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.