Iran and China agree to 25 years mega deal
Once signed, the deal will open doors for Chinese investment across the Iranian economy.
By Deepankar Mukherjee
Iran and China have drafted a four hundred billion dollars strategic deal. It is an economic and security partnership for 25 years, an 18 page agreement that weds Iran to china. Once it is signed, Iran will open its doors for Chinese investment across the Iranian economy. The Chinese presence in Iran would expand in banking, telecommunication, ports and railways and more than a dozen other projects will go to Chinese companies. On the other side, Beijing will consolidate it’s energy security by sourcing cheap oil at a heavily discounted rate for 25 years.
The deal also has a military dimension. There will be joint training and exercises, joint research and weapons development. Even intelligence sharing is part of the agreement. This deal will fundamentally change Tehran’s relationship with China. Hit by the US sanctions as part of the US’s “maximum pressure” strategy for Iran, and now the global shutdown because of the Covid-19 pandemic, the country is in dire need of foreign investment and interested in finding someone who they can export the oil to.
Growing bilateral ties
Neither side has publicly confirmed that the document is genuine, that they have signed it or that there is any such agreement. According to the Jerusalem Post when asked about a deal with Iran last week, Chinese Foreign Ministry spokesman Zhao Lijian 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.” Iran’s Foreign Minister Mohammad Javad Zarif said the partnership proposal would be submitted to parliament for final approval, and two officials said that it had the support of Iran’s Supreme Leader Ayatollah Ali Khamenei.
Tehran has been hit hard by American sanctions reimposed following Washington’s withdrawal from the 2015 nuclear deal in May 2018. Iranian crude exports have been severely curtailed by the US sanctions, as has much of the country’s foreign trade.
The US, together with it’s middle eastern allies, have been pushing the UN Security Council members to extend the arms embargo on Iran that began under the Joint Comprehensive Plan of Action (JCPOA), the 2015 nuclear agreement between Iran, the five permanent members of the UN Security Council, and the European Union.
Israel and the US have cited Tehran’s violations of that deal and continued attempts to build up its nuclear program, for which the International Atomic Energy Agency has repeatedly rapped Iran in recent weeks, as well as its sponsorship of groups, like Hamas and Hezbollah and warfare through proxies around the Middle East.
Chinese Ambassador to the UN Zhang Jun, however, last week said his country opposed US attempts to activate the JCPOA’s “snapback sanctions” mechanism.
Iran’s economic crisis
The return of US sanctions in 2018 has led to a major economic crisis in Iran and subsequent political instability. This empowered hard-liners inside the country to argue that Iran never should have made a deal involving the US in the first place. Hardliners won a decisive majority in the Iranian parliament in elections this year. But it also has led to protesters taking to the streets, protesting a government that uses its money to pay for wars in other countries instead of helping its own people.
Experts say the regime is as unpopular as it has ever been since the Islamic Revolution. The US “maximum pressure” campaign has clearly had a major impact on Iran, but a massive influx of Chinese investments will go a long way toward undoing it, effectively relieving the pressure. Both Tehran and Beijing are currently at loggerheads with Washington: Iran over its nuclear program and China over ongoing trade disputes.
The US has accused China of stealing its intellectual property and engaging in forced technology transfers from US firms doing business there. The Financial Express cited a report stating that in essence, the current revelations point to the Iranian wish list who seem to be too eager to come out of isolation from the US-sponsored economic sanctions by seeking funding from the Chinese.
Economic revival is imperative for Iran, given the economic hardship inflicted on the population as a result of the sanctions and Covid-19 pandemic, despite being endowed with rich mineral and natural resources.
Impact on India’sconnectivity plans
From the Indian perspective growing Iran China relations is a cause for concern. The changing strategic landscape points to growing Chinese dominance in alignment with Pakistan which threatens India’s relations with Afghanistan. The development of Chabahar port in Iran and the future of India-Afghanistan-Iran Trilateral Agreement for the development of Chabaharhas also not seen anticipated progress. The port was meant to connect to a multimodal transport system for India to access Afghanistan, the Central Asian states and further through the International North South Corridor to cities in Russia and further west and north.
A report in The Hindu said that Iran has dropped India from plans of construction of the Zahedan railway which was to connect from Chabahar port to Zaranj in Afghanistan. Iranian officials have cited delay by the Indian side.
Similarly, China-backed Pakistan-Iran-Taliban alignment emerging in India’s immediate neighbourhood is also a cause for Indian concern. India’s relations with Iran cooled off substantially after India agreed to reduce its trade relations with Iran after imposition of sanctions. The visit of President Trump and increasing Indo-US economic and strategic partnership seems to have been the last straw. It is unlikely that relations with Iran would improve in the near future.
