China strikes back
THE Petroleum Economist of Sept 3 reported that China has agreed to invest up to $290 billion in the development of Iran's oil, gas and petroleum sectors, and another $120bn in its transport and manufacturing infrastructure. This is a calculated kick aimed at America's strategic objectives.
According to the report, China will have the first right of refusal on all projects in Iran and a 12 per cent guaranteed discount on energy imports from there. China will provide the "technology, systems, process ingredients and personnel required to complete such projects" including "up to 5,000 Chinese security personnel on the ground to protect Chinese projects…."
China's agreement to so massively finance Iran's development is an extension of its Belt and Road Initiative. It is also an 'in your face' response to America's aggressive trade, technology and military moves against China over the last year. It will prick the balloon of the US strategy of 'maximum pressure' against Iran designed to bring the latter to its knees economically and oblige it to accept additional constraints on its nuclear and missile programs (beyond the JCPOA) and curb its politico-military ambitions in the Middle East. In entering this agreement, China has announced that it is not intimidated by the "secondary sanctions" which the US has threatened to impose on companies and countries which continue economic relations with Iran in defiance of America's unilateral sanctions against Iran.
China can import virtually all of Iran's oil and gas production. This could increase Iran's oil exports manifold from 200,000 barrels per day at present to its full capacity over 4-5 million bpd. China's energy giants - CNPC, CNOC, Sinopec - can rapidly expand Iran's oil and gas production from existing and new fields. Iran will not need other markets, such as India which has halted oil imports from Iran in compliance with US sanctions.
China's agreement to massively finance Iran's development is an extension of its Belt and Road Initiative.
A considerable part of Iran's gas could be exported via the existing Turkmenistan-China gas pipeline and
new oil pipelines can be constructed on the same route. This will significantly diminish the threat of a US/Western maritime energy blockade against China or Iran. Further, China's reliance on USfriendly energy suppliers in the Gulf (Saudi Arabia, UAE) and East Asia (Indonesia, Brunei) will be dramatically reduced since it could meet all or most of its requirements from Iran and Russia.
The transport infrastructure which China plans to build in Iran, including high-speed rail on several routes, will provide Beijing with additional avenues for its trade - overland trade through Iran and Turkey to and from Europe and maritime trade through Iranian ports (including, ironically, the hitherto Indian-sponsored port of Chahbahar) to the Middle East, Africa and beyond.
Iran's economic partnership with China will supplement its current close security ties with Russia and alter Middle East power equations. China will acquire considerable influence over Tehran's nuclear and security policies, adding to its leverage with the West including the US. On the other hand, Iran's reinforced 'strategic' partnership with China will considerably enhance its capacity to promote its policy objectives in Yemen, Iraq, Syria, Lebanon and Afghanistan. Iran may also feel sufficiently emboldened to retaliate robustly to Israel's frequent strikes on its military assets and militia affiliates in Syria, Lebanon and Iraq.
In Yemen, Iran is now playing a more open role to promote a political settlement which accommodates the Houthis. The Arab coalition has been weakened by an unsuccessful military campaign, internal differences and US and Western criticism of the human cost of the conflict.
In Syria, President Bashar alAssad has clearly won the civil war against the Western Gulf coalition with the support of Russia and Iran. Once its economy is stabilised, Iran could play an even more robust role not only in Syria but also Iraq and Lebanon.
Iran and China may also enhance their influence in Afghanistan. Donald Trump has declared that the agreement with the Taliban is ' dead' - at least for now. The most significant provision of this agreement was not the withdrawal of 5,000 American soldiers but the Taliban's acceptance of the continued presence of 8,600 US 'counterterrorism' forces. These troops would prolong US capacity for force projection within and across Afghanistan's borders. Now, it is possible that the Afghan Taliban, perhaps at Iran's instance, may no longer accept the rump US presence in a revived deal.
China's Iran partnership would supplement and reinforce its long-standing strategic participation with Pakistan. Obviously, Beijing wants strategic relationships with both. However, the Iranian partnership offers China another strategic ' window' besides CPEC and insurance against possible US or Indian disruption of the China-Pakistan corridor. Moreover, over time, the Sino-Iran economic partnership could add a security and military dimension.Western pundits often speak of a Chinese naval base in Gwadar. In fact, it could well appear in Chahbahar.
Time is running out for India to make a strategic choice between an 'Asian Order', combining China, Russia, Iran, Pakistan, Turkey and Central Asia under the SCO and the BRI, or an alliance with the US and participation in its 'Indo-Pacific' strategy.