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China’s One Belt, One Road Initiative And The Middle East Is A Crossroads, Part 2, Iran, Iraq, Israel, Jordan, Kuwait And Lebanon

ArmchairTechInvestor, May 26, 2018, by Brad Peery

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Below are summaries of the OBOR initiatives in the countries covered in the Middle East Part 2.

Iran

*Iran is on the China-Central-West Asia (CCAWA) Economic Corridor of the OBOR Initiative. Chinese President Xi visited Iran in January 2016 and the two dictatorship countries agreed to increase bilateral trade by more than tenfold to US$600 billion in the next decade. Areas of cooperation include energy, trade and industry. Iran is located in Southern Asia bordering the Persian Gulf, the Caspian Sea and the Gulf of Oman. It has an attractive opportunity to serve as a gateway to a regional market of 400 million people that includes Afghanistan, Iraq, Russia and Turkey, and the Central Asian countries. The OBOR Initiative is primarily intended to promote land and sea connectivity with countries along its key routes. However, the International North-South Transport Corridor (INSTC), which was established by Iran, India, and Russia in 2000, plans to connect the Indian Ocean and Persian Gulf to the Caspian Sea via Iran, and onward to northern Europe via St. Petersburg, Russia. As a multi-modal transport corridor, INSTC will make Iran a key link in connecting the three founding members and 11 other state members.

China has become Iran’s top trading partner. Chinese companies have gradually replaced those in the EU and the U.S. following nuclear sanctions. In 2016 trade with China reached $31.2 billion, and grew to $18.1 billion in the first half of 2017. China became the largest crude oil export market of Iran in 2017, followed by India. Additionally, Chinese companies China National Petroleum Corporation (CNPC) and the Sinopec Group, have won major oil exploration contracts in Iran. In 2021, another recent example of Iran-China co-operation can be found in the $4.8 billion South Pars contract to develop the largest natural gas field in the world. Iran’s other key trading partners include Turkey, Korea and the UAE. Iran is proposing trading agreements with a number of countries including Malaysia, Pakistan, Turkey, India and the Eurasian Economic Union (EEU).
*The Belt and Road Initiative: Country Profiles, Hong Kong Trade Development Council, May 17, 2018

**“Chinese businesses involved in Iranian developments are worth at least $33 billion as of June 2017 according to Beijing’s Commerce Ministry”, part of China’s OBOR Initiative. “In September 2017, China provided a $10 billion credit line to five Iranian banks financing water, energy and transport projects, and in March the two countries inked a $700 million deal allowing China to build a train line that links the port of Bushehr to the rest of Iran’s railway network.”
**China stands to gain in Iran after US quits nuclear deal, AFP, Julien Girault, May 17, 2018

Iraq

*Iraq has the world’s fourth largest proven oil reserves, which puts it in a favorable position because of China’s thirst for oil. Iraq’s oil output has increased following its gaining strength follow the U.S.-led invasion in 2003. Iraq mainly exports crude oil to India, China, the U.S. and South Korea, and imports food, medicines and manufactured items from Turkey, China, Syria and the U.S.

Iraq has established four free zones to promote trade through advantageous customs incentives. Chinese companies are among the largest foreign investors in Iraq’s oil sector, with PetroChina, Sinopec and China National Offshore Oil Company (CNOOC) involved in development of many of the country’s oil projects.

Iraq borders on the Persian Gulf. At present, Iraq is not listed as a participant of the OBOR Initiative. However, the country is one of the principal suppliers of oil to China. Bilateral trade between the two countries has been increasing steadily. Given that Iraq’s southern (Saudi Arabia), northern (Turkey) and eastern (Iran) neighbors are all slated to be participants of the OBOR Initiative, it is unclear to to what extent Iraq might benefit from the Initiative at the expense of its neighbors.

Israel

*Israel grew GNP by 4% in 2016 and by 3.3% in 2017. Israel is considered to be one of the most advanced countries in the Middle East and is a high-tech powerhouse. Despite the fact that Israel is a democracy, China might find it advantageous to develop businesses that use their technology and geographic location.

Many international high-tech companies have opened up branches as well as research and development centers in Israel. They include Microsoft, IBM, Cisco and Motorola. There have been a number of acquisitions of Israeli technological companies by U,S, firms such as Google, IBM and Facebook. Major transactions span various high-tech sectors, including software, mobile application and digital advertising. Such acquisitions could be of interest to Chinese companies.

“Israel is actively promoting cooperation with China and other parties under the Belt and Road Initiative, welcoming Chinese enterprises to participate in various infrastructure projects in Israel. Israel is attempting to add sea ports and new railroad networks. China Harbouris is building a new port next to Ashdod’s existing one, and the Shanghai International Port Group (SIPG) has won a 25-year license to operate another deep-sea private port planned in Haifa. It is reported that Israel would like China to participate in the building of a railroad connection between the ports in Eilat and Ashdod, connecting the Red Sea to the Mediterranean Sea.”

