May 14, 2021
by Warren L. Nelson
A huge national debate has been rattling across Iran over the new “comprehensive strategic partnership” agreement signed with China in March—a debate that is effectively hobbled by the fact that no one knows what is really in the agreement.
On the one side, supporters say the agreement is of immense importance because it will boost Chinese investment in Iran and help the country emerge out from under US sanctions while aligning Beijing as a virtual ally of the Islamic Republic in opposing Western interference.
But opponents—and they seem to come in huge numbers from both right and left, from both outside and deep inside the regime—say the new agreement will reduce Iran to a colonial possession of the Chinese, tied to Beijing by a short umbilical cord and forced to toe China’s line.
Rarely heard is a third possibility—that the new agreement is little more than yet another hollow “memorandum of understanding” that Iran has signed with many countries and that are long on rhetoric but short on substance.
The main problem is that the regime has not published the text of the agreement leaving everyone on both sides to sound off with statements about the document’s contents without having to base their opinions on any facts whatsoever.
The best argument that there is something in the agreement that Iranians would detest is that the government refuses to reveal the text. Government officials have said repeatedly that China does not want the text published. But the regime has a strong bias against transparency and often seems to prefer classifying the time of day and toilet paper as secret. So, the fact that it won’t publish the text does not really indicate anything other than a predilection to lock the public out of debate on public issues.
A text purporting to be a draft of an Iranian proposal for the “strategic cooperation agreement” with China was leaked last summer and certainly contains some features objectionable to almost every Iranian.
That text asserts that China will be able to buy Iranian oil at a 32 percent discount. While Iran must sell its oil nowadays at some sort of discount, 32 percent is beyond the realm of credibility. What’s more, some reports say China would not have to pay for the oil for two years and that its payments would be in Chinese yuan, not dollars or some other hard currency. That means Iran would have to use the foreign exchange to buy Chinese products,
Many people see an oil sales deal as central to both countries. But China buys far more of its oil from Saudi Arabia, and would undermine its relations, not only with Saudi Arabia, but with the Arab world as a whole if it shifted to buying most of its oil from Iran.
Some reports say the deal allows China to lease Kish Island for 25 years.
Another section of the purported draft says China will be allowed to station 5,000 security troops in Iran to defend its projects. But there is no way a revolutionary regime could agree to any such thing. Iranians all across the political spectrum would be incensed by that. A few years ago, Tehran gave the Russian Air Force landing rights at the airbase near Hamadan to use on bombing runs to Syria. The uproar was so great that the Islamic Republic canceled the concession after just one week.
These asserted concessions in the draft text, purportedly drafted by Iran and presented to China, make it highly unlikely that the “leaked” document is anything but a fraud.
But that doesn’t give any hint of what actual concessions the Islamic Republic was prepared to make to China.
The day after the agreement was signed, Iranians protesting the deal appeared in the streets of several cities opposing the deal they said amounted to “selling Iran.” The next day, a petition opposing the agreement garnered the signatures of 120,000 people on social media.
All the commentaries now going the rounds say the agreement provides for China to invest $400 billion in the Iranian economy over the next 25 years. That number is uniformly treated as fact. However, that number does not appear anywhere in the leaked “draft.” In fact, there is no number at all in that text.
The $400 billion figure was one of numerous investment figures that appeared when the debate started last summer. It was the highest of many numbers supposedly declaring what China would invest in Iran. All the other numbers that once floated about have now disappeared into the ether and $400 billion is being taken as gospel.
The 25-year agreement has been discussed within Iran as if it were the only such agreement that China has signed with any country and puts Iran in a very unique category. In fact, however, China has signed many “strategic cooperation agreements” with many countries. They are usually the basis for countries joining in China’s “Belt and Road Initiative” under which China underwrites infrastructure projects that help bring others within China’s economic ambit.
But many countries have become leery of such arrangements with China in the last few years since Sri Lanka couldn’t fulfill its side of a port development project with China and China invoked provisions of the agreement to effectively take over the port.
