Economy, Business And Markets

Silk Dragon Takes Iranian Road

Silk Dragon Takes Iranian RoadSilk Dragon Takes Iranian Road

He came, he saw and he pocketed all the deals that matter. Chinese President Xi Jinping’s tour of Southwest Asia to Saudi Arabia, Egypt and Iran–could easily be sold anywhere as your typical Chinese-style win-win.

On the public relations arena, Xi did a sterling job polishing China’s image as a global power. Beijing scored diplomatically on all counts, obtaining several more layers of energy security (over half of China’s oil come from the Persian Gulf) while expanding its export markets and trade relations overall, wrote Brazilian journalist Pepe Escobar.

Below are excerpts from the article:

In Iran, Xi oversaw the signing of 17 politico-economic agreements alongside Iran’s President Hassan Rouhani. Yet another diplomatic coup: Xi was the second leader of a UN Security Council member country to visit Tehran after the nuclear deal struck in Vienna last summer; the first was President Putin in November. [Though Xi was the first leader to visit Iran after the lifting of sanctions against Iran.] Note the crucial Russia-China-Iran interaction.

To make it absolutely clear, Xi issued a statement just before arriving in Tehran, confirming Beijing’s support for Iran to join Shanghai Cooperation Organization. That will solidify for good the key strategic partnership trio working for future Eurasia integration.

Of course, this whole process revolves around “One Belt, One Road”–the official Chinese denomination of the larger-than-life New Silk Road vision.

 No other nucleus, apart from Russia-China, offers so much potential in terms of bilateral cooperation; Iran, as much as during the ancient Silk Road uniting China and Persia, is the ultimate hub uniting Asia with Europe.

Xi’s high-tech caravan stopped first in Saudi Arabia and Egypt–the Arab world. Xi’s message could not be more crystal-clear: “Instead of looking for a proxy in the Middle East, we promote peace talks; instead of seeking any sphere of influence, we call on all parties to join the circle of friends for the Belt and Road initiative.”

Post-sanctions Iran, already in overdrive, is all about (re)integration into large swathes of the global economy.

Iran wants to increase its petrochemical output, by 2025, to 180 million tons. Chinese investment will be key.

According to a recent report by global energy, metals and mining research and consultancy Scottish group Wood Mackenzie, Iran may attract as much as $70 billion for its petrochemical projects.

On the alternative energy front, Iran has the capacity to generate 40,000 megawatts of electricity from solar and wind resources. Chinese companies will definitely be on it.

As a member state of the Non-Proliferation Treaty, Iran will continue to use nuclear energy for peaceful purposes. Chinese companies are already a player in the redesigning of the Arak heavy water reactor and will be involved in producing isotopes for medical purposes and desalinating seawater.

Investment in mining is also a certainty. According to the World Mining Congress, China and Iran were the first and 10th largest minerals producers in the world in 2013. Iran holds more than 7% of the world’s proven mineral reserves, but only 20% of these have been developed. Foreigners were now allowed to operate Iranian mines for 25 years, but now China will be on it.

“One Belt, One Road” is mostly about high-speed rail. So no wonder upgrading and expanding Iran’s railroad network is a key plank in the Joint Statement on Comprehensive Strategic Partnership between Iran and China.

Of course, progress along the New Silk Road will face pitfalls. Tehran won’t be content with being just a transit route for China’s exports; it aims at being a key trans-Eurasian partner. China is a WTO member; Iran is not a full member yet.

Geopolitically, Iran’s Leader Ayatollah Seyyed Ali Khamenei unambiguously set the tone as he met Xi. China, said the Leader, is a “trustworthy” country; the establishment of a “25-year strategic relation is completely correct and wise; and last but not least, … The Islamic Republic of Iran will never forget China’s cooperation during the time of sanctions.”

Subtle but firm, Ayatollah Khamenei could not but refer to the stark difference between Iran and Saudi Arabia in the absolutely crucial–for China–area of energy security: “Iran is the only independent country in the region that can be trusted in the area of energy because unlike many regional countries, the energy policy of Iran is not influenced by any non-Iranian factor.”

The bottom line is that for Beijing, a strategic partnership with Iran is a matter of vital national security.

Moreover, geostrategically, Beijing sees Iran as an essential hub, in Southwest Asia and Eurasia for that matter, counterpunching Washington’s much-advertised “pivot” and US naval hegemony. That implies Beijing’s full support for a powerful Iran in the arc spanning the Persian Gulf to the Caspian; all these maritime and land routes–New Silk Road-wise–are vitally important to China.

There is no fulfillment of the New Silk Road vision without a comprehensive Iran-China strategic partnership and Xi solidified it; in a sweeping move.

Next step is Iran as a full SCO member. Eurasian integration, here we come.