Iran and China: Business as usual

Given that the JCPOA is one step closer to reality, Chinese firms might not have long to wait until sanctions are lifted.

By TAYLOR BUTCH
December 7, 2015 21:53
3 minute read.
Nuclear Talks

The P5+1 – China, France, Germany, the US, the UK and Russia – prepare to meet with Iranian Foreign Minister Javad Zarif at nuclear talks in Lausanne.. (photo credit: REUTERS)

During Iranian Foreign Minister Javad Zarif’s first official visit to China since agreeing to the Iran deal this September, formally called the Joint Comprehensive Plan of Action (JCPOA), he called for deepening relations between Beijing and Tehran.

“Iran has always regarded China as a strategic partner, and bilateral relations will undoubtedly improve following the Joint Comprehensive Plan of Action,” Zarif stated in a meeting with Chinese Prime Minister Li Keqiang, reported PressTV. Zarif further predicted numerous benefits after sanctions against his country are lifted, including more opportunities for Chinese companies to do business in Iran. Given that the JCPOA is one step closer to reality, Chinese firms might not have long to wait.

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Iran’s Minister of Roads and Urban Development Abbas Akhoundi told the Islamic Republic News Agency (IRNA) at the recent Press and News Agencies Exhibition that Tehran needs short and midrange planes to replenish hundreds of planes undergoing maintenance or which are otherwise grounded. “We currently have 250 airplanes; only 150 of them are operational and 100 others are out of order,” he said. Many of Tehran’s active aircraft are dated and dangerous due in part to a lack of adequate aviation parts. According to the Aviation Safety Network Aviation Safety Database, Iran has had 131 “occurrences” from August 2014 – September 1929. Of these, eight out of 131 incidents have transpired since 2010.

Boasting the world’s second largest air travel market behind the United States, China might seek to fill Iran’s aviation void – in the coming years. This November, China’s state-owned Commercial Aircraft Corporation of China (COMAC) unveiled two planes that would satisfy Tehran’s request: the C919 and the 10ARJ21-700. According to the COMAC website, the standard C919 can hold a maximum of 158 passengers and has a maximum range 4,075 km.

Although the airplanes require at least three additional years of operational testing, China will soon make its mark on the world’s airline market.

ALTHOUGH COMAC will primarily fly domestic, it has laid the groundwork to cater to regional destinations and beyond. COMAC has already signed 517 deals from 21 national and international customers.

Thai firms have additionally agreed in principle to lease Chinese aircraft, including COMAC C919 and ARJ21-700. Given this expansion, it is plausible that Beijing might collaborate with Iran in a similar way.

Alongside airplanes, Iran officials have expressed the need for many of its airports to be renovated.

This news likely bodes well for Chinese companies, as they have successfully completed airport renovation around the world. When contract bidding opens, it would be a logical fit for Chinese companies to make an offer on Iran’s airport renovation contracts.

Although Chinese car manufactures in Iran are well established, the JCPOA will undoubtedly open up the Iranian automotive market to more competition from European and Asian carmakers. An HIS report described some challenges foreign automotive companies might face in the post-sanction Iranian market. The Iranian government may also limit imports of vehicles to give domestic OEMs time to respond to renewed demand. Indeed, the government has already put in place several laws that avoid large-scale imports of vehicles. For example, a model requires authorization before being imported; import duties total 90 percent of the initial final price of a vehicle; and imports of premium and powerful models are banned. As a consequence, vehicle sales will be dependent on future local production volumes.

With manufacturers setting a low vehicle price, therein allowing customers a purchasing choice, some Iranian news outlets have run pieces predicting the “Golden age of Chinese cars [is] over in Iran.”

Holding the second largest economy in the Middle East, Iran has done well to entice foreign firms, especially Chinese firms, to overhaul its ailing economic infrastructure. Hosting exhibitions this summer like the 15th Iran International Building and Construction Exhibition, the 15th International Automobile Exhibition and Related Industries, and last month’s 15th Tehran International Industry Exhibition, Tehran has courted Beijing firms well.

China is well positioned to make good on and even surpass its decision to double its quota for infrastructure investment in Iran last year.

The author is a contributing analyst at Wikistrat, Fellow at China Cooperative, and a freelance writer.

His work covering China, Iran, and the Middle East has previously been published at The Asia Times, The Jerusalem Post, International Policy Digest, Real Clear Defense and other publications. He graduated from King’s College London with a Masters in Middle East and Mediterranean Studies and earned his Bachelors of Arts in History from Elizabethtown College.


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