Will Israel Strike Iran and Ignite a Third World War?
Defying U.S., China and Iran Near Trade and Military Partnership
The investment and security pact would vastly extend China’s influence in the Middle East, throwing Iran an economic lifeline and creating new flash points with the United States.
By Farnaz Fassihi and Steven Lee Myers, The New York Times
Published July 11, 2020, Updated November 30, 2020
Iran and China have quietly drafted a sweeping economic and security partnership that would clear the way for billions of dollars of Chinese investments in energy and other sectors, undercutting the Trump administration’s efforts to isolate the Iranian government because of its nuclear and military ambitions.
The partnership, detailed in an 18-page proposed agreement obtained by The New York Times, would vastly expand Chinese presence in banking, telecommunications, ports, railways and dozens of other projects.
In exchange, China would receive a regular — and, according to an Iranian official and an oil trader, heavily discounted — supply of Iranian oil over the next 25 years.
The document also describes deepening military cooperation, potentially giving China a foothold in a region that has been a strategic preoccupation of the United States for decades. It calls for joint training and exercises, joint research and weapons development and intelligence sharing — all to fight “the lopsided battle with terrorism, drug and human trafficking and cross-border crimes.”
The partnership — first proposed by China’s leader, Xi Jinping, during a visit to Iran in 2016 — was approved by President Hassan Rouhani’s cabinet in June, Iran’s foreign minister, Mohammad Javad Zarif, said last week.
Iranian officials have publicly stated that there is a pending agreement with China, and one Iranian official, as well as several people who have discussed it with the Iranian government, confirmed that it is the document obtained by The Times, which is labeled “final version” and dated June 2020.
It has not yet been submitted to Iran’s Parliament for approval or made public, stoking suspicions in Iran about how much the government is preparing to give away to China.
In Beijing, officials have not disclosed the terms of the agreement, and it is not clear whether Mr. Xi’s government has signed off or, if it has, when it might announce it.
If put into effect as detailed, the partnership would create new and potentially dangerous flash points in the deteriorating relationship between China and the United States.
It represents a major blow to the Trump administration’s aggressive policy toward Iran since abandoning the nuclear deal reached in 2015 by President Barack Obama and the leaders of six other nations after two years of grueling negotiations.
Renewed American sanctions, including the threat to cut off access to the international banking system for any company that does business in Iran, have succeeded in suffocating the Iranian economy by scaring away badly needed foreign trade and investment.
But Tehran’s desperation has pushed it into the arms of China, which has the technology and appetite for oil that Iran needs. Iran has been one of the world’s largest oil producers, but its exports, Tehran’s largest source of revenue, have plunged since the Trump administration began imposing sanctions in 2018; China gets about 75 percent of its oil from abroad and is the world’s largest importer, at more than 10 million barrels a day last year.
At a time when the United States is reeling from recession and the coronavirus, and increasingly isolated internationally, Beijing senses American weakness. The draft agreement with Iran shows that unlike most countries, China feels it is in a position to defy the United States, powerful enough to withstand American penalties, as it has in the trade war waged by President Trump.
“Two ancient Asian cultures, two partners in the sectors of trade, economy, politics, culture and security with a similar outlook and many mutual bilateral and multilateral interests will consider one another strategic partners,” the document says in its opening sentence.
The Chinese investments in Iran, which two people who have been briefed on the deal said would total $400 billion over 25 years, could spur still more punitive actions against Chinese companies, which have already been targeted by the administration in recent months.
“The United States will continue to impose costs on Chinese companies that aid Iran, the world’s largest state sponsor of terrorism,” a State Department spokeswoman wrote in response to questions about the draft agreement.
“By allowing or encouraging Chinese companies to conduct sanctionable activities with the Iranian regime, the Chinese government is undermining its own stated goal of promoting stability and peace.”
The expansion of military assistance, training and intelligence-sharing will also be viewed with alarm in Washington. American warships already tangle regularly with Iranian forces in the crowded waters of the Persian Gulf and challenge China’s internationally disputed claim to much of the South China Sea, and the Pentagon’s national security strategy has declared China an adversary.
