The second decade of the 21st century put the geoeconomic emphasis and cooperation within the framework of China’s “One Belt, One Road” initiative into the China – East European states relations.
The Chinese initiative is dictated by the understanding of the importance of the CEE countries as an important component of a unified Europe. Thus, asserting itself in the role of one of the centers of a multipolar world order, Beijing began transforming the economic and political space that developed in CEE with the promotion of favorable economic proposals to the countries of the region, without raising questions of the difference of ideologies and ways of life.
For the first time, a joint project was announced in 2012 in Warsaw, where Premier Wen Jiabao launched an initiative called “12 measures” of China to encourage friendly cooperation with the countries of Central and Eastern Europe.
Starting in 2013, the main content of the programs of each 16 + 1 summit is the development of tools for this regional format. Naturally, the format of China’s cooperation with the CEE countries is closely connected with the implementation of the global concept of the “New Silk Road” proposed by the Chairman of the PRC Xi Jinping. The concept consists of two parts: the land “Economic belt of the Silk Road” and the “Maritime Silk Road of the 21st Century” and potentially involves cooperation of at least 60 countries in Europe and Asia.
By 2015, China has become one of the largest investors in Eastern and South – Eastern Europe. In November 2015, the Eastern Europe-China ( 16 + 1 ) summit was held in the Chinese city of Suzhou, in which the leaders of the PRC and 16 Eastern European member states and the Balkan countries took part. The meeting resulted in the strengthening of China’s economic presence in Eastern Europe. Also at the trade and economic forum in Hangzhou between China and the countries of CEE in 2015 it was agreed that China is ready to provide financial support for the re-industrialization of the countries of CEE, in the case that it will be conducted using Chinese technologies and equipment.
In 2015 – 2016, taking into account the opportunities and potentials, each country in the 16 + 1 format chose its own direction. For example, Bulgaria will supervise agriculture, Poland– investment and trade. The task of Latvia will be identification of links and projects, cooperation in the field of logistics, Romania will deal with energy projects, Lithuania is responsible for educational programs, and Hungary for the tourism sector.
The 16 + 1 format , in a certain sense, prepared the transition to a more focused and integrated strategy “One belt – One Road” and successfully “fits” into its main components – the projects “Economic belt of the Silk Road” and “Marine Silk Road of the XXI century”, aimed at developing new land and sea transport, logistics and trade and production systems linking China to Europe. In the first project, the countries of CEE play a key role, in the second – an important transit role in the development of “China – Europe” trade and investment ties, and in the long term – in the formation of a broad Eurasian “economic space” and “political stability belt”.
The basic design of the first project is the development on a new technological and organizational basis of the traditional direction of trade and transport “Sino – European” ties, complemented by their investment cooperation. This Northern road includes land international transit to Western Europe from China and other countries of the Asia – Pacific region (primarily, South Korea and Japan) through Russia and Kazakhstan along the Trans – Siberian Railway and the Kazakhstan railway with access to the European part of Russia in The Urals:
- Chengdu ( Sichuan province ) – Dostyk – Moscow – Brest – Lodz ( Poland )
- Suzhou ( Jiangsu province, Shanghai region ) – Warsaw ( Poland )
- Chongqing ( Sichuan region ) – Duisburg ( Germany )
- Zhengzhou ( Henan, North China ) – Hamburg ( Germany )
- Wuhan ( Hubei province, Yangtze belt region ) – Pardubice ( Czech Republic )
- Wuhan – Zabaikalsk – Hamburg
- Shenyang ( Liaoning, Northeast China ) – Hamburg
- Yiwu ( Zhejiang, Shanghai region ) – Madrid ( Spain )
Nevertheless, the transit and logistical potential of the other CEE countries is still used slightly. Almost not involved in the “European part” of the Northern road are the ports of Poland and the Baltic countries that gravitate towards it. On the contrary, the main transport and logistics centers for Chinese goods (primarily German Duisburg and Hamburg) are already overloaded, and the possibilities for expanding their capacities are limited.
Such uneven distribution of cargo flows combined with insufficient technological level of the transport and logistics infrastructure of the CEE countries hinders the further development of China – Europe ties. There are also serious organizational and economic limitations of this development. Most of the provinces ( especially the western ones, remote from the sea ) tend to establish regular communication with Europe for both economic and prestigious reasons. The export potential of only the western provinces of China is estimated at $ 40 billion. Therefore, the full utilization of trains and partial financing of transportation costs are provided by local authorities on the basis of public – private partnerships (especially since many Chinese companies retain great state involvement) (see Figure 1 below).
