Is Iran Being Turned into a Chinese Gas Station?

O n March 27, in a ceremony in Tehran, the foreign ministers of Iran and China signed an agreement for China to invest $400 billion in Iran over 25 years. The New York Times reported on the deal under the headline “China, With $400 Billion Iran Deal, Could Deepen Influence in Mideast” and added this:

Iran did not make the details of the agreement public before the signing, nor did the Chinese government give specifics. But experts said it was largely unchanged from an 18-page draft obtained last year by The New York Times.

That draft detailed $400 billion of Chinese investments to be made in dozens of fields, including banking, telecommunications, ports, railways, health care and information technology, over the next 25 years. In exchange, China would receive a regular — and, according to an Iranian official and an oil trader, heavily discounted — supply of Iranian oil.

I’m dubious. First, this deal was proposed five years ago, in 2016, when Xi Jinping visited Iran. That’s a long time to get to signing — and the terms of the deal have still not been made public. Why not? One theory is that Iran will be selling oil to China at a large discount — large enough to spur resistance and protests in Iran were it to become known. How much will materialize, turning paper into actual commerce, remains to be seen.

Consider the numbers, too. According to the World Bank, total foreign direct investment (FDI) in Iran, from all sources, maxed out in 2017 at $5 billion, but by 2019 had fallen to $1.5 billion. It seems to have fallen further in 2020, to about $1 billion. This agreement with China — $400 billion in 25 years — calls for $16 billion per year from China alone. Does that seem realistic for Iran, a country that has never absorbed more than $5 billion in a single year in FDI from the entire world? There is also good reason to question the notion that China will significantly increase its reliance on Iran for oil: Would China want to rely on a sole, Middle Eastern source rather than diversify its supplies?

There are other ways of evaluating how real the $400 billion figure may be. According to the China Global Investment Tracker produced by the American Enterprise Institute and the Heritage Foundation, in the 15 years between 2004 and 2019, China invested a total of $182 billion in the United States, or an average of $12 billion a year; $98 billion in Australia, or $6.5 billion per year; and $83 billion in the U.K., or $5.5 billion per year. The numbers are lower for countries such as Brazil, Canada, Germany, and Switzerland. How realistic is it, then, that China will invest more annually in Iran than it does — or has ever done — in any other country in the world?

This is not to suggest that a large economic deal between Iran and China has no meaning. One has to assume that Iran will sell more and more oil to China, defying and undermining U.S. sanctions. And one should also assume that China will increase its investments in Iran, in many sectors of the economy. Among other harmful effects, we should consider how this will affect China’s willingness to discipline Iran in the International Atomic Energy Agency for its continuing violations of the JCPOA, the Additional Protocol, and the Non-Proliferation Treaty — violations that bring Iran closer to being able to create a deliverable nuclear weapon.

Finally, one has to wonder about the prospects of Iran selling “heavily discounted” oil to China as its end of the deal, as is suggested in the New York Times report. The regime of the ayatollahs claims that Iran seeks independence and self-determination, comparing its firmness on this subject with the supposed weakness of the Shah. But suppose this deal with China came true. Then Iran would be selling oil cheaply to China, and China would be buying up the whole country. Remember: The maximum amount ever invested in Iran in one year was $5 billion, and under this supposed deal China alone would be investing three times that amount annually for 25 years. At the end of that period, Iran would be a wholly owned subsidiary of China, basically a gas station for the People’s Republic.

Skepticism about all the numbers is very much in order. And for Iranians, information about what has been agreed should be the key goal. Either the amounts are ridiculous and are mostly propaganda designed to boost both the Chinese and Iranian regimes. Or if the amounts are accurate, the regime, suffering under U.S. sanctions, is selling the country to China.