China Considers Iran Vital Belt & Road Hub

China’s strategic interest in Iran is intensifying, as Chinese manufacturers seek to establish new operations in Iran.

Tehran is viewed as a vital transport and logistics hub, reads a commentary by EurasiaNet.org. Below is the full text:

Iran is focusing in 2017 on expanding its railroad network so that it can better align with China’s Central Asian logistics strategy, Iranian Roads Minister Abbas Akhoundi said recently.

The minister added that the chief goal for Iran’s Department of Transportation would be to improve connections of the national rail network to neighboring railroad networks.

China is also providing $1.5 billion in financing to electrify the Tehran-Mashhad trunk line, and another $1.8 billion to establish a high-speed rail connection linking Tehran, Qom and Isfahan. In return, Iranian authorities are slashing transit tariffs for Chinese goods.

The Iranian upgrades are seen as crucial to achieve two Chinese trade priorities–expand commerce with Turkey and widen access for Chinese goods to Iranian ports near the Strait of Hormuz.

Beijing hopes to see trains running between the western Chinese region of Kashgar and Turkey’s Istanbul as soon as 2020. Iranian railroads figure to serve as key links in routes through both Central Asia and the Caucasus.

For Iranian leaders, China represents an important outlet for international trade and finance. On the sidelines of the Belt and Road launch event in Beijing in May, Iran’s Economic Affairs and Finance Minister Ali Tayyebnia held talks with Chinese Finance Minister Xiao Jie to discuss substantial development assistance deals, which the two sides hope to seal in the coming months.

In 2015, Chinese enterprises in Iran signed contracts worth $1.5 billion. And Iran has since become a major market for Chinese construction and energy infrastructure equipment.

China’s major contracting projects in Iran include energy, transport, steel and chemicals.

Among the planned energy projects is a production facility that would produce components for nuclear power plants.

Song Zhiping, chairman of China Building Materials Group, characterized Chinese projects in Iran as a “win-win” solution. He asserted that Chinese manufacturers were capable of moving production lines to Iran for about 20-30% of the cost of other international competitors.

China’s trade and foreign policy with Iran fall into a distinct category. Policymakers in Beijing tend to align their activities within various ministries, according to geographic boundaries, with separate departments dealing with distinct areas. But Iran, in the eyes of Chinese policymakers, is not considered West Asian, Arabian or Middle Eastern, it is included in East Asia.

Iran, along with Pakistan, is considered so important to China’s sphere of influence that they are part of the “home affairs” region, including Japan, Hong Kong and Indonesia.