It is also worth noting that while the agreement has become a huge issue within Iran, China has essentially treated it with a yawn. There has been little commentary or even notice of the agreement in China.
The Iranian government has said the agreement is not a treaty and contains no contractual commitments. As a result, there is no need to submit it to the Majlis.
This makes it sound like a vague “memorandum of understanding,” the type of high-sounding, low-content agreement that Iran loves and negotiates constantly with foreign countries. The Foreign Ministry has said any contracts for actual Chinese development projects in Iran would have to be negotiated individually later. The Foreign Ministry has been silent about how the projects would be paid for—for example, possibly by the sale of discounted oil.
Meanwhile, the South China Morning Post, an independent English-language newspaper published in Hong Kong, reported April 16 that China was refusing to sell its Chengdu J-10C fighter jets to Iran for oil and was insisting on hard currency. It said China was currently afloat in oil and didn’t want more. That seemed contrary to all the reports that discounted oil was the heart of the agreement.
What’s more, Iran’s Tasnim news agency said a major part of the agreement called for the creation of a joint Bank of Iran and China to provide for financial transactions outside the international Swift system based in Belgium. That bank would be for cash transactions and assumes Iran would be paying in the cash that China purportedly wants for its fighter jets.
Meanwhile, no Chinese investment in Iran has been announced. In fact, quite the opposite has happened—the same day China and Iran signed the agreement, Iran’s Oil Ministry announced that China had withdrawn from a contract to develop the Yadavaran oilfield in Khuzestan province. The regime has said repeatedly that the agreement is a “road map” and not a list of projects, with each individual project having to be negotiated and separately.
The regime likes to think that it has some kind of special relationship with China. But before Chinese Foreign Minister Wang YI came to Tehran to sign the agreement, he visited Saudi Arabia and Turkey. It would be helpful to know what he told those governments about the agreement. No one has said. It is speculated that he laid out the contents of the agreement to make clear that it did not mean China was signing on to any political alliance with Tehran, which would certainly have angered both Saudi Arabia and Turkey.
Furthermore, China previously signed “comprehensive strategic partnerships” (CSPs) in the Middle East with Iraq in 2015, Saudi Arabia in 2016 and the UAE in 2018. That telegraphs that the agreement with Iran is anything but the far-reaching strategic alliance that many in Iran would like the world to believe. Esfandyar Batman-ghelidj of Bouse & Bazaar said, “Rather than elevating the China-Iran relationship to new heights, the belated signing of this CSP is probably a clear signal that Iran wants to catch up to its neighbors.”
Some think Iran may even have pushed China to sign the deal now—while the Islamic Republic is hoping to induce Washington to rejoin the nuclear agreement—as a pressure effort to get the US back in the nuclear agreement.
Dr. Dina Esfandiary, a senior adviser with the International Crisis Group, recently wrote, “Sino-Iranian relations always had a few key premises: They would not come at the expense of the two countries’ relations with other major powers, the US in particular; they would be transactional, based on mutual interests and necessities; they would be mutually convenient, with Chinese and Iranian leaders working together only when it suited them; and there would be no strings attached.”
She also said she agreed with Batmanghelidj, founder of Bourse & Bazaar, who said the $400 billion figure was “completely made up [and] illogical.”
And Afshin Molavi, recognizing that there is no text to go by, suggested that everyone should follow the money. He said there have often been promises of big bucks from China, but the actual record on Chinese investment has been uneven, with promises often not materializing.
In 2016, China and Iran announced they were going to negotiate this strategic agreement and proclaimed that they had a goal of bosting two-way trade volume to $600 billion within a decade. Five years out, trade volume is down, not up. Total trade in the Persian year that ended at Now Ruz came to $26.8 billion, among the lowest in the last decade and barely 1 percent of everything China invested abroad in that time period.
According to the American Enterprise Institute, China invested $26.9 billion in Iran in the 15 years from 2005 through 2019—and average of just $1.8 billion a year.
The bottom line remains that no one discussing the agreement has seen a text, so everyone presenting conclusions is standing on sand.