Iran turns The Art of the Deal upside down
Tehran busy signing massive infrastructure deals with China's CITIC and European partners
As President Hasan Rouhani prepares to address the UN General Assembly in New York and the Trump administration and allies relentlessly lobby for the Iran nuclear deal to be decertified, Tehran is busy clinching deal after deal with Asians and Europeans.
For the Chinese government, Iran – and Pakistan – are so geopolitically important that they are treated as Home Affairs nations in East Asia (and not the Middle East, in the case of Iran), alongside Japan and Indonesia.
And just like Pakistan via the China-Pakistan Economic Corridor (CPEC), Iran is an essential node of the New Silk Roads, a.k.a. Belt and Road Initiative (BRI).
For Tehran, Beijing is a major player in international trade/finance. At the Belt and Road forum in Beijing in May, Iran’s Economic Affairs and Finance Minister Ali Tayyebnia extensively discussed deals with Chinese Finance Minister Xiao Jie. Chinese companies in construction and energy infrastructure equipment – as well as in steel and chemicals – are present all over Iran.
Enter the deal just signed between China’s CITIC and a consortium of Iranian banks worth $10 billion in loans.
Enter as well a BRI-related railway modernization drive, with Beijing providing $1.5 billion to electrify the Tehran-Mashhad trunk line, and another $1.8 billion for a high-speed rail linking Tehran, Qom and Isfahan.
These upgrades fit into two BRI vectors; to increase China’s trade/connectivity not only with Iran – all the way to the port of Bandar Abbas near the Strait of Hormuz – but also with Turkey. Freight trains ideally should be running non-stop between Xinjiang and Istanbul as early as 2020.
That should be no mean achievement. Iran is the key connectivity link in routes through both Central Asia and the Caucasus. A key proposed route runs from Xinjiang to Kyrgyzstan, Tajikistan, Uzbekistan, Turkmenistan, Iran and southeast Turkey. China South Corporation (CSR) – the world’s largest manufacturer of locomotives – expects the whole finished high-speed rail link to cost around $150 billion.
All aboard the investment train
Austria, Denmark and Italy, as well as Japan, are about to clinch as much as $30 billion in deals with Iran. Europeans are back in the Iranian market with a bang. Mercedes-Benz has signed a contract with Iran Khodro to distribute its trucks.
Ha Yung-ku, chairman of the Korea Federation of Banks (KFB), and Kourosh Parvizian, head of Iran’s Association of Private Banks (IAPB), signed a banking deal that – crucially – expands trade in their own currencies, bypassing the US dollar.
And then there’s movement in another transport corridor essential to landlocked Central Asia – and especially Afghanistan, at the intersection of Central and South Asia; the port of Chabahar.
Chabahar is the centerpiece of India’s Southern Silk Road – with a maritime component via the Indian Ocean linked to an overland branch all the way to Afghanistan. There’s fierce discussion about exactly how much the state-owned India Ports Global Limited (IPGL) invested in the development of Chabahar – the port as well as associated roads and railways. That ranges from $500 million (the Indian version) to only $85 million, according to an Iranian firm, Aria Banader, which states to have invested as much as $403 million.
Indian officials have already promised Afghan counterparts that wheat transported out of Chabahar should be supplying Afghanistan in a matter of weeks.
Complementing this connectivity frenzy some room may be opening for a certified game-changer; a navigable canal between the Caspian Sea and the Persian Gulf.
There are two potential routes for what is known as “Iran rud” (“Iran’s River”), stretching between 765km to 1,400km, and costing between $6 billion and $10 billion, according to Iranian estimates made four years ago.
Even considering the difference in sea level height, technically the canal can be built. The problem, besides cost, is that it might take roughly 10 years to finish. Iran, China and Russia (because of the access by Russian ships to the Indian Ocean bypassing the Bosporus and the Dardanelles), not by accident the three major poles of Eurasia integration, are interested.
This is a classic project that may gain impulse – perhaps under the umbrella of the Asia Infrastructure Investment Bank (AIIB) – as the interpolation of BRI with the Eurasia Economic Union (EAEU) gathers pace alongside the International North-South Transport Corridor (INSTC) of which Iran, India and Russia are members. Once again; it’s all about Eurasia integration.
What about our “global economic embargo”?
Now compare all this trade/investment/connectivity drive with the CIA once again obsessed with – what else – regime change in Tehran.
Or a document currently circulating on Capitol Hill and in the White House stating President Trump should declare to Congress next month not only that the Iran nuclear deal is no longer in the national security interest of the United States, but also hit Tehran with a “de-facto global economic embargo”.
Following a meeting with President Putin in Sochi this past Wednesday, Iranian Foreign Minister Javad Zarif went straight to the point; the (multilateral) nuclear deal is non-negotiable.
There’s no way the “RC” in BRICS – the Russian-China strategic partnership – as well as the Europeans involved in the Vienna negotiations (UK, France and Germany) will throw away the Joint Comprehensive Plan of Action (JCPOA).
Any possible, further, unilateral US sanctions simply would not be followed by all the other members of the P5+1 negotiating team. Europeans and Asians will continue to invest in Iran. China, India, Japan and South Korea will continue to buy Iranian oil and gas – paying for it in their own currencies or making swap deals.
But then we have Return of the Living Dead neocons casually floating the notion that the US “may need to go it alone in a conventional conflict.” Good luck with that, and with the “global economic embargo”.