Jordan

*Jordan’s economy is about 67% services, 30% industry and 3% agriculture. The major export markets are 50% Arab countries. Exports to the U.S. are almost 20% of the total, and Jordan’s currency is pegged to the U.S. dollar.

“Jordan has signed free trade agreements (FTAs) with the US, Canada, Turkey, MERCOSUR (which includes Argentina, Brazil, Paraguay and Uruguay), Egypt, Morocco, Tunisia (the Agadir Agreement), the EFTA states (which includes: Switzerland, Norway, Iceland and Liechtenstein), and Singapore. Jordan is a member of the Pan Arab Free-Trade Area (PAFTA) Treaty, with members including: Egypt, United Arab Emirates (UAE), Bahrain, Jordon, Tunisia, Saudi Arabia, Sudan, Syria, Iraq, Oman, Palestine, Qatar, Kuwait, Lebanon, Libya, Morocco, and Yemen.”

***Chinese Ambassador to Jordan Pan Weifang spoke during a press conference in Amman. “AMMAN — Jordan and China are holding talks regarding the signing of a memorandum of understanding (MoU) on cooperation, as part of China’s One Belt, One Road initiative, according to the Chinese ambassador. A multibillion land and maritime project, the One Belt One Road project aims to connect China to the rest of the world, including Jordan.”

“Following the signing of the MoU, we will witness increased cooperation and projects between the two sides in various areas,” Chinese ambassador to Jordan, Pan Weifang, said at a press conference in November, 2017.”
***China’s One Belt, One Road initiative to benefit Jordan — ambassador, The Jordan Times, By Mohammad Ghazal, November13, 2017

Kuwait

*Kuwait participates in the China-GCC Free Trade Agreement negotiations. The oil sector plays a dominant role in the Kuwaiti economy, with the country estimated to own roughly 6% of the world’s oil reserves. Oil exports account for over 90% of Kuwaiti government revenues and 50% of nominal GDP. Kuwait’s major export markets include India, Saudi Arabia, China, Iraq and the UAE.”

****Kuwait’s Silk City and the five-island developments are a key project in the One Belt One Road initiative. Kuwait is expecting to spend over $100 billion to build one of the world’s longest causeways to their northern area. “The plan is to reinvigorate the ancient Silk Road trade route by establishing a major free trade zone linking the Gulf to central Asia and Europe. The 36-kilometre (22-mile) bridge, three-quarters of it over water, will cut the driving time between Kuwait City and Subbiya to 20-25 minutes from 90 minutes now. It is already nearly three-quarters completed. A $3 billion 5,000-megawatt power plant has already been built in Subbiya.”
****Kuwait’s Silk City project expected to top $100B, Daily Sabah, March 8, 2017

*****“Mr. Jiang Zengwei said Kuwait and China have signed several cooperation agreements, which have further laid the foundations for promoting mutually beneficial growth. “China is today one of the Kuwait’s most important trading partners and an important source of crude oil from Kuwait. Bilateral trade was US$12 billion in 2017, recording a year-on-year growth of 28%.”
*****Kuwait’s Silk City is key project in China’s One Belt One Road initiative, AME info, March 22, 2018

Lebanon

*Lebanon is at the eastern end of the Mediterranean Sea. Syria is to the north, and Israel is to the south.

Ravaged by civil wars over the years 1975-1990, Lebanon has seen its debt balloon to 150% of GDP as it went through reconstruction. The government has been divided, but has seen the influence of Hezbollah increase.

“Lebanon has expressed a keen interest in China’s Belt and Road Initiative, seeing itself as a gateway to the Arab world. Al-Fayhaa Union of Municipalities, a union of three municipalities in Lebanon, signed an agreement with the Silk Road Chamber of International Commerce (SRCIC) in November 2017 for an active role in the OBOR.”

******The Union of Tripoli’s municipalities was hailed for joining the SRCICI, pointing to the “special importance of Tripoli and its huge potentials not only for Lebanon but for the whole region which enables it to enhance trade with China.”

During the signing it was stated “we will not spare any effort in boosting Tripoli’s standing and its openness on Chinese markets and such an alliance will prepare it to become a special hub for cooperation with China within the Belt and Road initiative.”

Important to success will be “the strategic location of Tripoli and its seaport on the Mediterranean and its human resources and infrastructure including the airport and railroads and logistic services it provides.”
******Lebanon’s Tripoli keen for active role in Belt and Road initiative, Xinhua, November 11, 2017

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