The long term trade and military partnership signed between China and Iran reeks of desperation. The deal which, will see USD 400 billion investment flowing towards Iran from the rising superpower, is set to change the balance of power in the already volatile Middle East region. At a time when Tehran’s regime is struggling with the US sponsored restrictions and the devastating impact of Covid-19, this development is a welcome relief. But at what cost? For China, it is a win-win situation. Beijing has not only secured an alternative access to hydrocarbons but has also further strengthened its influence across the Indian Ocean. This deal might come as a surprise for many given the Indian investments in Iran. But since 2010, China has nurtured friendly bilateral relations with Iran, signing over 17 agreements worth USD 18-20 billion and promised to increase trade relations between the two in the next 10 years to USD 600 billion.
The efforts of Hassan Rouhani and Xi Jinping since early 2020 have finally bore fruit, materialising in a 25-year long strategic pact. It was helped by President Donald Trump’s maximum pressure policy on Tehran. Under the American sanctions, Iran’s economic growth plummeted. Oil production – the lifeline of Tehran’s economy – dropped from nearly 3.8 million barrels per day in early 2018 to a meagre 2.1 million barrels per day by April 2019, pushing its GDP to shrink by 9 percent in 2019, as per the International Monetary Fund (IMF). The Iranian Rial lost 50% of its value against the US dollar by December 2019. Left with no choice, Iran accelerated its negotiation with the Chinese counterparts and added a military component to the deal as well. In geo-politics, one thing is certain: if you push a country too hard, sooner or later, it will push back.
Beijing is all set to invest USD 280 billion in Iran’s oil, gas and petrochemicals industry and another USD 120 billion in upgrading the country’s transport and manufacturing infrastructure. All of this investment is to be realised within the first five years of the 25-year long deal. Hence, there is a huge potential for further investments after every five-year period if the returns satisfy both the parties. Parts of the leaked deal indicate the shift of Chinese manufacturing to Iran, feeding on cheap labour to produce goods that can access the European market via the Belt and Road transport routes. Nearly a hundred projects such as railways, highways, ports, factories, and refineries are part of the deal.
In exchange, the Chinese businesses will be provided with the option of first bid on any new oil, gas and petrochemicals projects in Iran and will be given discounts of up to 12 percent. China will also develop a special economic zone in the North-West region of Iran. What is intriguing is that China will be granted the right to delay payments for up to two years and will be able to make payments in soft currencies. The Chinese tech giant Huawei will provide Iran with the technology to roll-out its 5G network. Whereas the Chinese GPS will help Tehran in regulating the country’s cyberspace, complemented by a China like firewall, which will most likely further suppress dissent and opposing views.
Besides this, China has secured access to Iranian seaports in the Persian Gulf, along the Strait of Hormuz, granting China a vantage point on the waters through which most of world’s hydrocarbons transit. China has already developed a series of ports in Gwadar, Hambantota and Djibouti. The Iranian ports fit perfectly in the networks laid out by China along its system of refuelling and resupplying stations from the South China Sea to the Suez Canal, which is referred to as the String of Pearls.
The draft calls on both countries to strengthen military cooperation by joint training exercises, joint defence research, and intelligence sharing. European intelligence believes that some 5000 Chinese troops will be posted in Tehran and will be provided access to military airbases to protect Beijing’s investments. China is also expected to equip Iran with electronic warfare capabilities, including early warning systems, jamming technology, and surveillance systems. This will significantly strengthen the Iranian anti-missile defence network against Israel or American attacks while boosting its missile and drone attack capabilities in the Persian Gulf. All this information is obtained from the leaked document of the deal. Otherwise, this deal is said to be a closely guarded secret between the two states, which is yet to be presented in the Iranian Parliament. Whatever the final deal is, it is sure to put Beijing, Tehran and Washington at a crossroads, potentially triggering a future flashpoint.
For Iran, the deal reeks of desperation and comes out of necessity. The Iranian regime is under immense political and public pressure for its mismanagement of the economy and The Covid-19 crisis, along with the failure of the 2015 nuclear deal. The country has been rampaged by sanctions, low oil prices, and a deadly pandemic. Along with this, unexpected blasts at its nuclear sites have damaged public confidence in the current regime. Now, more than ever, Iran must show that it can hold its ground. So, moving towards China’s camp not only discredits President Trump’s maximum pressure policy but it also shows that Iran has international allies.
For China, the deal is a break-through. Stretching from the Caspian Sea to the Indian Ocean, Iran will make for an indispensable ally for China’s BRI to which all the regional states have subscribed. Thanks to its vast deposits of crude oil and natural gas, Tehran can aid Beijing to withstand an American blockade on its sea-line of communications. More importantly, China having a capable ally in the heart of the Middle East will frustrate Washington and divert its attention and resources at a time of Beijing’s choosing. On the surface, the deal seems to be one of gigantic weight. But it may have its drawbacks. China might be over-stating its capabilities. From 2010 to 2019, the Chinese investments have averaged USD 200 billion each year, but given the slowing economy, trade war with the US, and impact of the devastating pandemic, China might not really have USD 400 billion to spare over the course of the next five years. And more importantly, it seems unlikely that China would divert a major chunk of its outbound investment towards a single country.
Much like CPEC, where the project is yet to show any significant real time benefit for Pakistan, the Iranian project might also repeat this damning tale. This coupled with the wide range of sanctions on Tehran, the Chinese plan to diversify its investments is likely to meet unexpected hurdles. At one end, the deal will serve to bring Iran and China closer together, but for the foreseeable future, it is unlikely to be a game-changer in the region. China is also unlikely to side with Iran in its geo-political conflicts in the Middle East. It will not strengthen its relations with one country at the expense of jeopardising them with another. Saudi Arabia is also in talks with China to invest in its 2030 vision megaproject and has signed an energy deal worth USD 10 billion. In Israel, China’s businesses are involved in sea-ports, shipping, and desalination industries along with USD 1 billion investments in Israel’s start-up ecosystem. Therefore, China is not keen to sacrifice its lucrative businesses in Saudi Arabia and Israel for the sake of Iran.