Figure 1.:China`s infrastucture investments in the 16 + 1
Source: CSIS; FT Research
The April 9th CEE– PRC summit 2019 in the Croatian city of Dubrovnik marked a new beginning in the development of relations between China and Eastern Europe. Although the Belt and Road initiative (BRI) usually focuses on Asian (whether Central Asian, South Asian, or South– East Asian) or African participants, post-Communist countries in Central and Eastern Europe have begun to play not less significant role. In fact, the CEE region was one of the most represented regions in the 2017– 2019 BRI Forums: of the 28 heads of state or government, four were from this region (representing the Czech Republic, Poland, Hungary, and Serbia), and Romania was represented by a delegation led by the country’s Deputy Prime Minister. This list of forum participants reflected the intensive development of cooperation between China and CEE under the auspices of the BRI.
Humanitarian influence is also increasing – the leadership of the PRC encourages interpersonal contacts with the CEE countries, especially through tourism, student and youth exchanges, etc. China’s credibility in the region is also growing, because now almost any project of cooperation on a bi – versatile basis is served under the brand “One Belt – One Road”, which allows China to demonstrate real ( albeit small ) successes literally every year. This is especially noticeable against the backdrop of crisis phenomena in the European Union and the weakening of the ties between the CEE region and Russia.
Underlining the main opportunities of BRI for CEE and EU, should be mentioned the following :
- Chinese public and private sector bodies were willing to take construction risk, and to act quickly. It was suggested that this could be a major opportunity when embarking on major construction projects. However, the experience of COVEC (the construction of a 49-kilometre Polish section of the motorway from Warsaw to Łódź. The construction contract was awarded to a consortium – formed by China Overseas Engineering Group – is a subsidiary of China Railway Engineering Corp (Hereinafter CREC – Auth.)) as a contractor in Poland shows that Chinese companies have not always been able to work well in the EU.
- One interviewee suggested that Chinese investment in rail infrastructure was leading to rail being a viable alternative to both sea and air for trade between the Far East and Europe.The European Bank for Reconstruction and Development (Hereinafter EBRD – Auth.) expressed the opinion that “the rail mode has a huge potential” but did not provide specific forecasts of what goods would transfer to rail, or over what timescale, or what routes they would use.
Other interviewees considered that rail services would attract demand mainly from shipping rather than from air. One of them, responsible for air cargo services, argued that rail would not abstract demand from air because it could not offer the very short transit times required by the most time-sensitive air cargoes. This interviewee also suggested that, to remain competitive, China and other parts of Asia with rail services introduced as a result of the BRI would still need air freight connections to Europe. In this context, ownership of the capacity of a cargo airline such as Cargolux can be seen as a key element of the infrastructure connecting China and the EU.
A representative of the Community of European Railway and Infrastructure Companies (Hereinafter CER– Auth.) agreed that rail would attract demand from shipping but would not be able to compete with air services. The European Commission also suggested that, from China’s perspective, the maritime elements of the BRI were more important and that overland rail was a distraction. In their view, 90-95% of traffic between China and the EU was maritime and would remain so. This is broadly consistent with the analysis of maritime and air traffic. It should also be stressed that the most common investments by Chinese parties in the EU appear to be ports, principally in the Mediterranean and the United Kingdom.
Russian Railways (Hereinafter RZD– Auth.) has long operated rail services along the Trans – Siberian Railway between Europe and the Sea of Japan. These could, in principle, be used to carry goods from Japan and South Korea to Europe, but these would first have to be shipped across the Sea of Japan to Russia. In contrast, from landlocked north east China, long overland journeys are needed to reach any port, but may also be needed to reach a suitable railhead.
Thus, the commercial objective of growing rail services appears not to be to put pressure on maritime operators, which are already efficient, but to offer a higher speed service. This also helps producers and consumers along the rail routes used.
- In principle, commercially viable rail services between China and the EU are a major opportunity for operators, shippers and industry.
