Feature Image – “What goes around, comes around.”

by Petr Konovalov, with New Eastern Outlook, Moscow, and the Institute of Oriental Studies of the Russian Academy of Sciences, a research institution for the study of the countries and cultures of Asia and North Africa.

“With a gentleman I am always a gentleman and a half, and with a fraud I try to be a fraud and a half.” ~ Count Otto von Bismark

[ Editor’s Note: Mr. Konovalov breaks new ground with his coverage of China’s goal of helping Iran modernize its banking sector. I would add that an important parallel goal would be to ‘sanction proof’ it after the US reneged on the JCPOA. The US not only stiffed Iran on its trade benefits, but tried to crush its economy via sanctions, an act that will forever stain the legacy of US diplomacy.

Such protection would require having access to an alternate payments settlement vehicle to use when the US is in one of its sanctions temper tantrums.

As for the Silk Road project, that is a no-brainer bonanza due to its being a two way street, as goods from China will be faster and cheaper to get, and the Iranian exports going West will have a similar economic edge.

Once this is fully developed, all the participating countries will have a vested interest in opposing a first nuclear strike capability by Western actors, and be open to stationing defensive weapons on their territory to protect the long term security of their consolidated trading network.

If this happens, then the push by the US and West to dominate the East will have been viewed as self-defeating. This is exactly why a number of countries don’t want to pick a side, when they could find themselves as a sacrificial pawn during a time of high tensionsJim W. Dean ]

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First published … August 18, 2021

Ibrahim Raisi, winner of the presidential election in the Islamic Republic of Iran this year, with his team, expects to increase cooperation with the People’s Republic of China (PRC) in the next few years.

The Iranian leadership has long been attaching great importance to its dialogue with China and has done everything in its power to strengthen diplomatic relations between the two states.

What’s the reason for Iran’s desire to establish the closest possible ties with Beijing? How do other states feel about this, and what is the partnership between the two countries like? These questions will be discussed below.

First of all, it should be noted that Iran occupies a challenging geopolitical position. On the one hand, it is surrounded by countries in the Middle East that are sharply opposed to Tehran’s policies. On the other side is Afghanistan, where the Taliban (banned in the Russian Federation) is becoming louder and louder every day.

Against this already challenging backdrop, the US sanctions against the Islamic Republic are a real hindrance to Iran’s prosperity. The only true allies of Iran are three countries. First of all, there is Syria, whose authorities are extremely grateful to Tehran for its help during the civil war.

Secondly, there is Russia, whose interests largely coincide with those of the Islamic Republic of Iran. Thirdly, there is China who seeks to oppose the US as a significant force on the world stage and be a major trading partner with the maximum number of countries.

The Iran-China strategic cooperation agreement, signed in March 2021, is a significant page in the history of Iran-China cooperation. This intergovernmental agreement declares a close relationship in the economic and military spheres. The Iranian leadership was happy to take this step, as the country now has the full support of the state that has the highest GDP in the world.

Countries opposed to Tehran’s actions have a negative view of both the Iran-China partnership and the signing of the aforementioned agreement. This is because they have no desire to see the Islamic Republic as a more influential country. Saudi Arabia fears that Iran will take away its status as a leading power in the Middle East region.

Israel is undisguisedly anxious about the growing power of a country that still does not officially recognize it as a full-fledged state. The US and its NATO allies oppose the potential modernization of the Iranian armed forces because, at the moment, Western countries do not have the resources needed to build up a military presence in the Middle East.

The main essence of the Iran-China agreement is that China will invest about $400 billion into the Iranian economy within 25 years in exchange for uninterrupted supplies of Iranian energy resources. In addition, the Celestial Empire plans to invest impressive sums in the construction of ports and railroads on the territory of the Islamic Republic.

China attaches great importance to the economic well-being of its partners because Beijing understands that more profitable deals can be struck with a country whose economic indicators are high.

Also, a lot of attention in this agreement is paid to improving the banking sector and developing the information technology sector. At present, Iran’s banking system is archaic and does not meet world standards.

The main reason for this situation is outdated software, irrational management decisions and a lack of competent professionals. Beijing’s plans include modernizing the country’s financial institutions to bring the well-being of Iranians to a new level.

We can assume that cooperation between Iran and China will soon be a reason to lift US sanctions. The US is losing its former power, and in order to maintain its status as one of the world’s leading economies, it needs to have links with prosperous developing countries.

If cooperation with China improves Iran’s well-being, Washington will reconsider its attitude toward the Islamic Republic. Of course, in this case, a lot will depend on Tehran, which may not want to interact with yesterday’s foe.

Called to link China to as many countries as possible through One Belt, One Road unified transport infrastructure, this project plays a vital role in developing Iranian-Chinese relations. It is a significant contribution to Iran’s integration into the single economic space.

With its help, Iranian companies will be able to transport their goods to other countries at minimal cost, thus promoting the image of the Iranian manufacturer in the global market. A network of infrastructure projects will accelerate Iran’s GDP growth.

After signing the Iran-China Strategic Cooperation Agreement, the Chinese influence in Iran is expected to increase. An growing number of commercial organizations from China will conduct their activities on the territory of the Islamic Republic. Of course, this will lead to an increase in the number of Chinese citizens staying in Iran. If this happens, the cultural exchange between the two countries will become much more intense.

According to some reports, the text of the Agreement also refers to joint military projects. If this is true, there could be Chinese military units on the Iranian territory in the long term. Of course, Iranian law prohibits the presence of foreign soldiers on the state’s territory. Still, the parliament of the Islamic Republic can revise these legal norms and cancel them as outdated and not corresponding to modern realities.

Based on the above, we can conclude that it is beneficial for Tehran to cooperate with China. Today, the Islamic Republic has a small list of friends, and Iran vitally needs to maintain ties with solid power.

Also, the Iranian leadership is interested in increasing economic growth and improving the living standards of the country’s citizens, which seems possible, among other things, through participation in Chinese trade, financial and other projects. Most importantly, it allows Iran to secure its borders against hostile states seeking to change the political regime in the country.

Petr Konovalov, a political observer, exclusively for the online magazine “New Eastern Outlook”.

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2 COMMENTS

  1. “Also, a lot of attention in this agreement is paid to improving the banking sector and developing the information technology sector. At present, Iran’s banking system is archaic and does not meet world standards.
    The main reason for this situation is outdated software, irrational management decisions and a lack of competent professionals. Beijing’s plans include modernizing the country’s financial institutions to bring the well-being of Iranians to a new level.”

    Just because Trump canceled the Obama’s removal of Iran from FATF’s blacklist by making the issue the Palermo and CFT conventions ratification an excuse, it doesn’t make any of the above statement true. I wouldn’t exactly call the 35 major banks with their 22,000 branches serving 85 million people who don’t have to report their balance sheets to Tel Aviv, an archaic system.

    • Plus imagine getting 15% (used to be 25%) interest on your regular deposit at the bank which is paid on the dot with pride and government assurance.
      When you suddenly hear a royalist expat who hasn’t visited the country in years saying we love it there, associate that with their paid interest on their deposit.

      Every merchant has a card reader (POS terminal) even in the middle of the most remote mountains at altitude.
      “Iran’s payment card market is developed, with penetration of 4.3 cards per individual in 2018 – the highest in comparison to peers Israel, Kuwait, the UAE, Bahrain, Saudi Arabia, Lebanon, and Oman.”