When you hear about Iran in the news it seems always to be about their nuclear program, threats of sanctions and a deal made to scale back their nuclear ambitions. This is sort of like China a few decades ago when it was a backward and isolated nation and before it became the workshop for the world. Now we see that China especially is investing in Iran and referring to Iran as the center of everything. The New York Times discusses China’s global ambitions and how Iran fits into the picture.
For millenniums, Iran has prospered as a trading hub linking East and West. Now, that role is set to expand in coming years as China unspools its “One Belt, One Road” project, which promises more than $1 trillion in infrastructure investment – bridges, rails, ports and energy – in over 60 countries across Europe, Asia and Africa. Iran, historically a crossroads, is strategically at the center of those plans.
Like pieces of a sprawling geopolitical puzzle, components of China’s infrastructure network are being put in place. In eastern Iran, Chinese workers are busily modernizing one of the country’s major rail routes, standardizing gauge sizes, improving the track bed and rebuilding bridges, with the ultimate goal of connecting Tehran to Turkmenistan and Afghanistan.
This map demonstrates the point of how China’s routes to Europe and Africa can bypass Russia by going through Iran.
The Silk Road
Ancient roads through Persia (Iran) connected the orient to Europe. Today the caravan routes that carried spices to Europe are being modernized with Chinese money in order to facilitate delivery to Southern Asia, Africa and Europe by land. Recently we speculated if China’s Silk Road project would damage the US economy.
Despite glowing Chinese propaganda not all is well with the Silk Road plans. First of all it is a Chinese enterprise meant to benefit China. All will be well advised to keep that fact in mind. Reuters writes of the Silk Road and cheap funds, heavy debt and growing risk.
Behind China’s trillion-dollar effort to build a modern Silk Road is a lending program of unprecedented breadth, one that will help build ports, roads and rail links, but could also leave some banks and many countries with quite a hangover.
At the heart of that splurge are China’s two policy lenders, China Development Bank (CDB) and Export-Import Bank of China (EXIM), which have between them already provided $200 billion in loans throughout Asia, the Middle East and even Africa.
They are due to extend at least $55 billion more.
Even Chinese bankers admit that if they lend too much to countries that cannot pay the loans will be unsustainable.
Even though there are risks to such a monumental project the Chinese can benefit at every step as they will be building the infrastructure, supporting their industry and gaining influence all along the way. Iran should benefit as it is geographically the center of everything for this ambitious Chinese project.