One interviewee in the logistics sector said that subsidies granted by the Chinese Government to rail services between China and the EU are “tremendous”. They also stated that Kazakhstan Railways (Hereinafter KTZ – Auth.) had reduced tariffs in 2012 but now agreed with RZD to keep tariffs high. KTZ indicated that the Chinese Government provided subsidies to support westbound container traffic, but envisaged that these would be withdrawn by 2020 as balancing eastbound traffic was attracted to the route. These comments illustrate a number of issues relating to the commercial viability of the services.Also trains between China and the EU will be charged transit tariffs by operators such as KTZ and RZD. There is no uniquely correct basis for setting such transit tariffs, although the principal applied in the EU is that they should be based on marginal costs. From the perspective of these transit railways, however, transit traffic is an opportunity to profit from third parties (A similar issue emerges in the provision of air navigation services within the EU, where national air navigation service providers (Hereinafter ANSPs – Auth.) may have incentives to overcharge for en-route services provided to overflying, and typically foreign, aircraft to subsidise terminal services provided to aircraft taking off and landing). The incentives on the transit states are typically to maximise their profits, rather than to maximise the economic, social and environmental value of the railway operation as a whole. For both the EU and China, however, there is the potential risk that a growing and successful rail service will be seen as a potential source of profit by the transit railways.
- Another opportunity is the rebalancing of freight flows.
Figure2 and Figure 3below summarise the volumes of loaded containers which are loaded and discharged on flows between ports in the Far East and ports in the EU, measured in TEU. However, the EU Member States in which containers are loaded and discharged may not be the final destination states(The country where custom controls are executed is the country of discharge. This is the reason why Czech Republic is included in Figure 5 below despite it has not access to the sea.)
Figure2 below illustrates the recent growth in loaded containers from the Far East to EU ports, from just over TEU one million in 1996 to about TEU eleven million in 2016. Other than China, no state loads more than one million containers to Europe.
Figure2.:Loaded containers from the Far East to Europe: country of loading
Source: MDST World Cargo Database
Figure 3shows the points at which loaded containers are discharged in the EU. A large proportion are discharged at ports in the United Kingdom, Germany, the Netherlands and Italy, before travelling onwards to the points at which they are stripped. Containers discharged in Rotterdam in the Netherlands, or Genoa (Genova) or Trieste in Italy, for example, may continue by river barge, train or truck to other EU Member States or to landlocked and non-EU Switzerland.
Figure 3.: Loaded containers from the Far East to Europe: country of discharge
Source: MDST World Cargo Database
Thus, the analysis of Figures 2 and 3 and 4show that westbound loaded container flows of 11 million TEU exceed the eastbound flows of 5 million TEU. This creates a need fora large number of containers to be returned empty in the eastbound direction. A representative of the CER said that this represented an opportunity for the EU to rebalance imports and exports.
Of the Member States shown, the largest imbalance in flows is for the United Kingdom, which exports only just over one quarter as many loaded TEUs as it imports. Even in Germany and Sweden, exports are less than two thirds of imports. This appears to confirm CER’s view that additional containers could be carried eastbound, in principle at little additional cost.
Figure 4.: Balance in loaded container flows for selected EU Member States
Source : MDST World Cargo Database
- Among other opportunities there should be metioned improved customs coordination. Thus, one interviewee saw opportunities to use through rail services between China and the EU to improve and streamline customs arrangements. However, they did not suggest either that specific initiatives were required or how these should be organised. As already discussed, a number of the MoUs supporting the BRI relate to the development of improved customs arrangements with a view to enhancing connectivity.
- Opportunity: EU companies working in CAREC states. The EBRD suggested that there were good opportunities for companies from the EU to build railways, roads and other transport infrastructure in the CAREC states. They argued that, in addition to construction, there would be opportunities in the areas of harmonisation of regulation, information technology systems, developing reliable and sustainable energy supplies, and logistics.
- Opportunity: complementary skills in the EU and China. Thus, one interviewee said that the EU had greater skills in regional issues and planning than Chinese bodies, and that there were opportunities for each country’s skills to complement each other. At first sight, it appears likely that each party may benefit from the other’s knowledge of local legislation, planning and procedures.
Table 1 below summarises a number of the opportunities and challenges which appear to emerge from the BRI. None of these may amount to a clearly-defined “problem”, as outlined in the EC’s Better Regulation Toolbox. Nonetheless, this section briefly discusses the extent to which it might be relevant to consider legislation to address them.
