08-04-2021
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THurSdAY, APrIl 8, 2021
5
China-Iran relations and the issue of massive investment
William Figueroa
On March 26, Iran and China signed an agreement
expressing a desire to increase cooperation and trade
relations over the next 25 years. This Strategic Cooperation
Agreement, as it is officially known, has been hailed as a
massive overhaul of Sino-Iranian relations that will see China
invest anywhere from $400 to $600 billion in Iran, with
some estimates running as high as $800 billion.
Proponents of the deal hail the onset of mutually beneficial
relations between two influential Asian countries with a
shared desire to reduce and resist U.S. influence in the
region. China is seen as a vital lifeline for a country weakened
by sanctions and diplomatic isolation. After eight years of
courting the West with nothing to show for it, many Iranians
across the political spectrum are hungry for a new way
forward. China represents a change of course - whether as a
new potential partner or a "China Card" for leverage in Iran-
U.S. negotiations.
Opponents paint a much bleaker picture. Some analysts
have expressed concerns that the deal threatens U.S. goals in
the Middle East, or the fundamental stability of the region
itself. Others have gone further and explicitly called China
and Iran "the new Axis of Evil." On social media, Iranians
have decried rumors that the deal will lead to nuclear waste
dumped in the desert and islands in the Gulf sold to China.
The agreement has been called a "New Treaty of
Turkmanchay," referring to the 19th century treaty that saw
Qajar Iran cede territory to the Russian Empire. Others claim
that Iran will be flooded with Chinese workers and crimeridden
Chinatowns.
Between the clashing narratives of the agreement "selling
Iran to China" and "America defeated," what is the truth of
the matter? The text of the agreement has not yet emerged,
and likely will not be published, so all analysis must be
tempered with caution. However, a draft of the agreement
leaked last summer, and it is unlikely the text substantially
changed in the intervening six months. Furthermore,
multiple outlets report that their sources have said there is
little changed from the leaked agreement. What can be said
about the deal based on this leaked draft?
First off, nowhere in the text of this or any other official
document or pronouncement is any numerical figure
mentioned. There are also no provisions whatsoever for the
sale of islands, military bases, occupation, or anything that
would sustain the other alarmist claims. This has been
thoroughly debunked by multiple scholars, and a quick
glance at the text will confirm their claims. While the draft
itself appears to be genuine, the claims of $400 billion of
Chinese investment and massive military concessions can be
Why the 25-Year China-Iran Strategic Cooperation Agreement isn't a "big deal," literally or
figuratively.
Photo: Ebrahim Noroozi
traced to a poorly sourced Petroleum Economy article from
2019, which has since been taken offline.
First off, nowhere in the text of this or any other official
document or pronouncement is any numerical figure
mentioned. There are also no provisions whatsoever for the
sale of islands, military bases, occupation, or anything that
would sustain the other alarmist claims. This has been
thoroughly debunked by multiple scholars, and a quick
glance at the text will confirm their claims. While the draft
itself appears to be genuine, the claims of $400 billion of
Chinese investment and massive military concessions can be
traced to a poorly sourced Petroleum Economy article from
2019, which has since been taken offline.
hinese Foreign Ministry spokesperson Zhao Lijian said the
day after that the China-Iran Strategic Comprehensive
Agreement "neither includes any quantitative, specific
contracts and goals nor targets any third party, and will
provide a general framework for China-Iran cooperation
going forward."
he same day, Reza Zabib, head of East Asia at Iran Foreign
Ministry, called the agreement a "non-binding document." In
response to why the text has not been published, he claimed
that "there is a legal requirement to publish agreements;
however, the publication of non-binding documents is not
common." Both sides have now admitted that the plan
contains no "quantitative, specific contracts" and is a "nonbinding
document." In my view, this confirms what was
signed was little changed from the leaked agreement last
summer. The agreement can best be described as an
aspirational document. It is a signal that Iran may grow
closer to China, but not a guarantee. It provides no methods
for enforcement, measurable goals, or specific programs. It
calls for vague "cooperation" through "enhancement of
contacts" in several areas. China also pledged to increase
investment in Iran tenfold in 2016, with little progress to
show for it five years later. In fact, Chinese investment has
decreased substantially since then.
It is notable that both pledges came in the wake of a new
U.S. president with a new foreign policy. This does not mean
that China-Iran ties are driven by U.S. policy, but the tendency
to trumpet them, and exaggerate them, is partly driven by the
desire to project strength internationally.
Whether the agreement would be "mutually beneficial"
depends on what perspective one takes. For the Iranian state,
it provides several benefits: a stable partnership with China
means a stable market for oil at a time when U.S. sanctions
have seriously hurt its revenues. It also projects an image of
strength and represents an attempt to break out of the
diplomatic isolation imposed by the United States. For China,
it provides similar benefits - a stake in a major source of oil
(although Iran provides a tiny fraction of China's overall oil
imports), a large foreign market for Chinese goods (although
one that requires a lot of investment), and both real and
symbolic progress toward the realization of the Belt and Road
Initiative and the expansion of China's global reach.
