Chinese Banks Open $35 Billion in New Financing to Iran

During the past week, a series of deals were reached between China’s top financial institutions and a delegation led by Iran’s Central Bank, in which China is effectively providing $35 billion in financing and loans in support of Iran’s economy.  Among these is a $10 billion line of credit offered by CITIC Investment Group, with the Export-Import Bank of China and China Development Bank each committing $10 billion and $15 billion, respectively.  The financing reportedly targets infrastructure projects in the water, energy and transport industries.

As scrutiny in Washington grows over Iran’s compliance with the JCPOA and debate continues on U.S. policy toward that agreement, these latest commitments show China continuing to deepen significantly its strategic economic and political ties with Tehran.  CITIC’s $10 billion credit line, specifically, has been cited as using euros and yuan as a potential hedge against U.S. sanctions.  China, however, is certainly not the only country seeking to establish new financial relationships, with reports of South Korea and an array of European banks also working on similar deals.

china-iran-visual-amIn China’s view, beyond traditional strategic objectives, Iran has become an integral and indispensable component of its “One Belt, One Road” strategy.  Iran’s transportation infrastructure, in particular, can serve as connectors for Beijing’s envisioned rail networks running between China’s western Xinjiang province and Istanbul.  Since the lifting of international sanctions under JCPOA, China has provided two credit facilities totaling $4.2 billion specifically to fund high-speed railway lines linking major Iranian cities, including Tehran, Mashhad and Isfahan.

As it stands, China is Iran’s largest oil customer and accounts for a third of Iran’s overall trade.   In the first six months of 2017 alone, trade between the two countries increased by more than 30%.  Indeed, President Xi has previously promised to expand bilateral cooperation to $600 billion over the next decade.    Below is a graph showing the growing presence of Chinese entities in Iran.