Why Trump’s threat to withdraw from Iran nuclear deal is a concern for China

PUBLISHED : Tuesday, 17 October, 2017, 9:57am
UPDATED : Tuesday, 17 October, 2017, 9:47pm

China is calling on the United States to preserve the Iran nuclear deal reached in 2015, after US President Donald Trump slapped new sanctions on the nation while threatening to tear up the agreement.

In a speech on Friday, Trump refused to certify the Joint Comprehensive Plan of Action, accusing Tehran of committing “multiple violations” of the deal despite international inspectors saying it had complied with it.

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The president’s actions threaten the accord to ease sanctions on Iran, which was negotiated by the US, China, France, Germany, Russia and the United Kingdom to curb Tehran’s nuclear ambitions.

That could further destabilise the economic and security situation in Iran, which has close links with China. The two countries have economic, trade and energy ties, with China relying on oil imports from Iran while Tehran looks to China for investment, particularly stemming from its sprawling belt and road trade and infrastructure plan. Here are some of China’s main economic links to Iran.

Bilateral trade

China has become Iran’s top trading partner thanks to sizeable oil and gas exports. China imported 3.34 million tonnes of oil from Iran in August – the highest monthly level since 2006.

During a trip to Iran after the 2015 nuclear deal was signed, Chinese President Xi Jinping agreed in a wide-ranging, 25-year plan to increase bilateral trade with Iran by over tenfold to US$600 billion in the next decade. Iran is a major food importer, while oil is its top export.

“The China-Iran friendship ... has stood the test of the vicissitudes of the international landscape,” Xi was quoted as saying at the time.

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Energy projects

Chinese companies have financed major energy projects in Iran, including developing huge oil fields in Yadavaran and North Azadegan. In July, state-owned China National Petroleum Corp took a 30 per cent stake in a project to develop South Pars in Iran – the largest natural gas field in the world.

Beijing also inked a US$3 billion deal to help upgrade Iran’s oil refineries in January. That includes a contract between China Petroleum and Chemical Corp, or Sinopec, and the National Iranian Oil Co to expand Iran’s major Abadan oil refinery, which is more than a century old.

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Belt and road projects

Located at a pivotal point on China’s “Belt and Road Initiative”, Iran has become a major part of the expansive infrastructure investment plan. One key project is a US$2.56 billion high-speed railway from Tehran to the eastern city of Mashhad, with China providing a US$1.6 billion loan to fund the electrification of the 926km line. That was the first foreign-backed project in Iran after the 2015 nuclear deal was signed. Export-Import Bank of China said it had financed some 26 projects in Iran, providing around US$8.5 billion in loans.

Chinese companies have been involved in highway building, mining and producing steel in the nation.

And China Export and Credit Insurance Corp, or Sinosure, also signed a memorandum of understanding with Iran in May to help Chinese companies invest in Iranian projects.