For China’s Global Ambitions, Iran Is at the Center of Everything

EghtesadOnline: When Zuao Ru Lin, a Beijing entrepreneur, first heard about business opportunities in eastern Iran, he was skeptical. But then he bought a map and began to envision the region without any borders, as one enormous market, reads a New York Times article published on Tuesday. Excerpts follow:

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29 July 2017

“Many countries are close by, even Europe,” Lin, 49, said while driving his white BMW over the highway connecting Tehran to the eastern Iranian city of Mashhad recently. “Iran is at the center of everything.”

For millenniums, Iran has prospered as a trading hub linking East and West. Now, that role is set to expand in coming years as China unspools its “One Belt, One Road” project, which promises more than $1 trillion in infrastructure investment—bridges, rails, ports and energy—in over 60 countries across Europe, Asia and Africa. Iran, historically a crossroads, is strategically at the center of those plans.

Like pieces of a sprawling geopolitical puzzle, components of China’s infrastructure network are being put in place. In eastern Iran, Chinese workers are busily modernizing one of the country’s major rail routes, standardizing gauge sizes, improving the track bed and rebuilding bridges, with the ultimate goal of connecting Tehran to Turkmenistan and Afghanistan.

Much the same is happening in western Iran, where railroad crews are working to link the capital to Turkey and, eventually, to Europe. Other rail projects will connect Tehran and Mashhad with deepwater ports in the country’s south.

Once dependent on Beijing during the years of international isolation imposed by the West for its nuclear program, Iran is now critical to China’s ability to realize its grandiose ambitions. Other routes to western markets are longer and lead through Russia, potentially a competitor of China.

“It is not as if their project is canceled, if we don’t participate,” said Asghar Fakhrieh-Kashan, the Iranian deputy minister of roads and urban development. “But if they want to save time and money, they will choose the shortest route.”

He added with a smile: “There are also political advantages to Iran, compared to Russia. They are highly interested in working with us.”

Others worry that with the large-scale Chinese investment and China’s growing presence in the Iranian economy, Tehran will become more dependent than ever on China, already its biggest trading partner.

China is also an important market for Iranian oil, and because of remaining unilateral American sanctions that intimidate global banks, it is the only source of the large amounts of capital Iran needs to finance critical infrastructure projects. But that, apparently, is a risk the leadership is prepared to take.

Together Moving Ahead

“China is dominating Iran,” said Mehdi Taqavi, an economics professor at Allameh Tabataba’i University in Tehran, adding that the “Iranian authorities do not see any drawbacks to being dependent on China. Together, we are moving ahead.”

It is not just roads and rail lines that Iran is getting from China. Iran is also becoming an increasingly popular destination for Chinese entrepreneurs like Lin. With a few words of Persian, as well as low-interest loans and tax breaks from the Chinese and Iranian governments, he has built a small empire since moving to Iran in 2002. His eight factories make a wide variety of goods that find markets in Iran and in neighboring countries.

“You can say that I was even more visionary than some of our politicians,” Lin said with a laugh.

Since 2013, when the “One Belt, One Road” plan was started, he has had dozens of visitors from China and multiple meetings with the Chinese ambassador in Tehran.

“I was a pioneer and they want to hear my experiences,” he said.

Lin established his factories along what will be a key part of the trade route—a 575-mile electrified rail line linking Tehran and Mashhad. When completed and attached to the wider network, the new line will enable Lin to export his goods as far as northern Europe, Poland and Russia, at much less cost than today.

“I am expecting a 50% increase in revenue,” Lin said. “Of course, Iran’s economy will also grow. China will expand. Its power will grow.”

“Life is good in Iran,” he said. “The future is good.”

Iranians who spotted Lin driving between his factories waved and smiled. Having mastered a few basic phrases in Persian over the years, he said “hi” and “goodbye” to some of his 2,000 employees. “Iranians are hard workers,” he said.

Even when the boss was out of earshot, workers in his factories said that they were very happy with the Chinese.

“They pay every month on time and only hire people instead of fire,” Amir Dalilian, a guard, said. “If more will come, our economy will flourish.”

When completed, the proposed rail link will stretch nearly 2,000 miles, from Urumqi, the capital of China’s western region of Xinjiang, to Tehran. If all goes according to plan, it will connect Kazakhstan, Kyrgyzstan, Uzbekistan and Turkmenistan, China’s state-owned paper, China Daily, wrote.

Track sizes need to be adjusted and new connections made, as well as upgrades to the newest trains.

In a 2016 test, China and Iran drove a train from the port of Shanghai in eastern China to Tehran in just 12 days, a journey that takes 30 days by sea. In Iran, they used the existing track between Tehran and Mashhad, powered by a slower diesel-powered train. When the new line is opened in 2021, it is expected to accommodate electric trains at speeds of up to 125 miles an hour.

More Than Transportation

Fakhrieh-Kashan, an English speaker who oversees negotiation of most of the larger international state business deals, said the Chinese initiative would do much more than just provide a channel for transporting goods.

“Think infrastructure, city planning, cultural exchanges, commercial agreements, investments and tourism,” he said. “You can pick any project; they are all under this umbrella.”

Business ties between Iran and China have been growing since the United States and its European allies at the time started pressuring Iran over its nuclear program around 2007. China remains the largest buyer of Iranian crude, even after western sanctions were lifted in 2016, allowing Iran to again sell oil in European markets.

Chinese state companies are active all over the country, building highways, digging mines and making steel. Tehran’s shops are flooded with Chinese products and its streets clogged with Chinese cars.

Iran’s leaders hope that the country’s participation in the plan will enable them to piggyback on China’s large economic ambitions.

“The Chinese plan is designed in such a way that it will establish Chinese hegemony across half of the world,” Fakhrieh-Kashan said. “While Iran will put its own interests first, we are creating corridors at the requests of the Chinese. It will give us huge access to new markets.”