at the highest levels of the Chinese Government,
despite protests from the Ministry of Foreign Affairs
that arms sales damaee China's image in t e Third
World. nilitary
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1 MO Neely%
Chinese armored command
hick exported to Iraq
leaders have consistently won out over Foreign Minis-
try objections, claiming that foreign exchange is
needed to finance military procurements from the
West and provide significant funds to revitalize the
defense industries. The military probably points to
such programs as the $1.6 billion purchase in 1984 of
the production line and technology for Israel's Python
III air-to-air heat-seeking missile as tangible payoff to
China's defenses. Most recently, following Secretary
of State Shultz's March visit to Beijing, Vice Chair-
man of the Central Military Commission Yang
Shangkun and the president of Baoli ' met with Deng
Xiaoping to discuss US demarches on arms sales to
Iran./
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Ministry of Foreign Affairs officials' efforts to regain
control over China's military exports have consistently
failed because of the military's political clout and
Deng's support for military exports
'The Chinese General Staff has used Baoli to conclude over $3.2
billion in arms sales and over $520 million in military purchases
from abroad since 1984. In addition to Deng Xiaoping's son-in-law
as president, the ompanys senior officials include Yan Shan
kun's son-in-law.
Impact of Demarches
We believe US demarches may have helped the
Ministry of Foreign Affairs in its efforts to curb the
military's arms sales policy. After Secretary of State
Shultz visited Beijing in March and reiterated US
displeasure with China's
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either Iran or Iraq
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The clearest impact of US demarches, however, has
been to increase China's efforts to hide its arms
deliveries to Iran, including the use of foreign flag
carriers for particularly sensitive cargos, such as the
Silkworms, and increased reliance on night loading of
such cargos to thwart US reconnaissance capabilities
(see inset). Since the Chinese delivery of antiship
missiles to Iran became public in March of this year,
Beijing has increased its public denials, attacking the
charges as "futile slander." It has also embroidered
these denials of arms sales with claims that Chinese
equipment, particularly the Silkworm missile system,
have not only been transferred, but also actually
produced, by third countries, such as the Soviet
Union, North Korea, and France
Regional Relations
-Ties-Norte4-
China's major arms sale role has not translated into
great regional influence, but Beijing's goals are rela-
tively modest and China does not seek to exercise
great power in the area. Beijing aims to expand
bilateral ties to individual states, to build markets for
military and nonmilitary Chinese goods and services,4
and also to warn host governments of the Soviet threat
to the region. Given its limited aims, we believe
Beijing sees itself as having been successful in the
region.
Iraq: Smooth Sailing From the Start
Beijing's willingness to supply arms has strengthened
already warm Sino-Iraqi relations, which include
party as well as diplomatic ties. In May 1981, Deng
' China's nonmilitary trade with Iran and Iraq is minor and
accounts for less than I percent of China's foreign trade. Sino-Iraqi
annual two-way trade averaged some $120 million for the period
1981 to 1986. Sino-Iranian t god about $140 million
annually in the same period.
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How the Arms Trade Is Ran
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have arranged deliveries through an elaborate system
of North Korean middlemen and Hong Kong and
Thai front companies.
In public denials of a Chinese-Iranian arms connec-
tion. Beijing points to ryongyang as a potential
source. North Korea may, in fact, be reselling some
'Chinese small arms it receives as part of a military
aid program but has not been involved in the major
transfers of Chinese arms to Iran.
The North Korean Connection
China has been using North Korea as an intermedi-
ary for arms sales to Iran since the early 1980s.
Defense Ministry�affiliated defense corporations,
particularly North China Industries (NORINCO),
and Premier Zhao Ziyang met in Beijing with Iraqi
Deputy Prime Minister Ramadan�the most senior
Iraqi visit to Beijing in two years�and signed two
bilateral agreements on trade and technical coopera-
tion. In 1982 and 1983, respectively, the two sides
convened the inaugural sessions of a permanent com-
mittee on economic and technical cooperation and a
joint committee on trade and economic cooperation.
