China occupies West's niche in Iran
Azerbaijan, Baku, Feb. 17 /Trend, T.Konyayeva/
Cooperation between Iran and China demonstrates the ineffectiveness of international sanctions, which were beneficial mostly for Beijing, experts said.
"Exactly the international sanctions bring Iran and China together, because exactly the sanctions cause Western companies to leave Iran, Northeastern University Professor Kamran Dadkhah wrote in an e-mail to Trend. Thus, Iran has no other option but to turn to Chinese or other countries which are willing to bypass sanctions. Thus, Western sanctions are ineffective except in helping China."
Last week, during the visit of the Chinese delegation to Iran, an agreement was signed on the construction of the railway network with a length of 5,300 kilometers worth $12.86 billion in total.
In addition, late last week it became known that Iran and China intend to sign a $7 billion cooperation agreement to develop two oil refinery projects in the southwestern Iranian city of Abadan, and in the center of Isfahan, which presumably will produce 30 million liters gasoline and diesel fuel per day.
About $4.1 billion will be invested in the expansion of refineries in Isfahan and more than $2.8 billion is needed for oil refineries in Abadan.
After all projects, the country's production capacity will be replenished by a total of 40 million liters of gasoline and 18 million liters of diesel fuel per day.
It is expected that China's total investments in Iran's energy sector could exceed $100 billion for 25 years.
According to Dadkhah, over recent years China has made great efforts to expand its energy sector, and the deal signed with Iran, which ranked third and second in the world for reserves of oil and gas, respectively, is a part of this global effort.
"The Chinese objective has been to avail itself of energy resources in Africa and the Middle East, he said. The drive is to satisfy the growing need of Chinese economy for energy."
Iran exports to China oil, gas and petrochemicals. China is the largest importer of Iranian oil after Japan. According to the data provided by the Iran-China Chamber of Commerce, China covers nearly 11 percent of its energy needs at the expense of Iran.
In addition, Iran has an extremely advantageous position from the geopolitical and strategic point of view to construct routes for oil transportation, allowing to significantly reduce the cost of delivering raw materials to the world markets.
Dadkhah believes Iran has to accept the deal because it is in need of investment in its energy sector in general and in refining capacity in particular.
"Iran's capacity to produce gasoline and other petroleum products is far below its domestic demand, he said. - As a result Iran has been forced to import gasoline. Its capacity to produce oil has also been in decline."
In its latest monthly report, OPEC notes the decline in oil production since early 2010. So, in January 2010, Iran produced 3.658 million barrels per day, and it is 20,800 barrels less than the average indicator for December.
Iran needs investments of $46.5 billion to build new refineries, and accordingly, to increase production of petroleum products.
According to Dadkhah, yet despite great effort, still Chinese companies do not have the technology or resources to match those of the Western companies like Royal Dutch Shell and Exxon Mobil which rank, respectively, second and third among the largest companies in the world.
In 2010 two Chinese petroleum companies Sinopec and China National Petroleum ranked 7th and 10th among the top 500 global companies.
According to the U.S. expert, Iran could have had much better deals with Western companies if it had made its peace with the world.
"In the absence of sanctions, Western companies would not have left to their Chinese rivals the abundant petroleum and gas resources of Iran as well as the opportunity to build refineries there, he said. So, In this game everyone except China are the losers."
Today, Iran experiences a number of economic challenges because of international sanctions against Iran.
The Resolution 1929 was adopted in June 2010 by the UN Security Council, as well as additional unilateral sanctions were approved by the U.S. Congress and the foreign ministers of all EU countries, primarily directed against the banking, financial and energy sectors of Iran.
Restrictions imposed by the EU include a ban on the sale of equipment, technologies and services to Iran's energy sector, including refining industry. New investments in Iran's energy sector as a whole was also prohibited. Due to lack of investments, the production capacity of the country is decreasing, and therefore, Iran can not effectively increase production.
T.Jafarov contributed to the article.