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China's blockbuster deal with Iran



 
Axios 
 
PRESENTED BY OURCROWD
 
Axios World
By Dave Lawler ·Jul 13, 200

Illustration of a lifeguard's torpedo buoy stuck in the sand with Chinese stars on it.

Illustration: Aïda Amer/Axios

 

China and Iran have negotiated a deal that would see massive investments flow into Iran, oil flow out, and collaboration increase on defense and intelligence.

Why it matters: If the proposals become reality, Chinese cash, telecom infrastructure, railways and ports could offer new life to Iran’s sanctions-choked economy — or, critics fear, leave it inescapably beholden to Beijing.

  • The deal has not yet been finalized, but both sides acknowledge it’s in the works (though China has been more circumspect).
  • A leaked draft envisions Chinese-built "airports, high-speed railways and subways," as well as "free-trade zones" in regions of Iran, per the NYT. The deal extends to cyberspace — with China offering "greater control over what circulates" — as well as to defense.
  • The projects total an eye-watering $400 billion over 25 years.

Reality check: If that figure sounds implausibly high, that’s because it probably is.

  • “This sounds like a wish list of all the projects that could conceivably be in play, rather than a realistic estimate of anything that China’s been able to do anywhere,” says Andrew Small of the German Marshall Fund’s Asia Program.
  • China is already “running into problems in innumerable locations trying to do project clusters on a much smaller scale than this,” Small says, referring to elements of China’s Belt and Road Initiative.

Between the lines: Both sides have clear incentives here: China locks in a cheap oil supply and deepens its strategic links in the Middle East, while Iran — which has virtually nowhere else to turn for foreign investment — gets economic benefits and a big flashing sign that it’s not as isolated as America claims.

  • But such a dramatic bet from Beijing would be a surprise. It's been dialing back on controversial Belt and Road mega-deals, has historically been careful to balance its relationships in the Middle East (including with Saudi Arabia), and may see uncomfortable parallels with Venezuela, which can't pump enough oil to cover its debts to China.
  • Meanwhile, while Iran does need Chinese cash, Tehran has found recent reliance on China "a painful experience" and "they absolutely don’t want to have the economy so beholden to the Chinese over that kind of time frame," Small says.

The latest: Domestic critics are already sounding the alarm in Iran, with former President Mahmoud Ahmadinejad accusing the government of handing Iran's “purse to other countries without informing the nation."

  • Foreign Minister Mohammad Javad Zarif defended the deal, while denying that Iran would offer discounted oil or sell Kish Island, as some critics had claimed.

What to watch: Even if only a fraction of what has been proposed comes to fruition, this a clear challenge to the Trump administration's "maximum pressure" campaign toward Iran, and another sign of America's geopolitical foes aligning.

Flashback: Tuesday marks the five-year anniversary of the Iran nuclear deal. While President Trump is nowhere near replacing it with a broader deal, a potential President Biden would also struggle to wind the clock back to 2015 and put a deal back together agai

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