By Sune Engel Rasmussen and Aresu Eqbali 

Iran and China are seeking to cement a wide-ranging partnership that would deflect U.S. economic pressure and ease Tehran's global isolation.

An initial draft of the Iran-China deal, which still requires Iranian parliamentary approval, would pave the way for Chinese investments in Iranian free-trade zones and for joint projects in other countries, such as Syria and Iraq. It would expand cooperation between the two countries in defense and counter terrorism. And it says that under a 25-year partnership, China would import "sustainable" levels of Iranian oil, but offered no further details.

The government has denied that an 18-page draft agreement circulating online is authentic but announced years ago plans to enter into an agreement along the lines drawn up in the draft. An Iranian official has also confirmed that a draft exists, which China is considering.

Even nascent talks between Iran and China for a partnership of such scope and duration is an indication of growing concern that each has about the U.S. Both Beijing and Tehran are engulfed in acrimonious relationships with Washington. China is engaged with the U.S. in a trade war, while Iran's economy is struggling under a raft of U.S. sanctions.

The deal, say analysts, aims to show that both countries have alternatives to the West, even if many of the projects mentioned never come to fruition.

"It's an expression of intent," said Dina Esfandiary, a fellow with The Century Foundation and co-author of a book on Iran's relations with China and Russia. "It's a useful PR message now."

China has so far resisted U.S. attempts to cut its consumption of the Mideast country's crude-oil supply to zero. Sales to China still account for the majority of oil that Iran exports.

Asked about the 25-year cooperation agreement, China's foreign ministry spokesman Zhao Lijian last week didn't confirm the deal but said: "China and Iran enjoy traditional friendship and the two sides have been in communication on the development of bilateral relations. We stand ready to work with Iran to steadily advance practical cooperation."

For Iran, developing closer ties with China is also a way to irk Europe. Tehran has repeatedly expressed its impatience with European countries over the lack of economic returns promised from an international nuclear deal, which restricted Iran's nuclear enrichment program in return for easing of sanctions.

The Trump administration left the accord in 2018 before imposing sanctions and threatening other countries not to deal with Iran. European parties to the deal sought to coax Iran to abide by its commitments in the accord by establishing a special trade mechanism, but it has so far conducted limited transactions.

"Iran's policy of looking East never went away," Ms. Esfandiary said. "But maybe the Iranians wouldn't have pursued it so much if European business was flowing into the country."

Former President Mahmoud Ahmadinejad was among the first to take the current debate over the expansive partnership public when, in late June, he accused the government of "secretly signing a deal" with China.

An Iranian foreign ministry spokesman didn't immediately respond to a request for a comment about the draft deal.

The president's chief of staff said Saturday said negotiations for the deal would stretch into next year due to the coronavirus pandemic that spread from China and hit Iran hard. A deputy foreign minister, Reza Zabib, also confirmed to the Iranian Shargh daily that a draft existed, which China was expected to respond to before talks could take place.

The deal also envisions the Chinese construction of a railroad in Iran, and gives Beijing preferential access to port facilities in the Persian Gulf by undertaking mutual industrial projects in several ports on Iran's southern coastline.

China already has a longstanding commercial relationship with Iran that extends beyond oil sales. China is Iran's biggest commercial partner, even as bilateral trade dropped by about one-third in 2019, to about $23 billion, according to China's General Administration of Customs.

Chinese President Xi Jinping in 2016 pledged to boost bilateral trade between the two countries to $600 billion within a decade, but trade levels are still far short of that level.

U.S. sanctions have also complicated ties between the two countries. In the face of mounting tensions between Beijing and Washington, China National Petroleum Corp. last year pulled out of a $5 billion natural-gas project in Iran, due to difficulties in finding banking channels to transfer funds to Iran.

The U.S. also last year sanctioned a Chinese company, Zhuhai Zhenrong, for transporting Iranian crude. The U.S. has pledged to punish other countries for undertaking similar moves.

Chinese investment in Iran has sparked criticism that the Iranian government is selling off parts of the country to Beijing. Although Iran's relationship with China dates back decades, it has become increasingly controversial -- and anti-Chinese sentiment has been on the rise since the start of the coronavirus pandemic.

Iran has seen a surge in coronavirus cases as the country has lifted lockdown restrictions. On Sunday it reported 2,186 new infections and 194 deaths, raising the total toll from Covid-19 to 257,303 cases, which includes 12,829 fatalities.

Iranian officials trace the origins of the country's coronavirus outbreak to a number of Chinese-backed infrastructure projects built by scores of workers and technicians from China, and to businessmen traveling between the two countries.

After a health ministry spokesman earlier this year described Chinese coronavirus statistics as a "joke," Iranian officials sought to repair relations by thanking China for its efforts in combating the virus in Iran.

China and Iran first announced the intent to form the 25-year partnership in 2016, but the renewed emphasis on negotiations now shows how Tehran is anxious to capitalize on Beijing's heightened tensions with the U.S., said Esfandyar Batmanghelidj, founder of Bourse and Bazaar, an Iran-focused business publication.

"Iran has some leverage here," Mr. Batmanghelidj said. "Iran is using the moment of increased China-U.S. tensions to put pressure on Beijing to finally agree on a long-term framework for bilateral ties."

Write to Sune Engel Rasmussen at sune.rasmussen@wsj.com

(END) Dow Jones Newswires

July 12, 2020 15:56 ET (19:56 GMT)