China to invest $400 billion in Iran

Crescent International

Muharram 05, 1441 2019-09-04

Daily News Analysis

by Crescent International

Repudiating US’ unilateral sanctions against the Islamic Republic, China has updated a 25-year deal signed first in 2016 that foresees $400 billion of Chinese investment in Iran.

While it is part of China’s Road and Belt Initiative (BRI) whose primary focus is economic, the latest announcement from Beijing has clear political ramifications.

At a time when the US is trying to squeeze Iran’s exports out of the oil market, the Chinese announcement reflects defiance in the face of Washington’s unacceptable behavior.

The update was reported by the respected energy publication, the Petroleum Economist.

It was finalized during Iranian Foreign Minister Mohammad Javad Zarif’s visit to Beijing on August 27-28.

The globetrotting Iranian top diplomat had flown from Paris after meeting French President Emmanuel Macron on August 24 and 25 at the sidelines of the G7 summit in Biarritz.

Macron had invited Dr Zarif without first informing the narcissist US president Donald Trump who was shown as being totally irrelevant.

In Beijing, Dr Zarif met his Chinese counterpart Wang Yi. The two described their countries as “comprehensive strategic partners”.

Here is why. The Chinese investment sums in Iran are staggering.

“The central pillar of the new deal is that China will invest $280 billion, developing Iran's oil, gas and petrochemicals sectors,” according to the Petroleum Economist.

The monthly magazine quoted “a senior source closely connected to Iran’s Petroleum Ministry” during Zarif’s visit to Beijing.

“There will be another $120 billion investment in upgrading Iran’s transport and manufacturing infrastructure, which again can be front-loaded into the first five-year period and added to in each subsequent period should both parties agree,” the magazine said.

Last month the magazine had reported that China had “re-engaged” Iran on three key energy projects, namely Phase 11 of the supergiant South Pars gas field, West Karoun oil fields and the Jask oil export terminal.

China National Petroleum Corporation (CNPC), that is one of the country’s “big three” producers, holds 80% stake in Phase 11.

The initial contract was signed with French major Total, but it withdrew in August 2018 after the US imposed sanctions on Iran.

China’s involvement in building Iran’s manufacturing infrastructure will fit neatly into its massive One Belt, One Road initiative. Beijing has plans to invest trillions of dollars in this initiative.

In Iran, China plans to electrify the 926 km rail line from Tehran to Mashhad at a cost of $1.5 billion.

There are also plans to establish a Tehran-Qom-Isfahan high-speed train line and to extend this upgraded network up to the northwest through Tabriz.

The idea is to ship Chinese products to Western markets by using Iran’s transport infrastructure.

China’s connectivity project will integrate Iran into the Central Asian and Turkish grids re-orienting global trade to Eurasia.

Trump’s bullying tactics do not work anymore. His tariffs on imported Chinese goods are hurting American consumers more than damaging China's economy.

Besides, China holds more than $1.4 trillion in US Treasury bonds that it will unload shortly causing a recession, if not a full-blown depression in the US.

Trump is finding that both Iran and China are more than a match for his bullying tactic.

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