Tag Archives: Iran and China

The End of the Mindless Self-Indulgence: the Gulf States

Algeria needs the price of Brent crude, an international benchmark for oil, to rise to $157 dollars a barrel. Oman needs it to hit $87. No Arab oil producer, save tiny Qatar, can balance its books at the current price, around $40 (summer 2020)….The world’s economies are moving away from fossil fuels. Oversupply and the increasing competitiveness of cleaner energy sources mean that oil may stay cheap for the foreseeable future. 

Arab leaders knew that sky-high oil prices would not last for ever. Four years ago Muhammad bin Salman, the de facto ruler of Saudi Arabia, produced a plan called “Vision 2030” that aimed to wean his economy off oil. Many of his neighbours have their own versions. But “2030 has become 2020…” 

Still, some see an upside to the upheaval in oil-producing states. The countries of the Gulf produce the world’s cheapest oil, so they stand to gain market share if prices remain low. As expats flee, locals could take their jobs…

Remittances from energy-rich states are a lifeline for the entire region. More than 2.5m Egyptians, equal to almost 3% of that country’s population, work in Arab countries that export a lot of oil. Numbers are larger still for other countries: 5% from Lebanon and Jordan, 9% from the Palestinian territories. The money they send back makes up a sizeable chunk of the economies of their homelands. As oil revenue falls, so too will remittances. There will be fewer jobs for foreigners and smaller pay packets for those who do find work. This will upend the social contract in states that have relied on emigration to soak up jobless citizens….With fewer opportunities in the oil-producing states, many graduates may no longer emigrate. But their home countries cannot provide a good life. Doctors in Egypt earn as little as 3,000 pounds ($185) a month, a fraction of what they make in Saudi Arabia or Kuwait. A glut of unemployed graduates is a recipe for social unrest…

For four decades America has followed the “Carter Doctrine”, which held that it would use military force to maintain the free flow of oil through the Persian Gulf. Under President Donald Trump, though, the doctrine has started to fray. When Iranian-made cruise missiles and drones slammed into Saudi oil facilities in September 2019, America barely blinked. The Patriot missile-defence batteries it deployed to the kingdom weeks later have already been withdrawn. Outside the Gulf Mr Trump has been even less engaged, all but ignoring the chaos in Libya, where Russia, Turkey and the UAE (to name but a few) are vying for control.

A Middle East less central to the world’s energy supplies will be a Middle East less important to America. ..As Arab states become poorer, the nature of their relationship with China may change. This is already happening in Iran, where American sanctions have choked off oil revenue. Officials are discussing a long-term investment deal that could see Chinese firms develop everything from ports to telecoms… Falling oil revenue could force this model on Arab states—and perhaps complicate what remains of their relations with America.

Excerpts from The Arab World: Twilight of the Petrostates, Economist, July  18, 2020

Unleashing Nuclear Power – Iran

China was expected to build two nuclear power plants for Iran as part of the country’s new nuclear direction under the controversial nuclear deal that was signed July 15, 2015. The plants were set to be located on the Makran coast, near the neighboring Gulf of Oman, Iran’s Atomic Energy Organization head Ali Akbar Salehi announced on July 22, 2015.

Uninhibited by sanctions, Iran announced plans for four new nuclear power plants. Chinese contractors will be building two of the four planned. “We will simultaneously launch construction of four new nuclear power plants in the country in the next two to three years,” Salehi said, according to Indo-Asian News Service. “We plan to engage more than 20,000 workers and engineers in this large-scale construction.”

When it comes to United Nations sanctions, China had always been an advocate for Iran, along with Russia, generally opposing Washington’s proposed restrictions. On July 20, 2015, the United Nations adopted the nuclear deal between Tehran and Washington, after the “P5+1” countries — the U.S., Britain, France, Russia, China and Germany — unanimously approved it, also voting to lift a series of economic sanctions that were previously imposed on Iran.

China has played a unique, hands-on role in the nuclear deal involving Iran’s Arak reactor, which has been described previously as a “pathway” to nuclear weapons for Iran.

“China has put forward the idea of the modification of the Arak heavy water reactor. … This is the unique role China has played in resolving the Iranian nuclear issue,” Chinese Foreign Minister Wang Yisaid in a statement…..  [The nuclear deal]  has also opened up a door to increased business opportunity in Iran, particularly for China.  Following the announcement of the landmark deal, Wang said that China played a pivotal role in negotiations, and he expressed hope that Iran would take part in China’s “one belt, one road” ambition to revive the Silk Road route.

Excerpts from Michelle FlorCruz, Iran Nuclear Deal: China To Build 2 Nuclear Power Plants For Islamic Republic Following Landmark Agreement, International Business Times, July 22, 2015

Full text of Iran Nuclear Deal Signed July 15, 2015
Joint Comprehensive Plan of Action
Annex I: Nuclear-related commitments
Annex II: Sanctions-related commitments
Attachments to Annex II
Annex III: Civil nuclear cooperation
Annex IV: Joint Commission
Annex V: Implementation Plan