When reports of a long-term investment agreement with Iran surfaced last September, China’s foreign ministry dismissed the question out of hand. Asked about it again last week, a spokesman, Zhao Lijian, left open the possibility that a deal was in the works.
“China and Iran enjoy traditional friendship, and the two sides have been in communication on the development of bilateral relations,” he said. “We stand ready to work with Iran to steadily advance practical cooperation.”
The projects — nearly 100 are cited in the draft agreement — are very much in keeping with Mr. Xi’s ambitions to extend its economic and strategic influence across Eurasia through the “Belt and Road Initiative,” a vast aid and investment program.
The projects, including airports, high-speed railways and subways, would touch the lives of millions of Iranians. China would develop free-trade zones in Maku, in northwestern Iran; in Abadan, where the Shatt al-Arab river flows into the Persian Gulf, and on the gulf island Qeshm.
The agreement also includes proposals for China to build the infrastructure for a 5G telecommunications network, to offer the new Chinese Global Positioning System, Beidou, and to help Iranian authorities assert greater control over what circulates in cyberspace, presumably as China’s Great Firewall does.
The American campaign against a major Chinese telecommunications company, Huawei, includes a criminal case against its chief financial officer, Meng Wanzhou, for seeking to disguise investments in Iran in order to evade American sanctions. The Trump administration has barred Huawei from involvement in 5G development in the United States, and has tried, without great success, to persuade other countries to do the same.
Moving ahead with a broad investment program in Iran appears to signal Beijing’s growing impatience with the Trump administration after its abandonment of the nuclear agreement. China has repeatedly called on the administration to preserve the deal, which it was a party to, and has sharply denounced the American use of unilateral sanctions.
Iran has traditionally looked west toward Europe for trade and investment partners. Increasingly though, it has grown frustrated with European countries that have opposed Mr. Trump’s policy but quietly withdrawn from the kinds of deals that the nuclear agreement once promised.
“Iran and China both view this deal as a strategic partnership in not just expanding their own interests but confronting the U.S.,” said Ali Gholizadeh, an Iranian energy researcher at the University of Science and Technology of China in Hefei. “It is the first of its kind for Iran keen on having a world power as an ally.”
The proposed partnership has nonetheless stoked a fierce debate within Iran. Mr. Zarif, the foreign minister, who traveled to Beijing last October to negotiate the agreement, faced hostile questioning about it in Parliament last week.
The document was provided to The Times by someone familiar with its drafting with the intention of showing the scope of the projects now under consideration.
Mr. Zarif said the agreement would be submitted to Parliament for final approval. It has the support of Iran’s supreme leader, Ayatollah Ali Khamenei, two Iranian officials said.
Ayatollah Khamenei’s top economic adviser, Ali Agha Mohammadi, appeared on state television recently to discuss the need for an economic lifeline. He said Iran needs to increase its oil production to at least 8.5 million barrels a day in order to remain a player in the energy market, and for that, it needs China.
Iranian supporters of the strategic partnership say that given the country’s limited economic options, the free-falling currency and the dim prospect of U.S. sanctions being lifted, the deal with China could provide a lifeline.
“Every road is closed to Iran,” said Fereydoun Majlesi, a former diplomat and a columnist for several Iranian newspapers on diplomacy. “The only path open is China. Whatever it is, until sanctions are lifted, this deal is the best option.”
But critics across the political spectrum in Iran have raised concerns that the government is secretly “selling off” the country to China in a moment of economic weakness and international isolation. In a speech in late June, a former president, Mahmoud Ahmadinejad, called it a suspicious secret deal that the people of Iran would never approve.
The critics have cited previous Chinese investment projects that have left countries in Africa and Asia indebted and ultimately beholden to the authorities in Beijing. A particular concern has been the proposed port facilities in Iran, including two along the coast of the Sea of Oman.
One at Jask, just outside of the Strait of Hormuz, the entrance to the Persian Gulf, would give the Chinese a strategic vantage point on the waters through which much of the world’s oil transits. The passage is of critical strategic importance to the United States, whose Navy’s Fifth Fleet is headquartered in Bahrain, in the gulf.
