As part of the new phase of Iran-China cooperation, Iran’s private sector has purchased shares in Chinese banks in order to eliminate certain banking and financial problems between the two countries’ private sectors.
Persia House Analysis:US financial sanctions, and informal pressure against international financial institutions, have succeeded in complicating Iran’s trade and business dealings with other countries, including with its largest single trading partner, China. In response, Iran has continuously sought—and often found—ways to circumvent these sanctions. The result has been an impasse: sanctions have failed to change the policies of the Iranian government, but have hampered Iran’s trade relations, and increased the overall cost of doing business for Iranians.
In anticipation of another possible round of UN sanctions against Iran, Tehran has announced plans to strengthen financial ties with China in official and semi-official news outlets. Expanding Iran’s financial ties to its key trading partner would certainly reduce some of the pressure of financial sanctions on Iranian trade and business. It would also remove some of the financial complications facing Chinese foreign direct investment in Iran. For the most part, however, these recent announcements are mere political posturing, and unlikely to result in any near-term developments.
- According to articles in Mehr News and Press TV, Iran has proposed purchasing 20 percent of the shares of Chinese banks. According to the Mehr News article, a 20-percent stake in these banks would entitle the shareholder to a seat on the board of directors, and afford them the opportunity to block any decision to limit the bank’s business dealings with Iran. It is doubtful, however, that Beijing would allow Iranians to take seats on the boards of directors of its banks. Even if Iran is able to buy its way onto the board of directors of Chinese banks, it will almost certainly not be able to substantially affect the policies of these banks on an issue as sensitive as Sino-American cooperation. The head of the Iran-China Chamber of Commerce, Assadollah Asgaroladi, has in fact denied the Mehr News report in an interview with Aftab News, saying that no Iranian has purchased shares in any Chinese bank.* According to Asgaroladi, such a purchase would take place on the Chinese stock exchange, and would require large amounts of capital, as well as a prior agreement between the two countries.
- According to the same media reports, Iran has also proposed establishing an Iran-China bank to process financial transactions between the two countries.** Such a bank would enable Iran to avoid working through European and other Asian banks, since these financial institutions have proven susceptible to US pressure to limit their dealings with Iran. An Iran-China bank, if established, would help ease many of the financial difficulties faced by Iranian businesses seeking to trade with China, and would facilitate bilateral projects between the countries. The Chinese would be certain to face pressure from the United States not to establish a joint bank with the Iranians. And while Beijing will likely continue to use Iran as a lever in its dealings with Washington, China will almost certainly favor its key strategic relationship with the United States over strengthened financial ties to Iran. In fact, Asgaroladi has said that he proposed the creation of such a bank some time ago, but that he is no longer hopeful that the project can go forward given “existing sanctions, and the international situation.”
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