Growing ties with Libya, China in Iran's Presidential Election, Saudi at the Beijing International Book Fair
I’m in Ottawa for a week of meetings so suspect posting will be somewhat slower this week. The Iranian presidential election makes for a really interesting look at China in the region. Despite the widespread assumption of a very strong bilateral relationship, China is a consistent point of contention in Iran, with a lot of folks upset about China’s large role in the local economy, low quality consumer goods, and the corruption such an asymmetrical economic relationship produces. Expect a lot more stories about frustration with China as a campaign issue as the election gets closer, followed by the status quo once it’s over.
China makes moves to reopen economic ties with Libya, 13 years after suspending trade - South China Morning Post. Noting the sideline meetings between Chinese and Libyan officials at last month’s China-Arab States Cooperation Forum, I speculated that we’d see a lot more movement on the bilateral. This piece from the SCMP makes the same assessment:
On June 10, Libyan Minister of Economy and Trade Mohamed al Hwej issued a directive to activate the Libyan-Chinese Joint Economic Chamber. The minister urged the chamber to help build bridges and enhance investment communication between the two countries.
Chinese officials and Libya’s National Transitional Council have been negotiating China’s return to Libya, which was one of the issues under discussion when GNU Prime Minister Abdul Hamid Dbeibah, visited China in late May.
Iran's Oil Minister Denies ‘High Discounts' to Buyers - Iran International. No suprise: China’s a campaign issue in Iran’s presidential campaign as the government has to defend its economic record. It’s a hard case to make, and denying that it’s been selling oil at a significant discount to China doesn’t match the math:
OPEC estimated the price of Iranian oil exports in 2023, excluding discounts and sanctions-busting costs, to be above $83 per barrel. Based on this, Iran's revenue from crude oil, condensate, and fuel oil exports should have been at least $46 billion. However, Iranian customs data reveals the actual figure was only $36 billion.
This $10 billion discrepancy suggests that around 22% of Iran's oil revenue was lost due to high discounts and sanctions-related costs.
Another way to look at the issue is that Iran needs around $50 billion from oil exports to balance its budget, but at least half of that amount is not realized. This means it receives around $25 billion in hard currency.
Another reason for Iran’s oil revenues being probably around $25 billion is the costs involved in illicit shipments to evade sanctions, and losing money in trying to repatriate the funds in hard currencies. Iran’s banking system is under US sanction and any oil revenues are laundered through intermediaries.
Presidential Candidate Discloses Tehran's Controversial Contract With China - Iran Wire. More China in Iran’s domestic political economy. The ongoing saga of a controversial municipal contract for a Chinese company continues to be an issue. Last October a delegation led by Tehran’s mayor and Presidential candidate Alireza Zakani signed a 2-billion Euro deal with China including
the construction of 791 metro carriages and developing metro lines 8 and 11 in collaboration with Chinese partners.
Additionally, a memorandum of understanding was signed to procure 1,000 electric single-cabin buses, 1,000 gas-powered double-cabin buses, 10,000 electric taxis, 10,000 electric vans, and 100,000 electric motorcycles.
Three elements to the controversy. First, the company, Poly Overseas Engineering Co., Ltd., is primarily a construction and engineering firm, so the EV side of the deal is problematic. Second, China’s Ministry of Commerce hasn’t provided a guarantor in the event that Poly Overseas isn’t able to deliver, leaving Tehran pretty exposed. Third, Tehran could have gone with domestic EV producers but didn’t:
Zakani asserted that purchasing Chinese buses is cheaper than purchasing domestic products, which sparked considerable debate and scrutiny.
Zakani claimed significant savings of 97,000 euros per bus by opting for Chinese manufacturers.
He said that Iranian car manufacturers priced their electric buses between 316,000 and 347,000 euros, whereas similar Chinese buses cost around 250,000 euros, plus additional costs for the municipality.
However, experts in the automobile industry have challenged these claims. They pointed out that companies like Iran Khodro Diesel have priced their electric buses at around 17 billion tomans, which translates to less than 262,000 euros at the prevailing exchange rate of approximately 65,000 tomans per euro.
King Abdulaziz Foundation Organizes ‘Saudi-Chinese Relations’ Seminar in Beijing - Asharq Al-Awsat - The Beijing International Book Fair was held from June 19-23, and Saudi Arabia was the guest of honour. Small but steady moves to develop closer cultural ties between China and the Middle East, and lots of regional think tanks and institutions were present.