Saturday 29 October 2016

Iran and China Get Cozy

Scattered among the hundreds of kiosks that made up the massive China–Eurasia Expo held in the western Chinese city of Urumqi in late September were a handful of Iranian rug merchants plying their wares. They didn’t seem to sell much, but they weren’t worried. The merchants, like the Iranian government itself, were looking ahead—and there are plenty of opportunities these days, particularly in China.

Inaugurated in 2011, the yearly Expo has become part of Chinese President Xi Jinping’s much-touted “One Belt One Road” initiative. An outgrowth of the larger foreign policy expansion that accompanied Xi’s ascent to power in 2013, One Belt One Road is an ambitious attempt to revive the ancient trading route known as the Silk Road through economic (and eventually political) partnership with countries to China’s west.

Iran is one of those nations. Once an international pariah, the Islamic Republic is now looking forward to sustained economic recovery, thanks to last year’s controversial nuclear deal with the P5+1 nations. The agreement yielded the country more than $100 billion in direct sanctions relief and other Western concessions in exchange for a temporary halt to its nuclear development. Throughout the negotiations, China’s role in keeping Iran at the diplomatic table was widely praised by the other parties. In November of 2014, for example, U.S Secretary of State John Kerry lauded “China’s serious engagement on the Iran negotiations as a full partner in the P5+1.”

But it is actually Iran that should be thanking China. A recent report from an IMF fact-finding mission to the country concluded that, thanks to the fruits of the nuclear deal, economic conditions “are improving substantially” in Iran, with GDP poised to grow by at least 4.5 percent in the coming year. And that economic rebound is getting a further shot in the arm from China’s westward opening. Xi paid a high-profile visit to Tehran in January that yielded no fewer than 17 trade and industrial accords. It also marked the start of a major Chinese tilt toward Iran, with the Chinese president pledging to increase bilateral trade more than ten-fold, to $600 billion, over the coming decade.

That plan is well underway. Government officials in Beijing now openly acknowledge that Iran—now flush with cash and with massive infrastructure needs—will continue to be a valued trading partner. In fact, this summer, an undisclosed Chinese firm committed some $550 million to the construction of a new oil terminal atop the Strait of Hormuz in a project clearly linked to China’s westward push. And in recent weeks, Chinese state-owned oil giant Sinopec signed a $1.2 billion deal with the Iranian oil ministry to build a new mega-refinery in Abedan as part of Beijing’s burgeoning energy stake in the Islamic Republic.


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