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Iran And China to Start 25-Year Strategic Partnership With $400 Billion In Investments

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Iran And China to Start 25-Year Strategic Partnership With $400 Billion In Investments

Iranian Foreign Minister Javad Zarif and Chinese Foreign Minister Wang Li circa February 2019. Click to see full-size image

China pledged to invest massively in Iran, increasing cooperation between the countries.

Iran’s foreign minister Mohammad Zarif visited China and spoke to Foreign Minister Wang Li at the end of August to present a road map for the China-Iran comprehensive strategic partnership, signed in 2016. The deal is a 25-year strategic partnership.

China announced that it planned to incorporate Iran into the Belt and Road Initiative (BRI), pledging investments totaling approximately $400 billion.

The central pillar of the new deal is that China will invest $280 billion developing Iran’s oil, gas and petrochemicals sectors. There will be another $120 billion investment in upgrading Iran’s transport and manufacturing infrastructure

One of the benefits is that Chinese companies will be given the first refusal to bid on new, stalled or uncompleted oil and gasfield developments.

Chinese companies will furthermore be given first refusal on any petrochemical projects in Iran, including the provision of technology, systems, process ingredients and personnel required to complete such projects.

“This will include up to 5,000 Chinese security personnel on the ground in Iran to protect Chinese projects, and there will be additional personnel and material available to protect the eventual transit of oil, gas and petchems supply from Iran to China, where necessary, including through the Persian Gulf,” an anonymous Iranian sources of Petroleum Economist said.

“China will also be able to buy any and all oil, gas and petchems products at a minimum guaranteed discount of 12pc to the six-month rolling mean price of comparable benchmark products, plus another 6pc to 8pc of that metric for risk-adjusted compensation.”

The deal would also allow China to delay payment for Iranian products for up to two years, and would be able to pay in soft currencies, accrued from business in Africa and the CIS states. Renminbi could also be used if need be, the US dollar would be completely circumvented.

“Given the exchange rates involved in converting these soft currencies into hard currencies that Iran can obtain from its friendly Western banks—including Europäisch-Iranische Handelsbank [in Germany], Oberbank [in Austria] and Halkbank [in Turkey]—China is looking at another 8-12pc discount [relative to the dollar price of the average benchmarks], which means a total discount of up to 32pc for China on all oil, gas and petchems purchases,” the source said.

Factories are to be built in Iran, overseen and designed by large Chinese companies, which will be identical to the ones in China, part of the BRI.

“When the draft deal was presented in late August to Iran’s Supreme Leader Ali Khamenei by Iran’s vice president, Eshaq Jahangiri—and senior figures from the Economic and Finance Ministry, the Petroleum Ministry and the Islamic Revolutionary Guard Corps—he announced that Iran had signed a contract with China to implement a project to electrify the main 900km railway connecting Tehran to the north-eastern city of Mashhad. Jahangiri added that there are also plans to establish a Tehran-Qom-Isfahan high-speed train line and to extend this upgraded network up to the north-west through Tabriz.”

This is where Russia comes in, the pipeline plan would require Russia to cooperate, cause it goes through the CIS states. Allegedly the deal also includes a clause allowing at least one big Russian company to be involved in the project.

Iran itself would get three key benefits from the strategic partnership:

  • China is a permanent seat member of the UNSC, with Russia being a permanent member too, that would assist in protecting its interests;

“In order to circumvent any further ramping up of sanctions—and over time encourage the US to come back to the negotiating table—Iran now has two out of five UNSC votes on its side. The fact that [Iran foreign minister Mohammad] Zarif showed up unexpectedly at the G7 summit in August at the invitation of France may imply it has another permanent member on side,” the source said.

  • The deal will allow it to finally expedite increases in oil and gas production from three of its key fields;
  • China agreed to increase imports of Iranian oil, in defiance of a US decision not to extend China’s waiver on imports from Iran in May.

In July, according to official numbers from the China’s General Administration of Customs (GAC), Beijing imported more oil month-on-month than previously.

According to the Iranian source, those numbers were purposefully reduced, so the alleged imports were even higher.

US pressure against both Iran and China is of varying and questionable effect, but it works unquestionably in one regard – pushing China, Iran, as well as Russia, closer together.

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  • d’Artagnan

    This is a win-win for both as Iran is the cornerstone of China’s One Belt initiative. China needs to increase military cooperation with Iran as well.

  • Tiresia Branding

    this agreement is the precise reason for the very probable war against Iran. If the agreement remained standing, it would be the end of the petrodollar

    • verner

      china, russia,india iran and other nations do what they can to finish off the dollar reserve status and now, very sensibly, use their own currencies for payment of whatever. and the alternative is the € which ain’t hampered by american sanctions watchdog banks.

      • Tiresia Branding

        if the ME oil and gas production will be stopped by a war, Europe will loose her little independence from the US

  • Boycott-Israel!

    This cooperation (2016) should nullify all and any attack on Iranian soil, as an attack (military or cyber) on Iran is a direct attack against China & Russia interest.

  • Garga

    I call buls#it.
    A few points:
    – No way any official in Iran agrees to that term. Its terms are worse than colonialism.