As an example of their close relations, the manpower-
short Iraqis have contracted for Chinese labor for
hydroelectric, irrigation, highway, petroleum, dam,
housing, and agricultural projects. Estimates of the
total number of Chinese workers sent to Iraq between
1981 and 1986 run as high as 20,000, according to
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Chinese media reports
\however, the number of Chinese workers
in Iraq�currently around 15,000�has been dropping
since June 1986 in the face of Iraq's inability to repay
its more than $100 million debt to China for these
services
A Common Cause With Riyadh
We believe Beijing also has tried to exploit Iraqi arms
sales to get its foot in the door in Saudi Arabia. China
has long sought to persuade Riyadh to end its diplo-
matic recognition of Taipei and establish relations
with Beijing. Although Riyadh continues to refuse to
switch recognition from Taipei, Beijing apparently
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has had some success at improving ties
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Despite the lack of diplomatic ties, Beijing has suc-
ceeded in expanding Sino-Saudi contacts. Chinese
Premier Zhao and then Saudi Crown Prince Fand
became the first leaders of the two countries to meet
when they exchanged greetings at the 1981 Cancun
summit. Foreign Minister Sa'ud's visit to Beijing in
1982 as part of an Arab League delegation marked
the first time a Saudi official had visited China. King
Fand hosted a state banquet for Chinese Muslim
pilgrims visiting Mecca in 1984; prior to that year
Chinese pilgrims had only met with Saudi leaders in
private. Two Saudi trade delegations visited China's
Ningxia Muslim Autonomous Region to begin eco-
nomic cooperation in 1985, Chinese Vice Premier Yao
Yilin and Saudi Crown Prince Abdallah met in Oman
in November 1985, and Zhao received a delectation of
Saudi entrepreneurs in November 1986.
China's willingness to sell significant amounts of arms
to Iran in 1983 created a new momentum in political,
economic, cultural, scientific, and technical exchanges
as the number of these exchanges totaled more in
1983 than the previous four years combined. Most
notably, Foreign Ministry adviser He Ying in early
1983 made the highest level official Chinese visit to
Iran since the Islamic revolution, and Iranian Foreign
Minister Velayati in September 1983 signed a five-
year cultural, scienti iednical cooperation
agreement in Beijing
Iran: A Far More Turbulent Relationship
Beijing was among the first to recognize the funda-
mentalist Khomeini government, but Beijing's rela-
tions with Iran since the revolution have seen dramat-
ic swings. Iran, initially, was not a readymade market
for China's Soviet-style equipment, but, as sources of
spare parts for Iran's Western hardware dried up,
Tehran faced the choice of acquiring military supplies
from either China or the Soviet Blo�
'Sino-Saudi annual two-way trade averaged over $180 million for
the ne rind 1051 t. 104A
A Breakthrough in 1985
A visit by Iranian parliament Speaker Rafsanjani and
Foreign Minister Velayati to China in late June 1985
appears to have inaugurated a much expanded arms
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Iranian parliament Speaker Rafsanjani meeting
with Chinese Presi6ent Li Xiannian in June 1986
relationship. Rafsanjani did not discuss arms sales
with Deng Xiaoping or Premier Zhao Ziyang directly;
two days after his departure two senior Revolutionary
Guard officials met in China with military officers
who indicated that China was willing to sell "defen-
sive weapons" through middlemen. We believe Bei-
jing's change of heart was probably in large part
stimulated by the precipitate drop in Iraqi military
purchases in 1983 and 1984 and possibly Iraqi inabil-
ity to pay on contracts
Beijing's dramatic policy shift involved not only the
sale of major arms to Iran but also the shipment of
weapons directly to Iranian harbors and the training
of Iranian missile crews in China:
malmumalialmmul
Not surprisingly, Beijing's willingness to engage in
direct sales to Iran has led to a substantial deepening
of relations. In addition to setting the stage for new
arms sales, the visit of Iranian parliament Speaker
Rafsanjani and Foreign Minister Velayati was
marked by meetings with Deng, Zhao, President Li
Xiannian, and other senior Chinese leaders. The
official press in both countries touted the visit, with
Zhao predicting that it would "open a new chanter
and Rafsanjani calling it "a total success."
Cooperation on Afghanistan
Beijing has also exploited the warming relations to
ope a dialoszue with Iran on the Af2hanistan prob-
lem
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Beijing apparently sees itself as a bridge between
Tehran and Washington on Afghanistan and has
taken some pains to keep US officials discreetly
informed on these exchang
Beijing
may hope that Washington might temper US de-
marches on Chinese arms sales if it perceives China
exercising a positive influence on Iran on the Afghani-
stan issue.
Impact on the War
In our judgment, Chinese military sales have not
given either side a definitive advantage but certainly
are of greater importance to Iran than Iraq�which
buys large quantities of arms from the Soviet Union.
