In its clash with America, China appears to have picked up the gauntlet

The Petroleum Economist of September 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 $120 billion 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 (bpd) at present to its full capacity of over 4-5 million bpd. China’s energy giants — CNPC, CNOC, Sinopec — can rapidly expand Iran’s oil and gas production from the 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.

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 US-friendly 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.

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 “IndoPacific” strategy. So far, India has had the best of both worlds. It is building an alliance with the US to emerge as China’s Asian “equal” and establish its domination over South Asia and the Indian Ocean. Yet, India pleads for US “strategic altruism” to enable it to preserve its traditional arms supply relationship with Russia and its growing trade and investment cooperation with China. As the Sino-US global confrontation intensifies, the strategic space for India, and others, to manoeuvre between the two global powers will become progressively narrow.

So far, despite Trump’s hostile trade tariffs, technology restrictions and military pugnacity, China has kept open the option of reverting to a “win-win” cooperative relationship with the US. But, a firm consensus seems to have emerged in Washington that China is America’s primary rival and threat to its century of global dominance and that China’s further rise can and must be stopped. China appears to have picked up the gauntlet. A titanic clash is in the offing across the world.