China to invest $400 bn in Iran’s energy, transport sectors

London: In a quantum jump to the China-Iran 25-year comprehensive strategic partnership plan of 2016, China will pump in $280 billion to develop the Middle Eastern country’s oil, gas and petrochemical sector, $120 billion in transport and infrastructure, and increase its purchase of Iranian crude, a report said.

The new developments – which could upend the global hydrocarbon market – follows the discussions during Iranian Foreign Minister Mohammad Zarif’s visit to his Chinese counterpart Wang Li late August, with several specific points of the agreement kept out of the public domain, according to the Petroleum-Economist.

Citing a source connected to the Iranian Petroleum Ministry, the key elements of the understanding are the huge Chinese investments, which are come across the first five years, while more can come in subsequent five year period after mutual agreement.

Chinese companies will also get first refusal to bid on any new/pending oil and gas field developments, as well as involvement with any petrochemical projects.

China will also be allowed to station its personnel in Iran, including up to 5,000 security personnel for protection of its projects, and later to safeguard the transit of fuel, “including through the Persian Gulf”, as per the source.

China will also be able to buy any and all oil, gas and petrochemical products at a minimum guaranteed discount – which could go up to 32 per cent, defer payment for up to two years, and pay in soft currencies (African/ex-Soviet states) including the that it has accrued from doing business in Africa and the Former Soviet Union (FSU) states, in addition to its own renminbi, so as to preclude any use of US dollars, as per Petroleum-Economist.

The investment in Iranian manufacturing infrastructure will benefit its ‘One Belt, One Road’ initiative.

Tabriz, home to a number of key energy sites, and the starting point for the Tabriz-Ankara gas pipeline, will become a pivot point of the 2,300km New Silk Road that links Urumqi in China’s western Xinjiang Province) to Tehran, via Kazakhstan, Kyrgyzstan, Uzbekistan and Turkmenistan, and thence into Europe through Turkey, the Petroleum-Economist cited the source as saying.

This will also seek to bring in Russia, and thus ensure Iranian some additional diplomatic backing – from two permanent members of the UN Security Council, according to the source.

The other two benefits for Iran will be ramping up production from three of its key fields – South Pars, West Karoun and Yadavaran, where Chinese entities like the CNPC are also present, and China’s increased imports of Iranian oil, despite the US not extending its waiver.

China has not cut down on oil from Iran despite the sanctions, the source maintains.

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