China has already constructed a series of ports along the Indian Ocean, creating a necklace of refueling and resupply stations from the South China Sea to the Suez Canal. Ostensibly commercial in nature, the ports potentially have military value, too, allowing China’s rapidly growing navy to expand its reach.
Those include ports at Hambantota in Sri Lanka and Gwadar in Pakistan, which are widely criticized as footholds for a potential military presence, though no Chinese forces have officially been deployed at them.
China opened its first overseas military base in Djibouti in 2015, ostensibly to support its forces participating in international antipiracy operations off the coast of Somalia. The outpost, which began as a logistics base but is now more heavily fortified, is within miles of the American base in that country.
China has also stepped up military cooperation with Iran. The People’s Liberation Army Navy has visited and participated in military exercises at least three times, beginning in 2014. The most recent was last December, when a Chinese missile destroyer, the Xining, joined a naval exercise with the Russian and Iranian navies in the Gulf of Oman.
China’s state-owned Xinhua news agency quoted the commander of Iran’s Navy, Rear Adm. Hossein Khanzadi, saying that the exercise showed “the era of American invasions in the region is over.”
David E. Sanger contributed reporting. Claire Fu in Beijing contributed research.
Proposed China-Iran deal is bad news for Israel
The American “maximum pressure” campaign has clearly had a major impact on Iran, but a massive influx of Chinese investments will go a long way towards undoing it.
By LAHAV HARKOV, Jerusalem Post
July 14, 2020
With Iran and China working on a multibillion-dollar 25-year economic and security deal, Israel has many reasons to be concerned and even alarmed.
The proposed agreement, leaked to The New York Times, which reported on it on Saturday, would lead to a closer military relationship between Tehran and Beijing, including joint military exercises, research and weapons development and intelligence sharing.
It would also increase Chinese investments in Iranian banking, telecommunications and transportation, such as airports and railways. China would reportedly get a discounted supply of Iranian oil in return.
The document describes the countries as “two ancient Asian countries... with a similar outlook” that “will consider one another strategic partners.”
Neither side has publicly confirmed that the document is genuine, that they have signed it or that there is any such agreement. When asked about a deal with Iran last week, Chinese Foreign Ministry spokesman Zhao Lijian said:
“China and Iran enjoy traditional friendship, and the two sides have been in communication on the development of bilateral relations. We stand ready to work with Iran to steadily advance practical cooperation.”
Meanwhile, there is public debate in Iran about whether the agreement could be a debt trap, with former president Mahmoud Ahmadinejad speaking out against it. The agreement has been in the works for a long time – Chinese leader Xi Jinping first proposed it on a visit to Tehran in 2016 – and the timing for the recent progress likely has to do with Iran being especially economically weak these days.
According to Carice Witte, executive director of SIGNAL, a think tank focused on China-Israel relations: “This is indicative of the Chinese approach, [to] identify where there is a vulnerability and then patiently look for ways to capitalize on it.”
China has much to gain from the deal besides a discount on gas when energy prices are plummeting anyway. The agreement fits into China’s Belt and Road Initiative to build infrastructure across the world, while bringing Iran into its orbit of influence. It also would bolster China’s new digital currency e-RMB as a way to bypass American systems and reduce the power of the dollar – another way in which the deal could hurt Israel if it comes to fruition.
Plus, China would gain power and influence in Iran, a diplomatic card it can play with respect to the US and garner greater leverage in the Gulf.
For Israel, the potential for damage from such an agreement is clear.
AS WITTE said, “Any dollar going into the Iranian system is one that can likely be spent against Israel.”
This is especially clear when it comes to the bolstering of Iran’s military through cooperation with China. Any of the new resources directed to the Islamic Republic’s army can potentially – and likely will – be turned on Israel.
Another part of the deal may be a massive sale of weapons to Iran. A recent Pentagon report said China seeks to sell Iran attack helicopters, fighter jets, tanks and more once the UN arms embargo expires in October.
