Economy, Business And Markets

Iran, China Embark on “New Silk Road”

Iran, China Embark on “New Silk Road”
Iran, China Embark on “New Silk Road”

China and Iran have enjoyed close-knit relations, since China’s Han Dynasty (207 BC-220 AD) welcomed merchants from Central Asia, India and Persia (Iran) to trade goods in the country, which was known as the ancient Silk Road.

The old Silk Road vanished, but in 2013, Chinese President Xi Jinping introduced the new “Silk Road Economic Belt and the 21st Maritime Silk Road” (Belt and Road) initiative to connect stronger logistics networks with Asia, Africa and Europe by building more roads, railways and airports, wrote Chinese newspaper The People’s Daily.

Beijing has launched the Asian Infrastructure Investment Bank-$100 billion in capital and the S40 billion New Silk Road Fund to fund major infrastructure projects in the region.

Tehran has already pledged to support the initiative with an investment of $6 billion for the next six years.

The United States and European Union imposed sanctions against Iran, but they signed a nuclear accord, which ends sanctions. Tehran can revitalize its economy and Xi’s state visit to Iran this week comes at an opportune time.

Despite sanctions, China and Iran had maintained close trade ties. Statistics show that in 2015, Iran exported 500,000 to 600,000 barrels of crude oil per day to China.

Chinese oil and gas companies-Sinopec and CNPC-commissioned projects to lease equipment and provide technical support for Iranian firms to develop liquefied natural gas in South Pars fields and oil in Yadavaran and North Azadegan regions.

Iran holds substantial reserves of oil and gas, while the world’s second-largest economy continues to experience higher than global average gross domestic product annual growth rates, which means strong energy demand from China.

Iran is strategically located in the Middle East, sharing land borders with 15 nations, and sea channels on its northern and southwestern coasts.

The country is expected to play a crucial role in the “Belt & Road” initiative as an energy hub and access to extensive delivery routes connecting the Middle East and Eurasia.

Iran can become a regional economic powerhouse. Iran’s Minister of Industries, Mining and Trade Mohammad Reza Netmatzadeh announced that the country would build more railroads; Chinese companies will supply the trains, rails, equipment, along with technical expertise, while Iranian contractors will construct the rail networks.

There’s more to Iran than its oil and gas. The nation holds a long and rich cultural history. Some of its traditions and artifacts still flourish today and have drawn many foreign tourists, including those from China.

Globe-trotting Chinese tourists, who wish to purchase exotic items like Persian rugs and porcelain, are flocking to Iran.

“Everybody in Iran knows about the Silk Road and that ancient Persia and China were two hubs of the trade route,” said Sadeq Zibakalam, professor of Tehran University.

The “Belt & Road” initiative is expected to rejuvenate Iran’s economy and the shared benefits can boost global logistics networks that would spur more trade and investments for the region.