Two analysts weighed in (when asked by DesPardes) on the “potential” deal between China and Iran –reports say it’s for 25 years and worth a whopping US$400 billion give and take.
British analyst Dr. Syed Mahmud Ali who’s based in Malaysia shared his views with DesPardes (on WhatsApp) in text form. We converted it into an audio with some edits for clarity purposes:
Dr. S.M. Ali on Iran, China “$400Bln Deal”
Transcript of Dr. Ali’s take on the “deal of the century” below:
Let me summarize my limited understanding. China and Persia had traditional Silk Road trade and cultural links for a thousand years and their historical memories run deep. For the Chinese, at least, this history is important. In recent years, China has rejected the US-led post-Soviet unipolar order as unjust, unnatural and unacceptable. In 1997, China and Russia formalized a quest for a multipolar order as opposed to the USA’s 1992 decision to perpetuate its sole superpower status. Iran became a rogue state in US eyes and a victim of unilateralism in Chinese eyes. China played a key role in the 2015 JCPOA with Iran and was aghast at US withdrawal from it and unilateral US sanctions on Iran. Iran has China’s sympathy.
China-Iran energy trade is big and is getting bigger. While GCC Arab countries supply a lot of energy to China, they are US client-states and are likely to obey the USA in a crisis. Iran will not cut off supplies just because the USA says so. That is a crucial issue for both. Iran had leased Chabahar Port to India as India wished to trump Gwadar, bypass Pakistan, and reach Afghanistan and Central Asia via Iran. But India has not put promised investment there and has moved closer to America. Iran seems to have lost faith in India. So, the China-Iran deal is a win-win for both.
Iran will need Chinese funds, expertise and technology for cost-effective exploitation of the Pars field. China will protect its investment and that should create a defensive layer around the Gulf coast for Iran. Chinese funds will enrich Iran and secure China’s energy supplies for about 25 years. This, if it goes through, will change the security dynamics in the Gulf. The USA will likely impose secondary sanctions on Chinese SOEs active in Iran. China is calculating those costs now.
If Biden wins, the trends could be positive for China and Iran. If Trump wins, then things could get really, and I mean really, dodgy for all sides.
A Pakistani analyst who’s former Head of a think tank commented on a recent piece on the “deal” and considered the write up “leaked”. His views were received in audio:
Pakistani analyst on Iran, China “$400bln deal”
Here’s the recent write up on the “deal” which was shared with DesPardes on WhatsApp:
Beijing and Tehran towards the largest geopolitical agreement in the 21st century paving the “Chinese era”
Dr. Hussein Majdoubi
The military and the Chinese and Russian presence in Iran is the geopolitical address of this agreement. Under this, China will obtain military concessions in Iran, which overlooks the Persian Gulf, the main oil region.
Iran has signed with China mainly, and with Russia, on a secondary basis, a giant agreement in the full meaning of the word, estimated at 400 billion dollars, which is Chinese investment and military support in Iran in exchange for hydrocarbons, which extends for 25 years. The agreement marks a new geopolitical era in the world, especially in the entire East region, not just the Middle East.
The announcement of this agreement took place freely this week, after nearly four years of negotiations and discussions were discreet due to the Iranian reluctance to lose sovereignty at a time when Tehran shows great sensitivity in the independence of its political decisions.
According to the outlines that have been leaked so far about this agreement, China has invested 400 billion dollars in Iran of various sectors, such as infrastructure, from motorways and railways related to trains, including express and air navigation, the modernization of the marine merchant fleet and the telecommunications sector, then huge investments will go to the oil and gas sector. In return, China will obtain concessions in the field of gas and oil, and the performance will be in the national currency of each country. Moreover, Iran will permit China to have a military presence in the country with the Russians.
The agreement, which will be ratified by the parliament of the two countries to enter into force, is a real surprise for the world for two reasons. The first is the huge Chinese investment, which amounts to 400 billion dollars over 25 years, at a rate of 16 billion dollars annually. It is not possible to find in international investment such an investment of this magnitude. The second reason is reflected in the huge geopolitical consequences of this agreement.
Face the US embargo
Iran suffers from a severe US embargo, crippling its economic capabilities and preventing its development. Despite its reliance on itself to achieve a quantum leap in the agricultural sector, the pharmaceutical industry and some industries, these efforts remain limited in light of their needs for rapid technological development in communications as well as transportation, as the country of development cannot be without solid infrastructure in the field of transportation nationally and internationally.