From the perspective of the Iranian people, things look
very different. Questions of "selling Iran" aside, closer
relations with China remain unpopular with many segments
of the Iranian population, who often object to the flood of
cheap, low-quality Chinese goods, which wreak havoc on the
local economy and cause a "race to the bottom." Some do not
consider China a stable partner, pointing to the fact that it
has pulled out of many deals with Iran in the past. Rather
than asking if the agreement is mutually beneficial to China
and Iran, it would be better to consider a different version of
that question: "Who in Iran and China does it benefit?"
Reports in the Iranian media have reflected this hesitation.
The official Fars News agency described the agreement as
"somewhat ambiguous, and on the other hand, in some
cases, Iran has had bitter experiences in dealing with other
countries. It has pros and cons." The report discusses general
plans for cooperation between banks and infrastructure
projects related to the "New Silk Road" and the Belt and
Road Initiative, but acknowledges the agreement is a
"roadmap." Discussing technology transfer, it urges that "if
Iran wants to make progress… it should not wait for the other
side" and needs to develop "a long-term plan" before
entering into specific agreements. Chinese investors are
"encouraged" to invest in Iran's various free economic zones,
such as Maku along the Turkish border, Qeshm island in the
Strait of Hormuz, and the strategic Arvand Free Zone near
that Shatt al-Arab.
The Huawei factor in US-India relations
Chinese Foreign Minister Wang Yi and Japanese Foreign Minister MotegiToshimitsu meet the press
in Tokyo, Japan, Nov. 29, 2020.
Photo: Ministry of Foreign Affairs of Japan
Is the China-Japan thaw over?
Shannon Tiezzi
Ahead of Japanese Prime Minister
Suga Yoshihide's first trip to
Washington, D.C. - and after an
inaugural 2+2 meeting with Biden
administration officials in Tokyo -
China's Foreign Minister Wang Yi
warned his Japanese counterpart not to
be "misled by some countries holding
biased view against China."
"The two sides should cherish and
safeguard the hard-won overall
situation of improvement and
development of China-Japan
relations… and ensure that bilateral
relations do not flip-flop, stagnate or
backpedal, and do not get involved in
the so-called confrontation between
major countries.," Wang told Japanese
Foreign Minister MotegiToshimitsu in
a phone call on April 5, according to a
read-out from China's Foreign
Ministry.
The call between Wang and Motegi
was aimed at calibrating China-Japan
relations in the midst of early outreach
from the Biden administration in the
United States. Beijing was alarmed by
unusually stern language regarding
China during foreign and defense
minister talks in Tokyo in March, and
wants to warn Japan against similar
signaling during Suga's visit to the
United States, starting on April 16.
After a Japan-U.S. 2+2 meeting in
Tokyo on March 16, the two countries'
foreign and defense minsters issued a
joint statement that "acknowledged
that China's behavior, where
inconsistent with the existing
international order, presents political,
economic, military, and technological
challenges to the Alliance and to the
international community." The second
paragraph of the statement was
essentially a list of shared concerns
about Chinese behavior, from "China's
unlawful maritime claims and activities
in the South China Sea" to the need for
"peace and stability in the Taiwan
Strait" to human rights concerns in
Xinjiang and Hong Kong.
As Yuki Tatsumi commented in an
analysis for The Diplomat Magazine,
"the degree of specificity with which the
joint statement lays out the two
countries' concerns vis-à-vis China is
unprecedented." The inclusion of a
reference to the Taiwan Strait in the
statement was a particularly notable
first, given Japan's reluctance to
mention Taiwan in the past.
"We urge the United States and
Japan to immediately stop interfering
in China's internal affairs, stop forming
the anti-China clique, and stop
undermining regional peace and
stability," Zhao added.
Wang's phone call, while more
diplomatic in tone, conveyed a similar
message: Beijing is unhappy with
Tokyo's new forward-leaning stance, in
concert with the United States. "China
hopes that Japan, as an independent
country, will look at China's
development in an objective and
rational way, instead of being misled by
some countries holding biased view
against China," Wang said. He
acknowledged Japan's alliance with the
United States, but pointed out that
"China and Japan have also signed the
Japan-China Treaty of Peace and
Friendship, so Japan also has the
obligation to fulfill the treaty."
For his part, Motegi repeated the
Japanese insistence that "the Japan-
U.S. alliance does not target any
specific third party." He continued:
"Japan attaches great importance to its
relations with China and remains
committed to ensuring the steady
development of Japan-China
relations."
At stake is a fragile thaw in China-
Japan relations that began under
former Prime Minister Abe Shinzo.
China-Japan relations were in a deep
freeze throughout much of Abe's nearly
eight-year stint at prime minister,
thanks to his flirtation with historical
revisionism (including a controversial
visit to Yasukuni Shrine in 2013). Yet
even while Abe became a champion of
the resurrected Quad and the Trans-
Pacific Partnership - both seen in
Beijing as "anti-China" - he
simultaneously managed a tentative
warming in relations with Beijing.
ArindrajitBasu
Uncertainty and speculation on
Huawei's future role in India continues,
with journalists and pundits
attempting to predict the government's
decisions on future engagement with
the Chinese telecommunications giant.
