Chinese companies doing business in Iran will remain in the country, a Chinese expert said on Wednesday, after US President Donald Trump announced the withdrawal of the US from the Iran nuclear deal.
Iran had been attracting the attention of worldwide investors after UN sanctions were lifted in 2016, but the recent change of policy by the US government is likely to affect foreign companies doing business in Iran, especially after Trump suggested that additional sanctions are on the way.
“The sanctions will drive most Western companies out of the country, while Chinese companies will remain, giving them a natural advantage,” said Ji Kaiyun, director of the Center for Iranian Studies at Southwest Normal University.
The UN placed sanctions on Iran in 2006, and in 2010 the US imposed further harsh sanctions, cutting Iran off from the international financial system and banning companies from dealing with its chemical and oil industries. The Iranian nuclear deal of 2015 led to the lifting of UN sanctions in 2016, leading many to expect an increase in Western trade with Iran. This will all change with the US withdrawal from the nuclear deal, experts say.
Even while complying with UN sanctions, China has maintained friendly relations with Iran. During a trip to Iran in 2016 after the nuclear deal was signed, Chinese President Xi Jinping agreed on a wide-ranging plan to increase bilateral trade with Iran more than tenfold to $600 billion in the next decade, according to media reports.
China’s trade with Iran grew to $37.2 billion in 2017, a 19 percent increase over 2016, according to Chinese customs data. Trade between the two countries is likely to continue growing, said Ji. “Some big companies that have dealings with the US will likely avoid the Iranian market, but overall, Chinese businesses will continue to deal with Iran,” said Ji, adding that there is a lot of potential for growth in trade.
“Iran is rich in resources, but it is not self-sufficient in many daily-use products. Iran will continue to import Chinese products, especially if Western markets are closed off, and China will buy Iranian oil and minerals. The Iranian and Chinese economies are very complementary,” he said.
However, renewed economic sanctions are likely to affect Iran’s general economic situation. Iran saw massive street protests in 2018, and the Iranian currency, the rial, has depreciated heavily, falling by nearly half its value in the last six months, according to a Reuters report.
Some Chinese traders in Iran have noticed that business in the country is slowing. “Business is quite bad these days. Many orders are being canceled because the currency has depreciated so much. Big clients are also not making many orders. The shipments we do manage to send get stopped in customs in Iran with no way to clear them,” said Tan, a trader in small goods from the Chinese city of Yiwu, who only gave her surname.
Many Chinese companies have been investing heavily in Iran as part of the China-proposed Belt and Road initiative. A Chinese railway company signed a contract in 2017 to build a rail line in Iran. China is also the destination for 90 percent of Iran’s iron ore exports, according to Iranian paper Financial Tribune.
Source: Global Times