Friday, August 2, 2019

China's Infrastructure Investment in Iran - Winning Hearts and Minds

With Washington readying itself for yet another military misadventure, a look at one aspect of Iran that gets only sporadic coverage in the Western media is in order.  The relationship between Iran and China goes back over two millennia when China and the Persian Empire as shown on this map which shows the ancient Silk Route (Silk Road) trading routes:

It was the old Silk Route that brought three of the world's great civilizations together; China, Persia and Roman.  

This ancient trading pattern has been revived, thanks in large part to the imposition of sanctions against Iran by the United States and its lapdog partners in Europe.  China has been able to take advantage of the departure of western economies from Iran, signing a myriad of deals with Iran's leaders that are to both nations' advantage as you will see in this posting.

Let's open by looking at which nations receive exports from Iran:

China accounts for nearly one-third of Iranian exports and China and India combined account for half of Iran's exports.

Here is a graphic that shows which nations are the source of Iranian imports:

Once again, China is the leading exporter of products to Iran, accounting for 37 percent of Iran's total imports.

Here is a graphic showing which products are exported by Iran:

Crude oil accounts for nearly three-quarters of Iran's exports, a significant percentage of which end up in China.  In total, in 2017, Iran exported $53.7 billion worth of goods, making it the 46th largest exporter in the world.  Iran's exports have dropped significantly, falling from $63.6 billion in 2012.

Here is a graphic showing which products are imported by Iran:

In total, in 2017, Iran imported $49.9 billion worth of goods, making it the 50th largest importer in the world.  Like its exports, Iran's imports have dropped, falling from $51.2 billion in 2012.

Now, let's focus on China and its present day economic relationship with Iran.  In 2013, China announced that it was going to assist in the creation of a new inclusive "era of globalisation" through its "One Belt, One Road" (OBOR) or "Belt and Road Initiative" (BRI).  This is in sharp contrast to the Trump Administration which is following the path to economic protectionist isolation through the imposition of endless tariffs and sanctions.   According to the Council on Foreign Relations, more than sixty nations have signed on to the BRI, representing 62.3 of the world's population and 30 percent of the global GDP.  Here is a list of participants from 2016:

It is interesting to note that some of these nations, particularly those in Europe are considered allies of the United States.

Here is a map showing the percent of GDP that Chinese imports comprise for some of the nations involved in the BRI:

China's state-owned financial institutions are playing a key role in funding this initiative; China Development Bank is tracking more than 900 projects in 60 nations with a total value of more than $890 billion.  The Bank of China pledged to lend no less than $100 billion between 2016 and 2018 and the Industrial and Commercial Bank of China has been examining financing for 130 projects worth $159 billion.  

Let's focus on Iran's role in China's economic initiative.  As you can see on this map, Iran is strategically positioned at a key geographic location; a land bridge linking China to the massive markets of Europe:

In 2017, as sanctions were lifted, China announced the financing of billions of dollars worth of infrastructure projects in Iran.  China's state-owned CITIC Bank announced the establishment of a $10 billion line of credit, China Development Bank loaned an additional $15 billion in September 2017 and the Export-Import Bank of China finalized a $10 billion letter of credit.  The funds were being used to build a wide range of infrastructure.

For the remainder of this posting, I want to focus on China's investments in Iran's rail system.    Thanks to China, there is a now a direct rail freight train running 2300 kilometres from Urumqi in China to Tehran, connecting Kazakhstan, Kyrgyzstan, Uzbekistan and Turkmenistan as shown on this map:

Here is news coverage touting the advantage of China's rail connection to Iran:

This train route reduces cargo transportation time from China to Tehran from 45 to 50 days by sea to 14 to 15 days by rail.  China is also building a 926 kilometre-long rail line from Tehran to Mashhad, Iran's primary pilgrimage site.  This rail line will reduce travel time from 12 hours to 6 hours and will have the capacity to move 25 million passengers and 10 million tones of cargo annually.  Here is an additional list of rail construction projects in Iran that are being undertaken by Chinese companies as reported by China Daily News on January 25, 2019:

"The State-owned China Railway Engineering Corp is building a 415-km high-speed rail line between Tehran and Isfahan via Qom. In January 2018, a subsidiary of China Railway Construction Corp won a 3.53 billion yuan ($513 million) contract to build a 263-km railway in western Iran between Kermanshah and Khosravi. In March 2018, China National Machinery Industry Corp signed a contract to build an $845 million railway connecting the Iranian cities of Tehran, Hamedan and Sanandaj." 

While this is just the tip of the iceberg when it comes to the burgeoning economic and infrastructure partnership between China and Iran, you can easily see that the two nations have a very long and very close economic relationship with both nations benefitting from the investments being made in Iran.  It is thanks, in large part, to Washington's moves against both Iran and China that these two nations have been driven together.  

With China investing tens of billions of dollars in Iran's infrastructure particularly its rail system, I simply cannot imagine that China will stand aside and remain neutral while the United States wages war with one of its key economic partners, particularly since U.S. military operations will likely focus on Iran's rail system which would likely be used to transport personnel and materiel should hostilities break out.  If China perceives that the infrastructure is being destroyed by the actions of the American military as was the case in Iraq during the War on Terror, my guess is that they will enter the conflict to protect their plans to boost economic inclusion in Asia and Europe.

China - winning Iranian hearts and minds one infrastructure project at a time.


  1. I had thought that Russia and China would supply Iran with various military supplies if war broke out between Iran and the US. They would benefit merely by forcing the US to waste lives and resources and by tying down a significant fraction of the US military.

    But your analysis suggests China has a much bigger stake in Iran, and that China's military would become engaged in combat with the US. This is a much more dangerous situation than I had imagined.

    The problem is that the neocons who run our foreign policy are too stupid to understand the consequences of what they are doing.

    1. Russia recently supplied Iran with the R-330Zh Zhitel SIGINT/jammer advanced electronic warfare system to Iran. This is the same system that was given to the separatists of eastern Ukraine who boiled tons of Ukrop Nazis in cauldrons.