Iran has been forced to fight an infantry war in order
to minimize its equipment disadvantages relative to
Iraq. Tehran has been unable to replace armor lost in
the war and now has roughly one-sixth the number of
operational vehicles that Iraq has. Without the consis-
tent supply of artillery, small arms, and large amounts
of ammunition proffered by Beijing, the Iranians
would have difficulty sustaining their ground attacks,
although Tehran could increasingly turn to other
suppliers such as North Korea or East European
countries
Beijing's supply of antiship missiles to both sides,
however, has markedly increased the danger to non-
belligerents. The Chinese claim that the HY-2 mis-
siles being installed on the Strait of Hormuz have a
9
70-percent chance of hitting an unprotected medium-
to-large-size ship�although the Iraqis reportedly had
only a 30-percent success rate using HY-2s against
Iranian targets. In comparison with other antiship
missiles in use in the Gulf, the HY-2 carries a
warhead three times larger than the Exocet's and
seven times larger than the Italian Sea Killer's,
making it far more likely to sink a tanker. The HY-2
has a range of 95 kilometers and travels this distance
in five minutes. Ships protected by active or electronic
defense systems may be able to defeat a single HY-2,
but in our opinion would have trouble defending
against two or more approaching at once
Baghdad's acquisition of Chinese B-6D bombers and
C-601 antiship missiles probably will improve Iraq's
ability to launch standoff weapons at targets in the
Persian Gulf. Most probably referring to Iraq's new
bombers, the Iraqi Air Force Commander recently
stated that Baghdad is prepared to hit economic and
oil targets in Iran using new and stronger weapons.
Even though the bombers have a 3,000-kilometer
range, the limitations of their 1950s technology sug-
gest that their primary use will be in the upper
reaches of the Gulf where they can be protected by
Iraqi fighter cover and air defenses. The slow-moving
B-6D lacks advanced electronic countermeasures to
help protect it from ground-based air defenses and
fighter aircraft. Moreover, the onboard radar of the
B-6D has demonstrated poor performance in open
water search and lacks sophisticated electronic
counter-countermeasures and, consequently, is sus-
ceptible to jamming by opposing aircraft and ships.
Looking Ahead
Unless international pressure increases markedly, we
see little chance that Beijing will stop its highly
lucrative arms sales to Iran and Iraq. Beijing seems
increasingly concerned, however, about the possible
impact of its arms sales on US-China relations and
about the potential damage to China's other foreign
policy interests from the attention being given to
Chinese-made Silkworm antiship missiles in the Gulf.
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China wants to protect its image and does not want
the issue to escalate to the point that it affects other
areas of its relations with the United States. Senior
Chinese officials have responded to US criticism of
Iranian sales with public statements of feigned sur-
prise at the allegation, continued denials, and whis-
pers that other nations�such as North Korea�have
resold Chinese arms illegally to Iran. At a lower level,
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however, Beijing has vented its anger at the adverse
publicity. A People's Daily commentary or 27 June,
which may have been aimed primarily at Third World
audiences, charged elements of the US news media
and unnamed US Government officials of spreading a
"stream of lies" and argued that the United States is
in no position to lecture anyone on arms sales to Iran.
Beijing is also attempting to deflect the increased
negative publicity by focusing world attention on the
"superpower buildup" and rivalry in the Persian Gulf.
Beijing reportedly placed an embargo on new sales to
Iran in March and may have intentionally leaked this
information to US officials to heln deflert eritir'em
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Chino's C-8W ansisAfp missik
We believe that any reversal of policy will have to
come from Deng himself. In our judgment, Deng may
consider ending Iranian sales only if he is convinced
that continued sales might have one or more of the
following effects:
� Severely Disrupt Chinese-US Relations. Beijing
values the deepening relations with Washington
both for technological and economic benefits as well
as the political leverage they provide in Sino-Soviet
negotiations. The Chinese are almost certainly deep-
ly concerned about the dangers inherent should a
Chinese-built missile strike a US naval combatant.
� Ostracize Beijing from the International Communi-
ty. The 27 June commentary in People's Daily
showed a concern in Beijing that US charges are
convincing other nations that Beijing's arms sales
are the source of the recent heightening of tensions
in the Persian Gulf. To combat this, the Chinese are
supporting the new UN Security Council resolution
calling for a cease-fire�but have not agreed to link
it to mandatory sanctions�and will take every
opportunity to declare their support for an early end
to the war.
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� Lead to an Iranian Victory. We believe Beijing
wants no winner in the Persian Gulf war, and, if
China is convinced that a particular weapon sale or
continued sales are tipping the balance, it almost
certainly will reject new arms transfer agreements.
� Expand Soviet Influence in the Gulf. Kuwait's
agreement to accept Soviet assistance is probably
perceived in Beijing as a dangerous signal that the
more moderate Arab states might be willing to
allow the Soviets to play a security role in the
Persian Gulf. If Deng sees this as an opportunity
created for Moscow by Beijing's sales to Tehran, he
may veto future sales as counterproductive to
China's efforts to minimize Soviet influence in the
region.
With few other arms markets the size of the Gulf
available to Beijing, however, anything short of these
potential consequences is unlikely to lead Deng to
forgo this extremely large source of revenue for
military modernization
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