Major business relief for the firm came
on March 6 when mobile carrier Bharti
Airtel awarded Huawei a telecom
infrastructure contract worth $41.12
million to expand its National Long
Distance Network (NLD), which is
presently run by Huawei. However, just
five days later, on March 11, a media
report quoted two anonymous
government officials claiming that the
center is likely to block mobile carriers
in the country from using telecom
equipment made by Huawei amidst
security fears.
Huawei, which was forced to lay off a
majority of its local staff in July 2020
due to sidelining by the Indian
government, remains resolute in its bid
to remain in the Indian market.
Speaking with the Business Standard
on January 16, Huawei India CEO
David Li made it clear that "Whenever
there's a chance, we make our point
that we have a good record and we
create value… Also, we are here as a big
contributor and are fully compliant."
He further stressed that while the road
map of the 5G auction is uncertain, they
will continue to engage with
stakeholders.
Since the breakdown in Sino-Indian
relations following the Galwan Valley
border clashes in June 2020, Chinese
technological presence and
investments in India have been facing
the heat. A slew of restrictions on
Chinese tech including the banning of
several Chinese apps and a press note
placing cumbersome restrictions on
foreign direct investment in India
(indirectly aimed at China) give the
impression that Huawei's inroads into
India may be faltering at the hands of
regulatory intervention, even though
India is yet to articulate a clear official
stance on the company's future.
All the while, there are many open
questions about how the Biden
administration in the United States will
maintain or alter the Trump
administration's decisions on Huawei
and on Chinese technology writ large,
from entity list export controls to
broader diplomatic engagement on the
security risks of Chinese technology
and Beijing's influence over the
Chinese tech sector.
The two countries' decisions around
Huawei thus have implications not just
for the future of Sino-Indian relations
or U.S.-China relations, but for
relations between India and the United
States as well. Huawei first entered
India as far back as 1999 when it set up
a research and development (R&D)
center in Bangalore focusing on
telecom hardware. This remains its
largest overseas R&D center. Since
then, it has made inroads both into the
retail market segment, where it sells
consumer goods like smartphones, and
into the telecom segment selling
equipment and software to network
carriers. While Huawei could easily be
replaced in the consumer segment (for
example, Huawei only has a 2.5 percent
share of the mobile phone market
across India), shunting Huawei out of
the telecom segment throws up more
complexities.
Several major network carriers rely
on Huawei for 4G network equipment,
including Bharti Airtel and Vodafone
Idea, which together hold just under a
55 percent share in the wireless telecom
market in India.
Despite oscillations around Huawei's
inclusion in the 5G sector, Bharti Airtel
went ahead with India's first 5G
network trial using Huawei equipment
in 2018. Vodafone Idea also announced
a partnership with Huawei, ZTE,
Ericsson, and Nokia for its 5G trials.
Experts believe that Huawei's inroads
into the market have been made
through deft negotiations - low prices
and long-term repayment schemes
combined with a challenging phase in
the market for Airtel and Vodafonet.
Mukesh Ambani (India's richest man),
who owns telecom giant Reliance Jio,
has provided tough competition to both
these players. This is the same man
who proudly claimed in a February
2020 meeting with former U.S.
President Donald Trump that Reliance
uses no Chinese equipment - a stance
that had been robustly endorsed by
then-U.S. Secretary of State Mike
Pompeo.
Vodafone Idea posted a loss of
around $600 million for the October-
December 2020 quarter, while Bharti
Airtel was able to post a consolidated
net profit for the quarter only due to a
one-time gain after the merger of a
subsidiary Bharti Infratel Ltd. with
Indus Towers. Further, both these
giants have huge outstanding dues to
the government, which increases the
necessity for financial thrift. Analysts
believe that any ban on Chinese
vendors, including Huawei and ZTE,
could push up procurement costs by 15-
20 percent as the European
alternatives, Ericsson and Nokia, are
more expensive and have limited gear
availability in India.
Huawei equipment is also considered
superior to that of its European
counterparts by industry players.
Speaking at the World Economic
Forum in 2019, Bharti Enterprise
(Airtel) Chairman Sunil Mittal was
quick to dismiss the notion that 5G
should be politicized, and further stated
that "[Huawei's] products in 3G and 4G
are significantly superior to Ericsson
and Nokia. I use all three of them."
It is no surprise, therefore, that the
Cellular Operators Association of India
(COAI) - which counts Airtel and
Vodafone as its members - have come
out in support of Huawei many times.
In December 2018, after the Telecom
Equipment and Services Export
Promotion Council argued for a ban on
the grounds of national security, COAI
sent a letter to the Department of
Telecommunication (DoT) arguing that
Huawei was "suitably equipped" to
A man walks past a billboard advertising Chinese technology firm
Huawei.
Photo: Mark Schiefelbein
build 5G capabilities in the ecosystem
and comply with government
requirements. In December 2020,
there was another letter to the DoT
asking for country-of-origin based
restrictions and import duty to be
waived for equipment vendors,
indicating that the department wants
Chinese vendors, including Huawei
and ZTE, to be a part of India's.