While Israelis and Israel supporters may find it hard to believe, the Chinese government truly does not think Iran is a danger to Israel, Witte said.
“China’s perception is that Iran doesn’t mean what it says about destroying Israel,” she said. “China does not see Iran as an existential threat to Israel and that Iran is only saying [it wants to destroy Israel] to be taken seriously by the world’s power centers.”
Israel and the US have been pushing UN Security Council members to extend the arms embargo on Iran that began under the Joint Comprehensive Plan of Action (JCPOA), the 2015 nuclear agreement between Iran and world powers. Israel and the US have cited Tehran’s violations of that deal and continued attempts to build up its nuclear program, for which the International Atomic Energy Agency has repeatedly rapped Iran in recent weeks, as well as its sponsorship of terrorism and warfare through proxies around the Middle East.
But Chinese Ambassador to the UN Zhang Jun last week said his country opposes US attempts to activate the JCPOA’s “snapback sanctions” mechanism.
The return of US sanctions in 2018 has led to a major economic crisis in Iran and subsequent political instability. This empowered hard-liners to say Iran never should have made a deal involving the US in the first place. They won a decisive majority of Iran’s parliament in an election this year.
But it also has led to protesters taking to the streets this year, protesting a government that uses its money to pay for wars in other countries instead of helping its own people. Experts say the regime is as unpopular as it has ever been since the Islamic Revolution.
The US “maximum pressure” campaign has clearly had a major impact on Iran, but a massive influx of Chinese investments will go a long way toward undoing it, effectively relieving the pressure.
Another concern is regarding Chinese companies’ involvement in infrastructure projects in Israel and Iran. This is already taking place, but the 25-year agreement would deepen those ties.
A Jerusalem Post investigation last month found that three of the six international groups bidding on the tender to build two lines of the Tel Aviv light rail include Chinese-owned companies that also worked on railway projects in Iran. These state-owned companies include China Railway Engineering Corporation, China Harbour Engineering Company, China Communications Construction Company and its China Railway Construction Corporation.
A report by the RAND research institute this year warned that due to China’s close ties with Iran, the Chinese government could have companies share insights on Israel with Tehran to gain favor and influence. In addition, China could use the companies operating in Israel and Iran for political leverage on Israel, such as in 2013, when it conditioned a Beijing visit by Prime Minister Benjamin Netanyahu on his stopping defense officials from testifying in a New York federal lawsuit against the Bank of China for laundering Iranian money for Hamas and Palestinian Islamic Jihad.
The US is waiting to see what actual agreement emerges, and it will continue to take action against any Chinese company breaking sanctions, a State Department source said. For example, the US is pursuing criminal charges against Chinese telecom company Huawei’s CFO Meng Wanzhou for attempting to avoid US sanctions by hiding investments in Iran.
The Prime Minister’s Office declined to comment on this matter, but it is likely eyeing the China-Iran agreement with concern.
Iran slips record volume of oil into China, reaches out to Asian clients for trade resumption
By Reuters
March 8, 2021
Iran has quietly moved record amounts of crude oil to top client China in recent months, while India’s state refiners have added Iranian oil to their annual import plans on the assumption that U.S. sanctions on the OPEC supplier will soon ease, according to six industry sources and Refinitiv data.
U.S. President Joe Biden has sought to revive talks with Iran on a nuclear deal abandoned by former President Donald Trump in 2018, although harsh economic measures remain in place that Tehran insists be lifted before negotiations resume.
The National Iranian Oil Company (NIOC) has started reaching out to customers across Asia since Biden took office to assess potential demand for its crude, said the sources, who declined to be named because of the sensitivity of the matter.
The sanctions caused a precipitous drop in Iranian exports to China, India, Japan and South Korea since late 2018. Those measures, and output cuts by fellow OPEC+ producers, have led to tight supplies of Middle East sour crude in Asia, the top global oil market. Asia imports more than half of its crude from the Middle East.
“They talked to us. They said: ‘very soon they hope to resume oil supplies.’ We said: ‘Inshallah’,” said one source at an Indian refiner. “Inshallah” is an Arabic term that means “God willing,” used to express that the speaker hopes something will happen.
