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Generational Dynamics Web Log for 15-Jul-2020
15-Jul-20 World View -- China, Iran draft 25-year $400 billion trade and military agreement

Web Log - July, 2020

15-Jul-20 World View -- China, Iran draft 25-year $400 billion trade and military agreement

Iran's Chabahar Port deal with India is at risk

by John J. Xenakis

This morning's key headlines from

China, Iran draft 25-year $400 billion trade and military agreement

A hearty laugh is shared in December by Iran's foreign minister Javad Zarif, left, and Miao Lu, secretary-general of Center for China & Globalization (AFP)
A hearty laugh is shared in December by Iran's foreign minister Javad Zarif, left, and Miao Lu, secretary-general of Center for China & Globalization (AFP)

A leaked agreement being negotiated by China and Iran has little chance of being implemented, but if it were, it would have significance going back through centuries of Iran's history. China would invest $400 billion over a 25 year period in infrastructure and military projects in Iran, in return for discounts on Iranian oil.

The agreement is very much in the pattern of China's Belt and Road (BRI) agreements with numerous countries, using "debt trap diplomacy." The typical pattern is that China lends an enormous sum of money to a country, and the country then uses that money to pay Chinese companies for parts and services, and then pays salaries of thousands of Chinese workers that will develop the projects. Once the target company fails to make its debt repayments, China seizes control of the country's strategic assets. China has used these secret agreements to acquire and control ports and other strategic assets in Sri Lanka, Democratic Republic of Congo (DRC), Ghana, Zambia, Kenya -- through its "debt trap diplomacy." Several other countries, including Pakistan and the Maldives, are at risk.

The draft agreement is secret, but the terms that are leaked look very similar to BRI agreements with other countries. According to the NY Times, which obtained the leaked agreement, it cites almost 100 projects, including airports, high-speed railways and subways. China would develop free-trade zones in Maku, in northwestern Iran, and in Abadan, where the Shatt al-Arab river flows into the Persian Gulf, and on the gulf island Qeshm. The agreement also includes proposals for China to build the infrastructure for a 5G telecommunications network, to offer the new Chinese Global Positioning System, Beidou, and to help Iran's government control the internet in the same way that China does. China will have access to Iran's military airbases.

A secretive element relates to the military dimension of the agreement, whereby China will have 5,000 members of its security forces present on the ground in Iran. Once again, this is a typical requirement. China lends money to Iran, Iran uses the money for Chinese parts and services, and to pay the salary of Chinese workers, the Chinese workers send the money back to their families in China. So China gets the money back, and Iran still has to repay the loan, so that Iran essentially has to repay the loan twice.

China will be investing nearly $400 billion in Iranís oil, gas and petrochemicals industries in the first five years of the agreement. In return, China will get priority to bid on any new project in Iran that is linked to these sectors. China will also get a 12 percent discount and it can delay payments by up to two years. In addition, China will essentially be able to pay in any currency it desires. In total, China will receive discounts of nearly 32 percent.

Iran's history with the 'capitulatory system'

The "capitulatory system" of the Middle East was developed starting in the 1500s during the rise of the Ottoman empire (Turkey). A capitulation was an agreement between two countries to permit one country to grant various concessions to another country. Under this system, the French were granted by the Ottomans to establish trading posts and consular missions in Syria and Egypt. Later, agreements with England and other Europeans provided for imports of steel, led, tin, gold and silver into Turkey.

In the 1800s, the capitulatory system reached Persia (Iran). After Persia's humiliating military losses to the Russians and English, Persia was forced to accept concessions as "reparations." Economic concessions fell into three major categories: public utilities, financial enterprises, and exploration for and exploitation of natural resources. I described this capitulatory system in detail in my 2018 book, "World View: Iran's Struggle for Supremacy -- Tehran's Obsession to Redraw the Map of the Middle East."

After decades of these concessions, where the Russians and English took advantage of the Iranians, and the Iranian politicians and clerics were enriched through corruption, there was a backlash. For example, the tobacco concession granted a monopoly on both the purchase and sale of tobacco within Persia to an English company for a period of fifty years, and during this period Iran's rulers received enormous kickbacks, while Iran's tobacco merchants suffered. Huge anti-government protests led to the anti-government Tobacco Revolt (1890-92).