Table 1.: Opportunities, challenges, and the need for legislation
|Opportunity or challenge||Issue(s)|
|Chinese investors may not always meet EU standards||Procurement and enforcement|
|China may subsidise products and transport||–|
|Scope for improved customs coordination||Multilateral coordination|
|EU standards must be maintained and harmonised|
|Wasted and misdirected investment||Transparency and coordination|
|Chinese parties may take over existing projects|
|Chinese dominance of rail transport||Chinese may limit transit traffic|
|China may focus its trade elsewhere||–|
|Changes in relative advantage within the EU||Regional and cohesion policies|
|New investment in transit countries||Coordination between EU and Asian railways|
|Making Asia’s infrastructure meet EU needs|
|Bottlenecks may emerge on rail and on TEN-T||Consider EU and Far East flows|
Source: Steer Davies Gleave analysis
Thus, it can be noted that the participating countries of 16 + 1 mechanism understood the scale, prospects and synergies of this interaction. It should be emphasized that the “Old” EU countries are wary of Chinese activity in the Central European zone of their influence and insist that all members ( and candidate members ) coordinate their cooperation with China, and that the EU should speak with the PRC “with one voice”. Nevertheless the strategic concepts of the development of these states reflect the importance and priority of both bilateral relations with China and cooperation in the China – EU format. That is why most of the foreign policy strategies of the CEE states are oriented toward expanding foreign economic activity and trade with the PRC. It is necessary to emphasize the consistency and planning of work in this direction, conducted by the states of the 16 + 1 format. As we can see, pragmatic economic diplomacy started to prevail in the newest foreign policy history of Europe.
The ninth summit of cooperation between China and CEE, based on the results, was the last for the 16 + 1 format. In April 2019, it became clear that Greece would be invited to be part of this initiative. This actually turns 16 + 1 into 17 + 1. This move confirms claims that the importance of the CEE countries to China is closely linked to COSCO’s acquisition of a controlling stake in the Greek port of Piraeus. With this strategy, Beijing is partly paving the way for a resolution of the dispute between Greece and Macedonia, aiming to connect the port of Piraeus via Macedonia to the proposed high-speed rail link between Belgrade and Budapest, and then direct it to the Western part of the continent.
The appearance of 17 + 1 has a direct bearing on the cooperation between China and CEE. Greece’s accession is likely to weaken some regional aspects of cooperation between partners and re-emphasize the bilateral nature of China’s relations with individual countries. This is a strategic step that will bear fruit for both Beijing and the CEE capitals, and will also aim to allay EU fears that China is trying to split the continent.
The potential development of the 17 + 1 initiative demonstrates that China has already become a full-fledged “European power”. The growing number of Chinese investments and relations on the continent suggests a much broader and more complex “deepening” into European Affairs than expected by Beijing or any European capital. This reality requires China to own its position as a “European power”. At the same time, Europe needs to engage in a mature and meaningful debate about the growing influence of China’s power, which goes beyond simplistic divisions between friend / foe, rival / ally, and so on. As the evolution of cooperation between China and CEE shows, that we live in a complex world and interlocutors can simultaneously perform several contradictory roles. Due to the BRI initiative, Europe has realized that it is impossible to sacrifice China, and ignoring the fact that this country has become the “new power of the European continent” can cause significant damage to the Union, primarily economic.
 The Central Asia Regional Economic Cooperation (Hereinafter CAREC – Auth.) Program is a partnership of 11 countries (Afghanistan, Azerbaijan, China, Georgia, Kazakhstan, Kyrgyzstan, Mongolia, Pakistan, Tajikistan, Turkmenistan, and Uzbekistan) and 6 multilateral development partners (Asian Development Bank, European Bank for Reconstruction and Development, International Monetary Fund, Islamic Development Bank, UnitedNations Development Programme, and World Bank) working to promote development through cooperation, accelerate economic growth, and reduce poverty. ADB serves as the Secretariat .
Role of WTO in Regularization of International Trade
International trade is one of the main features of the globalized world and global economy. There it needs also a well-organized institutional mechanism to regulate it. World Trade Organization is an international organization established in 1995, whose main objective is to facilitate trade relations among its member countries for their mutual benefits. Currently 164 states are its members. The activities and works of WTO are performing by a Secretariate of about 700 staff located in Geneva, Switzerland, led by the Director General. English, Spanish and French are the official languages of World Trade Organization. The annual budget of WTO is about 180 million dollars.
