Sun, May 13, 2018 - Page 7 News List

Iran’s door to the West is slamming shut, and that leaves China

By Ladane Nasseri  /  Bloomberg

Tehran traffic is gridlocked half the time, and the city spends most of the year engulfed in smog, so it is not surprising that locals travel underground when they can — on a metro system that sometimes carries 2 million people a day.

During the sanctions decade, when Iran was largely frozen out of global commerce, the capital’s authorities managed to steadily expand the network — nearly doubling its size.

It was not easy.

Often, “the parts we needed, we had to build ourselves,” Tehran Urban and Suburban Railway Operating Company deputy managing director Ali Abdollahpour said.

A constant of those years was Chinese help, with everything from building rails to manufacturing wagons. The nuclear deal of 2015, and the lifting of major sanctions the year after, was supposed to broaden Iran’s options.

Abdollahpour had his eyes on Europe (“their tech is better”) for essential braking and signaling systems.

However, when a major contract that would supply more than 600 wagons came up for tender, it went to a unit of China’s CRRC Corp, which beat off two European bids to win a contract worth more than US$900 million this year.

That is part of a wider pattern. The nuclear deal has not delivered more than a trickle of Western investment — and even that is poised to dry up, after US President Donald Trump pulled out of the agreement and said he would reimpose sanctions

To develop its US$430 billion economy, Iran is being forced to rely on political allies in the East.

Trade with China has more than doubled since 2006, to US$28 billion. The biggest chunk of Iran’s oil exports go to China, about US$11 billion a year at current prices.

Chinese direct investment is arriving too, although reliable data are harder to come by.

China is “already the winner,” said Dina Esfandiary, a fellow at the Centre for Science and Security Studies at King’s College in London, and coauthor of the forthcoming Triple Axis: Iran’s Relations with Russia and China.

“Iran has slowly abandoned the idea of being open to the West,” she said. “The Chinese have been in Iran for the past 30 years. They have the contacts, the guys on the ground, the links to the local banks.”

And they are more willing to defy US pressure as Trump slaps sanctions back on.


Even that possibility has kept many European banks and manufacturers from doing business with Iran and some of those that were ready to do so could reconsider in the light of tougher US rules.

Airbus Group’s contract for 100 jetliners, worth about US$19 billion at list prices, was already held up amid financing problems, and US Secretary of the Treasury Steven Mnuchin on Tuesday said the export license would be revoked (Russian manufacturers could be the beneficiaries).

Total has a contract to develop the South Pars gas field together with China National Petroleum, but has signaled that it would pull out if the US reimposes sanctions and it cannot win an exemption.

In that event, Iran says, the Chinese partner would take over Total’s share.

Chinese companies are not beyond the reach of US regulators. Huawei Technologies is said to be under investigation for possible violations over sales to Iran, and network-equipment maker ZTE was banned from buying US components for a similar offense.

Compared with the pre-sanctions era, “Chinese companies have become much more multinational and global, they have more of a brand reputation that’s important to them,” said Esfandyar Batmanghelidj, founder of the Europe-Iran Forum, an annual gathering for executives.

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