07.04.2021 Views

08-04-2021

You also want an ePaper? Increase the reach of your titles

YUMPU automatically turns print PDFs into web optimized ePapers that Google loves.

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and likely will not be published, so all analysis must be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.

Hooray! Your file is uploaded and ready to be published.

Saved successfully!

Ooh no, something went wrong!