GRAPHIC: China's Iranian oil purchases hit record in early 2021 -
Restored Iranian supplies to India, the world’s third-largest crude importer, could reduce demand for spot cargoes, which has climbed recently after Iraq cut supplies and Kuwait reduced the duration of some contracts.
India, which is hurting from the recent sustained recovery in global crude prices, expects Iranian supplies to return to the market in 3 to 4 months, a government official said.
Another Indian refiner said they had been told by NIOC officials that a formal agreement on crude supply would be signed after Iran’s elections in June. NIOC has also reached out to other Asian customers.
“Recently NIOC called us, asking about demand,” said a trader at an east Asian refiner. “It looks like Iran is getting ready to return to the market.”
Another refining source said the talks were “very initial” and that NIOC wanted to know whether the company would resume Iranian oil purchases. The sources declined to be named because of the sensitivity of the matter.
CHINA
Unlike India, China never completely halted Iranian oil imports.
Iran moved about 17.8 million tonnes (306,000 barrels per day) of crude into China during the past 14 months, with volumes reaching record levels in January and February, according to Refinitiv Oil Research.
Of these, about 75% were “indirect” imports identified as oil from Oman, the United Arab Emirates or Malaysia, which entered China mainly via ports in eastern Shandong province, home to most of China’s independent refiners, or Yingkou port in northeastern Liaoning province.
GRAPHIC: China's indirect Iranian oil imports by ports -
The remaining 25% of imports were marked as official purchases for China’s Strategic Petroleum Reserves, Refinitiv said, as Beijing maintains a small purchase volume despite U.S. sanctions.
GRAPHIC: Oman, Malaysia UAE crude flows to China -
“Volumes started to surge from the last quarter of 2020, with Shandong province as the top receiving region which indicates independent plants are the main consumers,” said Emma Li, a Refinitiv crude flows analyst.
Tankers carrying Iranian oil typically switch off their transponders when loading to avoid detection, but then become traceable via satellites near ports in Oman, the UAE and Iraq. Some transfer part of their cargoes to other ships near Singapore or Malaysia before sailing to China, Li said.
Reuters is unable to identify the end buyers for these cargoes.
Without commenting directly on the oil transactions, the Spokesman’s Office of China’s Foreign Ministry said: “Iran is a friendly nation to China and the two nations have maintained normal exchanges and cooperation. The cooperation between China and Iran under the framework of international laws is both reasonable and legitimate, and deserves respect and protection.”
NIOC declined to comment. An official at the country’s Oil Ministry said, “When the unjust U.S. sanctions are lifted, Iran will be able to sell its oil to any country, and I can assure you that many contracts will be signed.”
Geneva-based tanker tracker Petro-Logistics said Iranian oil loadings in January exceeded 600,000 bpd for the first time since May 2019, a sign that the end of Donald Trump’s term may be changing buyer behavior.
Indirect shipment arrivals in February, including those waiting to discharge off Chinese ports, reached nearly 850,000 bpd, beating the daily record of 790,000 bpd set in April 2019, according to Refinitiv and Chinese customs data.
Chinese customs data showed on Sunday that crude imports rose 4% annually in the first two months of this year. It will release details for the breakdown by country of origin this month.
“Iranian stuff started to slip into Shandong from late 2019... started with some cash-stripped refiners which processed oil first before paying for the cargo,” said an independent Chinese trader familiar with some of the transactions.
Most of these transactions were settled in Chinese currency or euros to circumvent U.S. scrutiny, the trader said.
The record imports have weighed on prices for competing medium and heavy grades from other Middle East producers, traders said.
“While it does not seem that the sanction will be lifted anytime soon, Iran has resurfaced,” another trade source said.
By Amos Harel, Haaretz
March 13, 2021
The report published by the Wall Street Journal on Thursday about Israel's operations targeting Iranian ships explains many of the developments that have taken place in the Middle East over the last two years. It also provides, belatedly, a glimpse of the ...
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