Waiting for impressive results, which will be positively reflected on Iran due to the Chinese progress in various fields, especially communications and transportation. It is a pioneer in the field of communications technology, including the fifth generation, and a pioneer in building highways, railways and airports. Therefore, the face of Iran may change within a decade if the agreement starts to be implemented starting next year. Its structures will be similar to China, Western countries, or South Korea. There is a strong Chinese ambition in this field to make Iran a symbol of its success in international cooperation and an example that other countries might set in signing agreements with China.
At the same time, China may consume all of Iran’s energy production from oil and gas, and thus will relieve Iran of betting a lot on the international market and bypassing US sanctions. China will guarantee itself energy away from international political volatility and US maneuvers.
The military and the Chinese and Russian presence in Iran remains the geopolitical address of this agreement. Under the agreement, China will obtain military concessions in Iran, which overlooks the Persian Gulf, the main oil region. On the one hand, no one will now be able to attack Iran militarily because of Russian and Chinese interests. This presence will translate into strengthening the capabilities of the Iranian army with the latest weapons, including the Russian anti-air defense system and the S-400 missiles.
At the same time, the Chinese and Russians will have facilitation access to the Arabian Gulf and consequently the entire Middle East. This fact is more important thanks to the land extension, that is, the roads that will link China and Iran through Pakistan, a situation similar to the roads that link the eastern and western American coast from it, but this time it is based on the so-called Silk Road, which is structuring global trade now and in the future. Iran is gaining more strength for Chinese ambitions by virtue of Iran having 15 common border points between the navy and the land. Iran shares the land borders with Afghanistan, Armenia, Azerbaijan, Iraq, Pakistan, Turkey and Turkmenistan, while it shares the maritime borders with Russia and Kazakhstan in the Caspian Sea and with all the Arab Gulf countries including Saudi Arabia, Qatar, the Emirates, Bahrain, Kuwait and the Sultanate of Oman. In turn, China shares 15 land and sea borders with China, which means that this agreement affects geopolitically dozens of Asian countries and Russia. In the exercise of this agreement, the three countries held military maneuvers last December in the waters of the Arabian Sea and the Persian Gulf, and they were a surprise to the West, but without their understanding of the true dimensions of these maneuvers, which are currently translated into a huge geopolitical agreement.
Blow to the dollar
Perhaps one of the prominent headlines of this agreement is the adoption of national currencies between Beijing and Tehran in addition to Russia, and even Pakistan may enter this dynamic thanks to its presence between China and Iran, and it will be an important link in commercial and investment activity. And Iran will finally get rid of the hegemony of the dollar, which stands as a sword of Damocles at its head and prevents its development due to the difficulty of acquiring what it needs from the international market as a result of the US sanctions. In turn, China will have made strides in fixing its currency, the yuan, in world trade to hit the dollar’s hegemony. One of the conditions that China claims to the world is to make its currency a major instead of the dollar or a peer in global trade.
This agreement strikes the interests of the West in depth and even financial institutions such as the International Monetary Fund and the World Bank. Thanks to the agreement, the Iranian market has become closed to international investments, including European ones, and thus the Europeans lose a promising market for investment. All deals go to China. Other countries will bet on the Chinese model because it will exempt them from requesting loans from the international financial institutions that are controlled by the West. They may pay their national currencies and natural resources and escape the cumbersome conditions and benefits that hinder their development.
A blow to Israel
This strategic agreement means the end of major US and Israeli maneuvers, as well as Saudi Arabia, against Iran. The three countries have been planning for decades to weaken the Iranian regime in order to topple it, and the last episode was Washington’s withdrawal from the nuclear agreement overseen by the United Nations and European countries, as well as China and Russia. Now the result is counterproductive thanks to China, which has military and commercial power, unlike Russia, which has only military and commercially weak power.
This agreement, insofar as it protects Iran and strikes Washington’s plans for this country, gives China the qualitative leap towards its transformation into a true superpower. It is an extraordinary link in the course of the “Chinese era”.
American intelligence failed
This agreement and the United States come at the doors of the upcoming presidential elections next November, which will make its real impact in assessing the performance of the current President Donald Trump, who raised the slogan of confronting China, and if it becomes more powerful in his era because of his irrational policy, such as his withdrawal from the nuclear agreement Hexagon. But the real blow is that the CIA received all its branches and bodies from the civilian “CIA” to the “military” EEA. Many people wonder, how did this intelligence, which is available to thousands of analysts, speculate on a geopolitical agreement of this kind that constitutes a strong link in the course of the “Chinese era”?
DesPardes did not edit the write up.
Will update the post with comments (as and when received) from Rashid Hussain Syed, an energy analyst based in Toronta who spent several decades in the Middle East and writes for BBC, Saudi Gazette, Arab News, Dawn, Toronto Mail.