In the political debate of that time, a merchant wrote:

"By what laws does the government sell our national rights to foreign racketeers? These rights, according to both the principles of Islam and traditional laws of Iran, belong to the people of our country. These rights are the means of our livelihood. The government, however, barters the Moslem property to the unbelievers. By what law? Have the people of Iran died that the government is auctioning away their inheritance?"

Today, the proposed Iran-China draft agreement is receiving sharp criticism that sounds very similar to the above criticism of the 1890 tobacco concession. Some lawmakers are saying that it feeds China's 'colonialist greed." Former President Mahmood Ahmadinejad warned that the Iran-China agreement was with "a foreign country" was being discussed "away from the eyes of the Iranian nation." Reza Pahlavi, the son of the last Shah of Iran, blasted the "shameful, 25-year treaty with China that plunders our natural resources and places foreign soldiers on our soil."

The Tobacco Revolt was a major event in Iranian history, with implications far beyond the income of tobacco merchants. The tobacco concession was revoked, but the anti-government protests continued. In 1905 there were protests over the price of sugar and the sugar merchants. This led to a massive generational crisis civil war known as the Constitutional Revolution, whose purpose was, among other things, to demand adoption of a constitution that would guarantee that no leader was above the law, and would control the powers of the Shah, and not allow him to grant concessions to other countries without the approval of the Majlis (parliament).

What's obvious here is that today's proposed Iran-China agreement is stirring up emotions still remaining from the Tobacco Revolt and the Constitutional Revolution, just as racial issues in America today stir up emotions remaining from the American Civil War.

People are always asking me about "regime change" -- when will the Iranian people rise up and finally replace the exceedingly corrupt religious thugocracy running the country now? As we know from Generational Dynamics, Iran is in a generational Awakening era, which is the time in any country when a "velvet revolution" or non-violent coup is most likely to occur.

So I believe that this agreement has almost no chance of being implemented. But if Iran's loony leaders continue to push it, it could be the trigger for the regime change that everyone claims to want.

John Xenakis is author of: "World View: Iran's Struggle for Supremacy -- Tehran's Obsession to Redraw the Map of the Middle East" (Generational Theory Book Series, Book 1), September 2018, Paperback: 153 pages, over 100 source references, $7.00,

Iran's Chabahar Port deal with India is at risk

In 2016, India and Iran signed a the "historic" Chabahar Port agreement. Chabahar is on the coast of Iran near Pakistan. India has agreed to invest $500 million to significantly increase the size of this port. Using it, India will be able to bypass Pakistan in shipping goods to Iran, and from there to Afghanistan, Central Asia or Europe. When India took operational control of the port in 2018, India agreed to invest in the 628 km Chabahar-Zahedan railroad linking the port to the Trans-Iranian railway and to other cities in Iran, connecting from there to Afghanistan, Central Asia, and Eastern Europe. ( "18-Feb-18 World View -- Iran gives operational control of its Chabahar seaport to India")

On Tuesday, Iran announced that India would no longer be part of the Chabahar-Zahedan railway project, and that Iran would go it alone. The reason given is that India has delayed providing funding for its share of the project, related to the American sanctions on Iran.

However, it's widely suspected that India was dropped from the project under pressure from China. Under the new China-Iran draft agreement, China will assist Iran in "Chabaharís duty free zone, an oil refinery nearby, and possibly a larger role in Chabahar port as well," according to reports. The upcoming deal will facilitate Chinese investments in "infrastructure, manufacturing and upgrading energy and transport facilities, to refurbishing ports, refineries and other installations." Furthermore, the agreement wi commit Iran to supplying oil and gas to China for the whole duration.

Using debt trap diplomacy, China has taken over Sri Lanka's Hambantota port, and is expected soon to take over the Mombasa port in Kenya. In each of those cases, there is a large enclave of thousands of Chinese workers living near the ports. Under the new draft agreement, China is already planning an enclave of 5,000 Chinese workers in Iran, and may be planning to take over the Chabahar port, when the time is right.


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