Since its creation it is playing an important role in the regularization of international trade. It offers a forum and facilitation for negotiating trade agreements in order to reduce the barriers in the way of smooth international trade among member countries. Thus, the role of this organization is playing very important role in the regularization of international trade which is contributing to economic development and growth of member countries in this globalized world. The World Trade Organization also offers an institutional structure and legal framework for the execution and supervising of the international trade related agreements which are very helpful in regularization of international trade. It also settles disputes, disagreements and conflicts occurring during the interpretation and execution of the components of the international agreements related to international trade. During the past 60 years, the World Trade Organization and its predecessor organization the GATT (General Agreement on Tariffs and Trade) have assisted to establish a solid and flourishing global trade system, by this means helping to extraordinary international economic development.
The WTO is regularizing international trade more specifically through negotiating the decrease and finally elimination of barriers to trade among countries and try to make smoothly the working of the rules and principles governing the international trade e.g. tariffs, subsidies, product standards, and antidumping etc. It also administers and monitor the execution of the World Trade Organization’s determined guidelines for trade in services, goods as well as intellectual property rights related to international trade. It also monitors and review the member states international trade policies as well as make sure the transparency in bilateral and multilateral trade agreements. Likewise, it also solves disputes arising among members related to trade relations or related to the explanation of the provisions of the trade agreements. It also offers services to the governments of the developing states in the fields of capacity building of officers in matters related to international trade. WTO is also doing research on matters related to international trade and its related issues and collect data in order to find better solutions of the problems and obstacles in regularization of international trade. It is also trying to bring into the organization the 29 states who are yet not members of the organization aimed to assist and regulate their international trade according to the international standard.
One of the main barriers in way to international trade is disputes between the engaged parties. Since long this was a very critical issue limiting the trade among states. The WTO is playing very good and instrumental role in the solution of trade related disputes. Since the establishment of WTO in 1995 over 400 disputes related to trade have been brought by its member countries to WTO. The increasing number of bringing trade related disputes to WTO is showing the faith of member countries in the organization. Close trade relations have massive advantages but also create disputes and disagreements. With the increase of international trade, the possibility of its related disputes also increases. Previously, such problems and disagreements have caused in severe disputes. But at present, in the era of WTO the international trade related disputes are decreased because the member states have now dispute’s solution platform, and they are turning to the World Trade Organization to solve their trade related disagreements and disputes. Before the World War Second, there was not any such international organization or forum which could facilitate international trade and its related affairs, and there was also noany legal framework for solving trade related disputes among states of the word.
One of The World Trade Organization’s guiding principal is to continue the open boundaries for trade, ensure the Most Favoured Nation (MFN) status among member countries and stop discriminatory behaviour of members towards other member(s) and bring transparency in doing international trade. It is also assisting counties to open their indigenous markets to global trade, with justified exemptions or with suitable flexibilities, promote and support to durable growth, reduce trade deficit, decrease poverty, and promote economic stability. It is also working to integrate different international trade policies and principles. The member countries of WTO are also under the compulsion to bring their trade related disputes to this organization and avoid unilateral actions. WTO is the central pillar of the current international trade system.
Russia and France to strengthen economic cooperation
On April 29, Russian President Vladimir Putin held videoconference with leaders of several French companies-members of the Franco-Russian Chamber of Commerce and Industry (CCI France-Russia) to discuss some aspects of Russian-French trade, economic and investment cooperation, including the implementation of large joint projects as well as the prospects for collaborative work.
Putin noted that the Economic Council of the Franco-Russian Chamber of Commerce and Industry is still operational in spite of difficulties, and the late April meeting was the fourth time since 2016. From the historical records, France has been and remains a key economic partner for Russia, holding a high but not sufficiently high, 6th place among EU countries in the amount of accumulated investment in the Russian economy and 5th place in the volume of trade.
Despite a certain decline in mutual trade in 2020 (it went down by 14 percent compared to 2019) the ultimate figure is quite acceptable at $13 billion. French investment in Russia is hovering around $17 billion, while Russian investment in France is $3 billion.
