The NY Times reports that China and Iran have prepared a far-reaching commercial agreement that would offer Iran $400-billion in investment over 25 years in return for selling China a large proportion of the oil it produces over the same period (at a sharply discounted rate):
The partnership…would vastly expand Chinese presence in banking, telecommunications, ports, railways and dozens of other projects. In exchange, China would receive a regular — and, according to an Iranian official and an oil trader, heavily discounted — supply of Iranian oil over the next 25 years.
The document also describes deepening military cooperation, potentially giving China a foothold in a region that has been a strategic preoccupation of the United States for decades. It calls for joint training and exercises, joint research and weapons development and intelligence sharing…
The projects, includ[e] airports, high-speed railways and subways…China would develop free-trade zones in Maku, in northwestern Iran; in Abadan, where the Shatt al-Arab river flows into the Persian Gulf, and on the Gulf island Qeshm.
The agreement also includes proposals for China to build the infrastructure for a 5G telecommunications network, to offer the new Chinese Global Positioning System, Beidou, and to help Iranian authorities assert greater control over what circulates in cyberspace
Though the agreement has not been finalized or acknowledged publicly, the document the Times has is marked “final version,” indicating that it has been fully negotiated and vetted by both parties. Iran’s government approved the deal last month though it has not been ratified by the Majlis. It’s not known whether China has formally approved it. But since Xi Jinping originally proposed the arrangement in 2016, that would seem highly likely to happen.
This agreement would, in a flash, both alleviate some of the most pressing economic problems facing Iran, while it potentially creating new ones down the line. On the positive side, it would allow Iran to ignore the pressure bearing down on it from the U.S., Israel and European nations seeking to halt its nuclear program. The punishing sanctions regime imposed by the Trump administration would be severely mitigated by the Chinese investment, expertise, and massive infrastructure upgrade. Another lifesaving factor is that Iran will no longer have to hope and pray that the Europeans, who’ve spoken up against the U.S. policy while doing nothing tangible to aid it, will somehow come through and save the day. Instead of a timid European Union frightened of its own shadow in defying the Trump administration, Iran’s new partner is one of the great superpowers ready and willing to defy the U.S.
The Europeans are so deeply tied financially and economically to the U.S., that they could not offer any independent arrangement permitting them to offer sanctions relief to the Iranians. Any European bank or company willing to defy the U.S. diktat would find itself cut off from the global economic system dominated by the U.S. The Chinese face no such constraints. For years, they’ve been building a financial system that bypasses us. Though it’s possible that companies like Huawei, which are in the crosshairs of the U.S., might suffer damage, overall the Chinese economy is so large that any negative impact from a cut-off of western trade can easily be mitigated.
Iran, whose oil production and exports have tanked in this latest phase of U.S. sanctions, will not only have a customer willing to buy most of its oil, it will also get the sort of investment necessary to upgrade its oil infrastructure and rapidly increase its production capacity. In addition, Iran will now find itself able to upgrade its weapons and military capabilities with new Chinese products.
If the deal is consummated and produces the sort of results it promises, Iran will have solved many of the most pressing economic and security problems it faces. Its role in the region, where it faces the implacable hostility of Israel and its Sunni allies, will be further strengthened. Though the Times article does not specify the possibility of nuclear cooperation, given that China possesses such weapons, it’s entirely possible it could offer expertise and even infrastructure that would aid Iran in its pursuit.
The agreement offers a body-blow to the U.S. and its “maximum pressure” approach to Iran. It makes a mockery of the bellicose rants of Secretary of State Pompeo and Pres. Trump. For all their sloganeering, they have little or nothing to show. Iran which, till now, has turned its face to the west hoping to find a way out of its economic malaise, instead turns east and finds a partner strong enough to defy the west.
It also renders the newly-revived joint Israeli-U.S. effort of sabotage Iran’s nuclear program almost obsolete. Whatever was lost in the Natanz explosion, which destroyed a major portion of the country’s advanced centrifuge production, can easily be made up with Chinese assistance. Days ago, the Mossad was trumpeting the massive damage done by its Natanz bombing, saying it would set back Iranian scientists by two years. That celebration proved premature given the role that China can play in rebuilding Iran’s enrichment capacity.
This is also a humiliation to Bibi Netanyahu, who has invested enormous efforts in cultivating China as a commercial and military partner. China has essentially said to him: “that’s all well and good, but when we balance what you can offer with what Iran offers us, you come up short.”
As the U.S. finds itself increasingly at odds with China militarily and economically, the latter’s embrace of Iran pokes a finger in our eye. It offers a strategic lifeline to Iran, one of our most bitter foes in the Middle East. It adds Iran to the bulwark of alliances it’s creating in its battle against U.S. domination.
In a further humiliation, our own $38-billion military aid package for Israel over ten years, now looks shabby in comparison to the projected Iran-China package.
There are, of course, dangers for Iran in making such a deal. There are numerous examples of countries in Africa and Asia which have signed similar agreements only to find themselves in massive debt to China, and with little or nothing to show for it. These deals are structured so that China is able to extract the maximum benefit in terms of harvesting natural resources from the host nation, while offering its partner little more than promises.
Iran is offering China, whose economy has an inexorable appetite for oil, much of the supply of its most precious export. Will China come through with everything it’s promising in return? Will it commit the hundreds of billions, and provide the specific needs Iran finds most critical to address? Or will it, after taking the oil, offer Iran crumbs and fumes in return? As John Kerry and anyone who has negotiated with the Iranians will tell you, they are tough and shrewd bargainers. If anyone can compel the Chinese to fulfill their promises, it would be Iran.
Pres. Rouhani, whose government devised the agreement, faces massive opposition from conservatives who seek his ouster in the coming presidential election. They know the experience of countries like Sri Lanka who’ve made such deals with the Chinese only to regret them afterward. They are accusing the moderates of giving away the country. They fear the worst, or at least they refuse to offer Rouhani any opportunity to trumpet his success in easing Iran’s economic misery. The bitter irony is if the hardliners win the presidency, they would likely be only too happy to make a similar one.
This article was published by Tikun Olam