A secret oil deal between China and Iran at the heart of the One belt One Road project will change the geopolitical balance of power in the Middle East. The manufacturing products created by utilizing cheap Iranian resources will be used to crack the western markets through the China-Iran axis along with unrestricted access to Iranian military bases. As always Indian policymakers have been caught in this changing dynamics leaning heavily on one player after other without a clear vision of its own.
Must Watch: Would you live on 3D Printed Mars for a year for $60,000?
The Secret China Iran Deal
In 2016 an agreement was signed to signify the 25-year China-Iran strategic partnership. So to take this forward, last August, Iran’s Foreign Minister, Mohammad Zarif, paid a visit to his Chinese counterpart, Wang Li, to present a roadmap.
Though the information in the updated agreement was not revealed, last week former Iranian President Mahmoud Ahmadinejad gave a clear hint to some secret parts of this deal. He stated that:
“It is not valid to enter into a secret agreement with foreign parties without considering the will of the Iranian nation and against the interests of the country and the nation, and the Iranian nation will not recognize it.”
The Galwan Valley standoff is a Chinese pre-emptive measure in response to India’s Darbuk–Shyok–DBO Road infrastructure project in Ladakh. The DBO road project is seen by the Chinese as a tool to offset the China Pakistan Economic Corridor.https://t.co/XkqUVkKN8h
— GreatGameIndia (@GreatGameIndia) June 17, 2020
The 12% Discount
This deal, signed just last year states that China will invest US $280 billion in expanding Iran’s oil, gas, and petrochemicals sectors. This amount being given by China will be front-loaded into the first five-year period of the new 25-year deal, and further investments will be available in each subsequent five year period, provided that both parties agree.
Another US $120 billion of investment will be for upgrading Iran’s transport and manufacturing infrastructure, this amount will increase in each subsequent period, should both parties agree.
Subscribe to GreatGameIndia
Just to begin with, Chinese companies will bid on any stalled or uncompleted – oil, gas, and petrochemicals projects in Iran. China is granted the offer to buy any and all oil, gas, and petchems products at a minimum guaranteed discount of 12 per cent.
One Belt One Road
The 25-year deal outlines that China will help in the build-out of Iran’s core infrastructure, which will be in alignment with China’s key geopolitical multi-generational project, ‘One Belt, One Road’ (OBOR).
US Secretary of State Mike Pompeo has said that the US is deploying troops from Germany to India
One of the reason Pompeo gave for reducing American troop presence in Europe was the recent clash between India and China at Galwan Valleyhttps://t.co/XK6bFXEvfm
— GreatGameIndia (@GreatGameIndia) June 26, 2020
China aims to utilize the cheap labour available in Iran to build factories with master infrastructure. These will be financed, designed, and overseen by big Chinese manufacturing companies. The final manufactured products will then go to the Western markets through new transport links, also planned, financed, and managed by China.
There are also plans to establish a Tehran-Qom-Isfahan high-speed train line.
The Military Element
Now, though, another element that will change the entire balance of geopolitical power in the Middle East has been added to the deal. If the aerial and naval military elements work in co-operation between Iran and China, with Russia also playing an integral role then this deal will be extended to include even new military elements that are proposed by senior figures in the IRGC [Islamic Revolutionary Guard Corps] and the intelligence services.
“There is a meeting scheduled in the second week of August between the same Iranian group, and their Chinese and Russian counterparts, that will agree the remaining details but, provided that goes as planned, then as of 9 November, Sino-Russian bombers, fighters, and transport planes will have unrestricted access to Iranian air bases,” he said.
Iranian Naval Forces to establish Naval Base in Indian Ocean by March 2021 to counter Anglo-American Diego Garcia Base – the key launchpad for western powers in case of an attack on Iran that is beyond the range of Iranian ballistic missiles.https://t.co/R8UamtBbtX
— GreatGameIndia (@GreatGameIndia) June 23, 2020
This process will begin with purpose-built dual-use facilities next to the existing airports at Hamedan, Bandar Abbas, Chabhar, and Abadan.
Iranian Sanctions & JCPOA
What Iran hopes to receive in return for its co-operation with China, and Russia, is conveyed in this statement that came last week when Zhang Jun, China’s permanent United Nations (U.N.) representative, told the U.S.:
“To stop its illegal unilateral sanctions on Iran… The root cause of the current crisis is the U.S.’s withdrawal from the Iran nuclear deal in May 2018 and the re-imposition of unilateral sanctions against Iran.”
He also opposed the U.S.’s push for the extension of the U.N. arms embargo on Iran, which expires in October. “This has again undermined the joint efforts to preserve the JCPOA [Joint Comprehensive Plan of Action],” Zhang said, and added: “The [JCPOA] agreement was endorsed by the U.N. Security Council [UNSC] and is legally binding.”
China has occupied Rui village of #Nepal and removed the boundary pillars to legitimise its annexation. China has gradually made inroads into strategic lands at 11 places across Nepal with around 36 hectares of land in four districts.https://t.co/5aGacItx96
— GreatGameIndia (@GreatGameIndia) June 23, 2020
He concluded, “We urge the U.S. to stop its illegal unilateral sanctions and long-arm jurisdiction, and return to the right track of observing the JCPOA and Resolution 2231 [of the UNSC].”
This partnership was a way to secure China’s support and it is speculated that the real reason is included in the secret part of the deal. Talking of Russia, including China these two countries have two-fifths of the total Permanent Member votes on the UNSC, plus there is the US$400 billion+ of investments promised by China to Iran. China guarantees that it will continue to take all of the oil, gas, and petchems that Iran requires.
Indian Energy Dependence
Meanwhile, Trump administrations hostility towards Iran resulted in an ultimatum to bring down import of Iranian oil to zero. This was dutifully followed by Indian policymakers. And now in a big blow to the Aatmanirbhar Bharat Abhiyan, India is planning to store its Oil in US Reserves. Although the move will create further energy-dependency for India in the event of supply-chain disruption or price-spikes, the policy is being projected as a strategic masterstroke by the Oil Minister.
In big blow to #AatmaNirbharBharat, India to store its Oil in US Reserves. Although it will create further energy-dependency for India in event of supply disruption or price-spikes, the policy is being projected as strategic masterstroke by Oil Minister.https://t.co/eBUI3PJyN2
— GreatGameIndia (@GreatGameIndia) July 21, 2020
India has always been looking to expand the storage capacity. But instead of building storage infrastructure and protecting our strategic reserves within India, the Oil Ministry is hiring storage in the US and projecting it as a feasible option for India. These reserved stocks if within India can be used in times of extreme price volatility or supply disruption. The same becomes a tool of geopolitical influence if located at any foreign location.
So, here is a question for the “strategic experts” of India: What route do you think the Chinese will carry oil from Iran into mainland China?
GreatGameIndia is a journal on Geopolitics and International Relations. Get to know the Geopolitical threats India is facing in our exclusive book India in Cognitive Dissonance. Past magazine issues can be accessed from the Archives section.