Over 500 companies with French capital are operating in various sectors of the Russian economy. French business features especially prominently in the Russian fuel and energy complex, automobile manufacturing and, of course, the food industry. “It could have been more if the French regulatory and state authorities treated Russian businesses as Russia is treating French businesses. We appreciate that in a difficult economic environment, French companies operating in Russia have not reduced their activity,” Putin pointed out.
The Russian Government established the Foreign Investment Advisory Council, which includes six French companies. Further, there is an opportunity to discuss specific issues related to the economic and investment climate in Russia, and that opportunity is traditionally provided at the St Petersburg International Economic Forum, which will be held on June 2-5.
French companies are involved in the implementation of globally famous landmark projects, such as the construction of the Yamal LNG and Arctic LNG 2 facilities and the Nord Stream 2 gas pipeline project. This, Putin regrettably said “We are aware of and regret the amount of political speculation concerning the latter. I would like to point out once again that it is a purely economic project, it has nothing to do with present-day political considerations.”
Russia intends to increase assistance to the development of science and technology. Funds will be directed primarily to innovation sectors such as pharmaceuticals and biotechnology, nuclear and renewable energy, and the utilisation of carbon emissions.
“We are interested in involving foreign companies that would like to invest in Russia and in projects we consider high priority. In order to do this, we will continue to use preferential investment regimes and execute special investment contracts, as you know. A lot of French companies successfully use these tools on the Russian market. For example, more than one third of 45 special investment contracts have been signed with European, including French, partners,” he explained during the meeting.
He also mentioned continuous efforts to attract foreign companies to localise their production to state purchases and to implementing the National Development Projects, as well as existing opportunities for French businesses in special economic zones. Today there are 38 such zones created throughout the Russian Federation.
Russia pays particular attention to attracting high-quality foreign specialists. Their employment is being fast-tracked, and their families can now obtain indefinite residence permits. There is a plan to launch a special programme of ‘golden visas’ whereby to issue a residence permit in exchange for investment in the real economy, a practice is used in many other countries.
Taking his turn, Co-Chair of the CCI France-Russian Economic Council, Gennady Timchenko, noted that the pandemic has changed the world, people and business, and that French companies in Russia are responsible employers and socially responsible members of Russian society.
Despite the crisis and the geopolitical situation, a number of French companies have launched production in 2020–2021. Companies such as Saint-Gobain and Danone have renewed their investments. French companies have increased their export of products manufactured in Russia; they are investing in priority sectors of the Russian economy. For example, this year the French company Lidea is launching a plant called Tanais to produce seeds. Russia is dependent on the import of 30 to 60 percent of these seeds, according to various estimates.
Despite the current geopolitical conditions and information field, there are important signals for French business and the Russian side to strengthen economic cooperation, attract investment, and create partnerships on a new mutually beneficial basis.
Co-Chair of the CCI France-Russian Economic Council, Patrick Pouyanne, noted that the meeting has become an excellent tradition, the presence of 17 CEOs and deputy CEOs of French companies shows the importance of these joint meetings, and further reflect the deep interest of French business in Russia.
In addition, Patrick Pouyanne further offered some insights into Russia-French cooperation. By 2020, twenty members of the Economic Council invested a total of 1.65 trillion rubles, supporting 170,000 jobs. These companies have operated in Russia for decades and continue investing in the Russian economy despite the sanctions and the epidemic. These companies help France maintain its status as the second largest investor in Russia. In 2020, France invested over $1 billion in Russia despite the economic difficulties caused by the pandemic.
Concluding his remarks, Patrick Pouyanne stressed that the economic operators believe everyone will benefit if Russia, France and all of Europe are not divided or isolated. This is the challenge today. Indeed, diplomacy has to continue playing an important role in settling differences, and businesses are convinced that meetings like this create bridges between Russia and France to strengthen investment and economic cooperation.
Iran’s Economic Diplomacy through CPEC
U.S. sanctions against Iran are characterized by strategic flexibility and adaptability. They are designed to have maximum negative and deterrent effect on Iran’s military, economic and diplomatic growth. Tehran is exploring ways to counter these sanctions most probably by economic engagements with the regional countries. Iran’s perception of CPEC lends some credit to this argument.
