Why China’s massive $400 billion deal to pave Iran’s roads is scary.
By: Andrew Moran
March 31, 2021

The U.S. government has employed a doctrine of isolating its adversaries, preventing them from attending the dinner party. As the number of nations joining America’s enemies list grows, these sanctioned rogue states are coming together and forging a bond. The neo-isolationist route executed by both GOP and Democratic administrations could backfire on the United States, resulting in a new axis of power that threatens Western supremacy on the international stage. But this new battle is not being waged with boots and bullets – China, Iran, and Russia are utilizing economics to achieve their endgame.

Iran Into The Red Dragon’s Fire

After five years of negotiations, Tehran and Beijing formally signed a 25-year cooperation agreement on March 27 to bolster their economic and political relationship. The $400 billion arrangement officially brings Iran into China’s international multi-trillion-dollar Belt and Road Initiative (BRI) that extends from East Asia to Europe to Africa. The agreement would serve as a blueprint for increased trade, transportation, and energy partnership, with Chinese investments in Iran’s infrastructure. The Middle Eastern country is also expected to receive more coronavirus vaccines from China (Sinovac’s CoronaVac) as part of the quarter-century pact. At the same time, Tehran would ship more crude oil to Beijing.

Iranian Foreign Minister Mohammad Javad Zarif described China as “a friend for hard times.” Iranian President Hassan Rouhani called cooperation between both governments “very important.” Chinese Foreign Minister Wang Yi stated that their relations “will be permanent and strategic.”

“Iran decides independently on its relations with other countries and is not like some countries that change their position with one phone call,” Wang added. “No matter how the international and regional situation changes, China will unswervingly maintain its friendly policies towards Iran.”

But while this may seem like a win-win for Iran, countries a part of the BRI might have had buyer’s remorse after learning the consequences.

Belt And Road Initiative: A Primer

China Belt and Road Initiative

The Belt and Road Initiative (BRI) is a historic global infrastructure investment plan that constructs and expands rail, road, and sea routes connecting China to Africa, Europe, and Central Asia. Officials aver that the objective is to facilitate trade, but skeptics can read beyond the hidden meaning inside the fortune cookies: gaining worldwide influence.

One of the most prominent Chinese investments has been sub-Saharan Africa, totaling close to $300 billion, with an additional $60 billion on the way. On the one hand, the funds have enhanced commerce and infrastructure. On the other, the money has spawned so-called debt-trap diplomacy.

For the last several years, China’s financial institutions have granted billions of dollars in loans to nations participating in the BRI. But once the coronavirus pandemic shut down the global economy, it became more challenging to adhere to the terms and conditions of repayment plans. As Liberty Nation reported last year, the key problem for low-income Third World nations is barter deals:

“This is when Chinese loans are denominated in something like a barrel of oil, which could be a double-edged sword. On the one hand, the more oil that is pumped out to repay the loans, the less it will be worth. On the other, Chinese companies could be given control of state-run companies or be compensated by assets.”

The insidious objectives behind BRI can also be spotted in China’s greenfield investments in its chief political and economic foe. Beijing has been exporting state-owned enterprises (SOEs) to the United States, creating as much as $10 billion in direct money-losing investments in one year. The previous administration warned states that “you are being worked,” and Senator John Kennedy (R-LA) has attempted to investigate greenfield investments conducted by SOEs that are financed by Chinese-run banks.

Circling Back To Sanctions?

Jen Psaki

How is the White House responding to the agreement? This was one of the first questions that arose immediately following the Iran-China announcement. Press Secretary Jen Psaki told reporters that President Joe Biden and his staff would weigh fresh sanctions, noting that officials have yet to take a comprehensive look at the details.

“We of course will take a look and ensure that any sanctions that need to be implemented would be as it relates to this package, but we haven’t looked at the specific agreement yet at this point in time,” Psaki said.

Beijing has defied the U.S. administration in the weeks leading up to the pact. China has quickly become the world’s largest single importer of Iran’s sanctioned crude, raising its purchases by 129% in March to 856,000 barrels per day. A senior official for Biden told the Financial Times that the Oval Office is not ignoring Chinese ports scooping up deeply discounted crude from Tehran. Washington has reportedly reminded China that there are still sanctions intact against the country, adding that “we will continue to enforce our sanctions” and “there will be no tacit green light.”

The Rebellious Alliance

Dating back to the Carter administration, the United States had often nudged China to be mindful of its relationship with Iran. Until the last few years, Beijing had been considerate of the U.S. government’s sensitivities regarding Iran. But times have changed, and the Sleeping Giant has been blunt that it “cares much less about what the U.S. thinks.” America’s influence on the world stage is gradually waning as it is chipped away, piece by piece, from de-dollarization efforts to deteriorating fiscal conditions at home. Western powers can sanction as much as they want, but when a group of economically powerful countries can gather in a corner and trade with each other, these penalties become superfluous.