    – Strategic partnership and preparing a roadmap takes long time. It can’t possibly be done in 2-3 years, China and Russia’s negotiations took nearly 10 years.
    – Iran’s cannot absorb that massive amount of investment in a healthy way. Just a simple look at the annual budget for infrastructure helps a lot.
    – Chinese contractors for some projects with small investments compared to this did not finish the projects (like electrifying the railroad between Tehran and Sarakhs, border with Turkmenistan and some phases of the South Pars after Total left and the Chinese part grew to %80). How are they going to finish the new projects?

    – Why would anyone trust a report from an unnamed source?

    I believe it when I hear or read it from the official news, like IRNA or Xinhua (well, only and only them in this regard), with named persons. All this nonsense is coming from an obscure site, petroleum-economist.com

    Don’t get me wrong, I love to see a strategic partnership between China-Iran-Russia, a real one with equal terms but wishful thinking is so rampant that it blinds our judgment. Don’t fall for fake news and it spares you from the inevitable disappointment.
    Even some idiots in Iran-China chamber of commerce called for a news conference announcing it. Poor guy a few hours later had to officially eat the crow.

    • EveryoneIsBiased

      Thanks Garga! You often bring true insight on this site, and are one of the few to have an own, independent, and well founded standing and opinion here.
      And i agree, the terms are pretty bad. But sadly this is true for some other deals China made with other developing countries. Africa is an example of that.

      Some here see China as a saviour, but dont see the negative side. China may not have the “global dominance” thinking of the US, but they too see themselves as superior to any other “races”.
      To be clear, the “Han” race.
      Russia sure knows this, and even though the US painting China as the ultimate evil is nuts, dont seeing the dangers of a potential Chinese role as global hegemon is equally nuts.
      A multipolar world is the only concept to garantuee at least some stability. But this concept sadly crashes not only with the US but also with the falcons on the Chinese side.
      Aside this, i hope Iran will not be forced in a bad deal. But in the current situation, i fear the previous and current proud approach to economic souverignity could be succesfully attacked.
      But the safeguard in form of the supreme leader having to ratify such a descision should at least in theory prevent it, i hope.

      • Garga

        Thank you for the kind words.
        For China like many other countries, their interests comes first. Their methods may be less brutal compared to the old colonialist countries, but still they seek to get more than they give. Some may choose to believe that Iran won’t be attacked because China and Russia will defend Iran but that’s just wishful thinking and they continue to think this way because it’s easier and makes their worlds less scary. Russia and China like any other country will look to know what they’ll gain from it and act accordingly purely based on interests. If their interests dictates that Iran should not be attacked, they’ll intervene otherwise they negotiate with the attacker and seek to compensate and score points in some other matters. And this is normal, at least as long as we don’t have a mutual defence pact with them.

        Accepting a bad deal directly relates to the people in power and the degree of oversight the people have on them. Contrary to what western MSM claims, elected officials in Iran are under a very large magnifying glass and are mercilessly criticized. We have very bad memories from the times of absolute monarchies and king-appointed officials who sold the country for some scraps in their pockets, Iran used to be 3 times and since 200 years ago, every single king gave up some parts, the last one of which gave Bahrain to the British silently. Not to mention countless lives lost due to the greed of foreigners and their domestic collaborators. What hurts us are un-elected officials, like chairman of this organization and director of that agency. That’s the area which enemies heavily invest on.

        The past is past but now that there is responsibility and accountability, the people are very sensitive to such news and the enemies of Iran know it. That’s the reason we hear such news, from Russia acquiring military bases and stationing troops to this one with China. These news are designed to create restlessness and distrust in the population.
        The newest in the long list of plots against Iran is banning Iranian athletes from 2020 Olympics. So far they managed to do it with Judo and Football will be next. Anyway, the psychological pressure on the people is enormous and not everybody has the insight to read between the lines.

        • RichardD

          How does China seek to get more than they give? Name a few examples.

      • RichardD

        China as the global hegemon? Do you think that they aspire to that, they don’t act like it. They’re not the ones on a global rampage and killing spree engaged in widespread economic terrorism.

    • RichardD

      Are you jumping to conclusions? It’s a road map not a done deal according to the article. And it’s not from an official source. Maybe it’s disinfo. And maybe it’s a trial balloon to gauge public reaction.

      If you’re sitting in a Langley cube putting together assessments and this comes across your screen you can’t ignore it. And it’s exactly what I’ve been calling for. To replace Jew world order bully boy economic terrorism with a non kinetic pick up our toys and go play with nicer people alternative.

    • RichardD

      You’re mistaken on at least part of your contentions. There is IRNA confirmation, and there is a 25 year roadmap.

      “”I proposed a 25-year roadmap to consolidate the comprehensive strategic partnership between Iran and China and to make a positive contribution to the “Belt and Road” initiative, Zarif reiterated.”

      – China: Iran should enjoy JCPOA implementation reward –
      https://en.irna.ir/news/83453072/China-Iran-should-enjoy-JCPOA-implementation-reward

  • AM Hants

    Nice to see Iran still has friends, more than ready to lend a hand, when needed.

  • Ashok Varma

    Iran has good relations with India, China and Turkey and that is successful foreign policy.

  • Ashok Varma

    In reciprocation, Iran has conceded to China first refusal “to bid on
    any new, stalled or uncompleted oil and gas field developments”. To
    protect its interests, China will depute 5,000 military personnel in
    Iran. In addition, bilateral trade is planned to expand to $600bn over
    the next decade. Iran is set to become China’s western ‘hong’.