Since the initiation of CPEC, the regional perception has already started to change as many countries have begun to see the project within the domain of their national interests. Iran has expressed its long-standing interests to join the CPEC viewing the corridor as a cornerstone for the country economic prosperity and regional connectivity.
Iran solely focuses more on the economic aspect of CPEC. Regional connectivity through CPEC can boost Iran’s stake in the global output. In 2015, on the sidelines of the United Nation General Assembly (UNGA) address, Iran’s President Hassan Rouhani expressed a desire to be the part of CPEC. He emphasized the importance of connectivity projects for the region. Iran’s initial reluctance to CPEC was transformative in nature and heavily came down with the unfolding of new geoeconomic realities.
Iran’s inclination for the CPEC project even becomes the part of official discourse. Iran’s ambassador to Pakistan Mehdi Monardost showed keen interest to participate in the CPEC and named it as one of the greatest projects in the history of the region. He envisioned a great boost to bilateral trade between Pakistan and Iran under the framework of this regional connectivity corridor. In 2017, Iran’s economy minister Ali Tayyebnia participated in the New Silk Road summit. He praised the New Silk Road concept for regional connectivity.
Iran’s economy is already clutched due to the international sanctions invoked by the Trump administration after pulling back from the Iranian Nuclear Agreement formally known as the Joint Comprehensive Plan of Action (JCPOA) in May 2018.Downplaying the perception of geopolitical competition between Gwadar and Chabahar, Iran higher officials negated the impression of competition falsely exaggerated by International and India media and insisted on the complementary nature of two ports.
In 2016,Iran and India signed an agreement for the development of Chabahar port and it was view as the counterweight to Gwadar port. Without explicitly mentioning India by name, Iran’s ambassador to Pakistan Syed Mohammad Ali Hoseeni defended the decision of his country to drop out India from the project in Chabahar by stating “when some foreign governments found reluctant in their relations with Iran and need other’s permission for even their normal interactions, for sure they would not be capable of planning and implementing such long-term cooperation contracts”.
The same rhetoric appears in the views of Chinese leadership. Brushing aside the allegations of Iran’s perceived resistance to CPEC and Gwadar port, Iran’s foreign minister Jawad Zarif dismissed the allegations and supported growth and development anywhere in Pakistan.
Chabahar is often seen as a rival to Gwadar port. However, Indian discourse has got an altogether different lease of life in the media compared to the Iranian one. Iran’s ambassador to Pakistan Mehdi honardoost utterly disregarded the narrative of competition of two ports. He invited both Pakistan and China to closely work in Chabahar port.
China considers Iran as an important country for its energy security, BRI and in the larger context of global competition with USA. China dual role both in Gwadar and Chabahar, according to the analysts, will likely reduce the impression of competition between two ports. Chinese stance on the Chabahar port also complement the Iran’s position on Chabahar. Chinese premier Le Keqiang rejected the notion that Chabahar port is in competition with the Gwadar. He is convinced with the idea that both ports have the potential to complement each other.
Tehran global status goes upward with the emerging financial and diplomatic backing of China. Beijing openly backs Tehran in the face of U.S. might. On March 26, 2021, China and Iran signed an agreement expressing a desire to increase cooperation and trade relations over the next 25 years. Wang Yi, Chinese foreign minister, said that USA should rescind the sanctions against Iran. The 25 years deal is considered as part of the Belt and Road Initiative (BRI). According to Tehran Times analysts Peyman Hassani and Ammar Hossein Arabpour, this deal is considered a relief to Iran’s gas and oil sector against USA sanctions.
USA sanctions forcefully bar the countries from purchasing oil from Iran. The US Department of Defense’s report notes that China Pakistan Economic Corridor (CPEC) focus on pipelines and port construction. Pakistan’s reluctance to follow the Iran-Pakistan gas pipeline which is stalled due to American pressure can be reviewed, too much sigh of relief for Tehran’s energy export.
Triangular relations of China, Pakistan and Iran will likely put Iran on the strong footing. Richard Caplan, a professor of international relations at the university of Oxford, notes, “The agreement which predates Biden, undercuts U.S. efforts to isolate Iran economically and, to some extent, diplomatically.
Diplomatic and economic isolation remain at the center of Iran’s foreign policy under the severe U.S. sanctions. Iran’s perceptions of CPEC revolves around the same fact that through regional engagements under CPEC and BRI, it can tackle its global problems to some extent.
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