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China’s $400 billion deal with Iran

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    World Affairs
  • Published
    3rd Apr, 2021


China and Iran signed an economic investment agreement worth $400 billion over 25 years with Iran.

About the Program

  • The agreement includes key infrastructure programs on
    • Airports and high-speed railways and subways
    • free-trade zones in Maku in northwestern Iran
    • projects in Abadan, where the Shatt al-Arab river flows into the Gulf
    • on the island Qeshm in the Gulf
    • investment in Iran’s petroleum sector

Significance of the agreement for China

  • The agreement is considered as a major shift in strategic attitudes and is also being called as China’s ‘white area warfare’.
    • It gives China massive new strategic gains in the Gulf region.
    • The agreement gives China potential access to Iran’s new port and naval base at Jask, which is located outside the Gulf on Iran’s Indian Ocean coast.

What are the major concerns?

  • Arms Race: No military agreement is signed but the expiry of UN agreement that prevents Chinese and Russian arms exports to Iran opens the platform for any such arms supply to Iran.
  • Halting sanctions: The agreement undermines the U.S. efforts to use economic warfare to pressurize Iran.

What are the expected Impacts of the agreement on India?

  • Counter to investment in Iran: It is seen as countering India’s efforts to develop Iran’s port and new petroleum pipeline and oil export facilities at Chabahar.
  • It also hinders India’s role in helping Iran to create a better road and railroad access to Central Asia.
  • Pakistan link: A greater Chinese role in Iran gives China a stronger potential role to exploit its ties with Pakistan.
  • Indian Ocean facilitation: It facilitates China to exploit the new naval base and port facility at Djibouti on the Southern coast of the Red Sea.

India and Iran ties

Multiple cooperation declaration and projects are held in between both the countries such as:

  • The ‘Tehran Declaration’, signed in April 2001.
  • The ‘New Delhi Declaration’,signed in January 2003.
  • India-Iran railway line connecting Chabahar to Zahedan and the capital of Iran’s Sistan and Baluchestan Province.
  • Despite the several rounds of economic sanctions placed on Iran by the US, India never stopped buying oil from Tehran completely, because New Delhi never followed unilateral sanctions.
  • The Chabahar Port project was conceptualized in 2003.