Iran Signs $400 Billion Deal with China

Iranian foreign minister Mohammad Zarif (pictured) concluded a trade and investment deal with China. (Wikimedia Commons)

Iranian foreign minister Mohammad Zarif (pictured) concluded a trade and investment deal with China. (Wikimedia Commons)

Following a meeting last month between Mohammad Zarif and Wang Yi, the Iranian and Chinese foreign ministers, respectively, the two countries concluded a trade and investment agreement worth $400 billion. The announcement comes just days after Saudi Arabia’s second-largest oil field was hit by an airstrike, which Saudi Arabia and the U.S. say was backed by Iran.

The conclusion of the deal has also come at a time of increased hostility between Iran and the U.S. Ever since President Donald Trump withdrew from the Iran nuclear deal in May 2018, the U.S. has increased sanctions on Iran. In November 2018, the Treasury Department reinstated the sanctions that had been lifted under the 2015 nuclear deal, saying, “These are the toughest U.S. sanctions ever imposed on Iran and will target critical sectors of Iran’s economy, such as the energy, shipping and shipbuilding, and financial sectors.” In fact, the latest in this series of sanctions was announced just two days after Iran and China’s deal was reported, with the United States now targeting Iran’s National Bank, according to the New York Times.

Sanctions have negatively affected the Iranian economy. Iran’s GDP in the 2018-2019 fiscal year dropped 4.9 percent, while the oil and manufacturing sectors fell 14 percent and 6 percent, respectively. The sanctions have left Iran in a vulnerable economic position, making a deal with China financially beneficial for the country. Full details of the agreement have not yet been disclosed, but certain parts have been leaked with the Times reporting that the Chinese government will allocate $280 billion to Iran’s gas, oil, and petrochemical sectors over a five-year period. The remaining $120 billion will be invested in Iranian transportation infrastructure, including a railway between Baghdad and Mashhad. China will benefit from the deal through a guaranteed discount of at least 12 percent on all petrochemical, oil, and gas products.

Strengthening ties to China may worsen relations with the United States due to the current trade conflict between the two. Not only will China, the world's second-largest oil consumer, boost imports of Iranian oil, which accounts for a third of Iran's income, but, according to Arab News, it will also send 5,000 security officers to Iran to secure the projects. Iran’s partnership with one of the major world powers will not only supply much needed economic assistance, but it will also provide an ally in a time of potential regional conflict. While the U.S. is yet to comment on the deal itself, the latest set of sanctions was announced in the days after the deal was concluded.