China to invest $280bn in Iran’s petroleum sector to strengthen strategic partnership

A staggering 25-year deal could mark seismic shift in the global hydrocarbons sector.

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In a major development on the global stage, Iran and China are cozying up with the later making a landmark $280bn investment to develop former’s oil, gas and petrochemicals sectors. Not just that, China will also be investing in a whooping $120bn in Iranian transport sector too, The Petroleum Economist an energy industry monthly magazine reported.

Iran’s foreign minister Mohammad Zarif with his Chinese counterpart Wang Li will soon present a road map for the China-Iran comprehensive strategic partnership, signed earlier in 2016.

Despite representing a potentially material shift to the global balance of the oil and gas sector, many of the key specifics of this new understanding will not be released to the public. The news has sent a far reaching wave across the global and circles monitoring International Relations and Global Economy are all ears and eyes to a potentially huge global development.

China in Iran

The relation doesn’t only have Petroleum and Transportation dimension to it but a Military dimension too as “up to 5,000 Chinese security personnel on the ground in Iran to protect Chinese projects, and there will be additional personnel and material available to protect the eventual transit of oil, gas and petchems supply from Iran to China, where necessary, including through the Persian Gulf,” as per the Iranian source.

China’s road to EU : Transport infrastructure

Iran had signed a contract with China to implement a project to electrify the main 900km railway connecting Tehran to the north-eastern city of Mashhad. Jahangiri added that there are also plans to establish a Tehran-Qom-Isfahan high-speed train line and to extend this upgraded network up to the north-west through Tabriz.

Tabriz is the starting point for the Tabriz-Ankara gas pipeline, will be a pivot point of the 2,300km New Silk Road that links Urumqi (the capital of China’s western Xinjiang Province) to Tehran, connecting Kazakhstan, Kyrgyzstan, Uzbekistan and Turkmenistan along the way, and then via Turkey into Europe, says the Iranian source.

Iran’s Benefit

Apart from all the lucrative investments in oil and infrastructure, maybe the best thing for Iran is that China has agreed to increase imports of Iranian oil, in defiance of a US decision not to extend China’s waiver on imports from Iran in May. This step will help Iran a lot that faces crippling US sanctions. All this increased Sino-Iran engagement would help Iran in shrugging US pressure off.

“In order to circumvent any further ramping up of sanctions—and over time encourage the US to come back to the negotiating table—Iran now has two out of five UNSC votes on its side. The fact that [Iran foreign minister Mohammad] Zarif showed up unexpectedly at the G7 summit in August at the invitation of France may imply it has another permanent member on side,” the source adds.

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