Viewed strategically, the deal is tilted in favour of China by providing leverage to Chinese firms and influence to Beijing over Iran’s foreign policy. It amounts to selling off the country to China amid tremendous pressure. But for economic experts based out of Iran, this option is the only one in the near future that can help restore Iran’s oil production and maintain its position as a key global player in the energy sector. This deal might be a bluff negotiation and a diplomatic way to seek concessions for Tehran, from Brussels or Washington. This would not be the first time China has engaged in bluff negotiations. Among the games of deception, Iran might just be a pawn in the political chessboard between America and China.
Prosecutors seek 20-year sentence for ma…
26-11-2024
French prosecutors sought a 20-year sentence for Dominique Pelicot, accused of drugging and facilitating the rape of his wife by dozens of men. The trial, involving 50 defendants, concluded arguments...
Read morePutin signs law forgiving debt arrears f…
26-11-2024
Russian President Vladimir Putin signed a law forgiving up to $95,835 in debt for new army recruits who sign at least one-year contracts to fight in Ukraine. This measure, effective...
Read moreKing Charles and Queen Camilla set to em…
26-11-2024
King Charles III, while continuing his cancer recovery, is planning a major tour of South Asia in 2024, including India, Pakistan, and Bangladesh. This follows a successful trip to...
Read moreWatch: Opposition lawmakers clash with S…
25-11-2024
A brawl erupted in Serbia's parliament after opposition lawmakers accused the ruling party of responsibility for a deadly train station roof collapse. Opposition members displayed accusatory banners and chanted...
Read more'Bullet with bullet': Imran Khan support…
25-11-2024
Thousands of supporters of jailed former Pakistani Prime Minister Imran Khan clashed with police in Islamabad, defying a government ban and demanding his release. Security forces responded with tear...
Read more'Price of fentanyl will rise sharply': E…
25-11-2024
President-elect Trump announced plans to impose tariffs on goods from China, Mexico, and Canada to combat illegal immigration and drug trafficking. He proposes a 25% tariff on Mexican and Canadian...
Read moreHong Kong court grants housing and inher…
25-11-2024
Hong Kong's highest court has delivered a landmark victory for LGBTQ+ rights, affirming same-sex couples' housing and inheritance rights. The court ruled against government appeals, deeming the exclusion of same-sex...
Read more'You better start packing now': Trump’s …
25-11-2024
Tom Homan, Trump's appointed border czar, is preparing a comprehensive deportation plan prioritizing the removal of illegal immigrants, many of whom he says should have been deported under previous administrations...
Read moreWhy hundreds of Pakistanis are ready to …
25-11-2024
Supporters of jailed ex-PM Imran Khan march on Islamabad, protesting against the Shehbaz Sharif government and demanding Khan's release. The government vows to suppress the protests, while the US...
Read morePilot and rescue dog killed in remote wo…
25-11-2024
A pilot and a rescue dog perished in a small plane crash in the snowy Catskill Mountains while transporting three dogs from Maryland to Albany. Two other dogs survived the...
Read moreBitcoin millionaire hides $2m treasure a…
25-11-2024
A Bitcoin investor, Jon Collins-Black, has concealed five treasure chests worth over $2 million across the US. His book, "There's Treasure Inside," provides clues to their locations. The chests...
Read more‘I never intended to kill anyone’: Flori…
25-11-2024
A Florida woman was sentenced to 25 years for killing her neighbour. The two women argued over children playing near the woman's home. The woman shot her neighbour through...
Read moreWatch: Japan rocket site gutted in fire…
25-11-2024
An engine combustion test for Japan's Epsilon S rocket was suspended after a fire erupted at the Tanegashima Space Center. The incident is under investigation. The Epsilon S, a...
Read more'Will just get pilots killed': Elon Musk…
25-11-2024
Elon Musk criticized manned fighter jets, especially the F-35, as obsolete, advocating for drones. He called the F-35 expensive and flawed, while a researcher defended its strategic importance, highlighting its...
Read moreMike Waltz to resign for national securi…
25-11-2024
Florida Representative Mike Waltz will resign from Congress on January 20 to become Trump's national security adviser. Special elections will be held to fill his and other vacant seats...
Read more'RUN, JIMMY, RUN!': Trump backs Jimmy Pa…
25-11-2024
Former Florida CFO Jimmy Patronis has resigned from his position and announced his candidacy for Florida's 1st Congressional District seat following an endorsement from Donald Trump. This comes after Matt...
Read moreKash Patel's name being finalized for ei…
25-11-2024
Patel has openly discussed retaliation against Trump's political enemies in government and media, and wrote in his book: "[T]he FBI has become so thoroughly compromised that it will remain a...
Read moreDiddy's Thanksgiving meal in jail reveal…
25-11-2024
Sean "Diddy" Combs will spend Thanksgiving in Brooklyn's Metropolitan Detention Center after his house arrest plea was denied. As Diddy will be spending Thanksgiving in jail, People reported the...
Read moreJack Smith files motion to dismiss Jan 6…
25-11-2024
Special counsel Jack Smith moved to dismiss the four charges against President-elect Donald Trump related to the 2020 election plot. Citing longstanding DOJ policy, Smith argued that the Constitution requires...
Read more