Shanghai Cooperation Organisation (SCO) and Global South strategic cooperation

enroger said:

TBH I'm not too fond of this kind of short term exploitation if it is true. I'd much prefer if China is able to establish some long term institutional change in Iran that is irreversible and firmly put Iran into China's camp and prevent them from flipflopping every few years.

In comparison buying some cheap gas just seems so short sighted.

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I think it has a point of putting more of the global oil reserves under Yuan control.

China needs to start aggressive to eat up as much exclusive contracts as possible. It can tone down later, with the added benefit that it will be considered a goodwill gesture.

Iran might flip flop from going at it alone to going at it together with SCO, but they've never flip flopped from being against US since the Shah got deposed.

Like many others, I also think political change must come to Iran. But talking politics now would likely cause Iran to just go lone wolf.

However, if China can work through the brokers of power within the Iranian government, through business interests, investment and through education, then eventually, there will be real popular support for political reform.

Just having Iranian tourists be able to freely access China, exchange students, open up a world class consumer goods choices for Iranians, while at the same time slowly buying the loyalty of the pragmatic oil/business elite, that alone will have vast impact on Iran's politics, more than any demands China can make verbally right now.

tphuang said:

also, I have to take back what I said about Iran if this is actually the deal they are getting from the Iranians on energy as I posted on the Chinese economics Thread. I know Chinese negotiators are pretty ruthless, but this is next level stuff.

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Seems like Zoltan has some really good sources with his position. I just needed more confirmation at the time

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so it seems like the combination or Russia/Iran/Venezula has given China the leverage to push for trading oil in Yuan. That's quite a strong move. I think quite the change. Obviously, Russia was the key cog here with its general push to de-dollarize, but having Iran in the fray helps also.

Of course, Iran has talked about using more RMB in its trading with China

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and probably that means they will use CIPS also.

None of this means China should favor Iran or GCC countries, but rather China has used its position very well. I would caution them from taking advantage of Iran too much, since that would cause resentment.

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It's difficult to know what sources to trust regarding Iranian statistics, it's such a divisive issue. What's clear is the Iranian exports have risen substantially in 2022, implying more leverage to negotiate a better price. And what's the price Iran is getting for a Venezuela/Iranian blend?


What's also clear is that ever since the Obama era sanctions on fuel imports into Iran, they have improved their refining capacity and are now a large exporter of oil products, reducing the importance of crude.


And what's China giving in return? The recently announced deal after the visit to China emphased speedy implementation. Iran has often complained, rightly or wrongly, that China promises investments but doesn't deliver. Maybe now they're satisfied that China is really investing in Iran. Charging a nominally low price for oil could also be a method to hide how much China is really investing in Iran. They've engaged in a lot of barter trade with oil. So maybe China is getting some free oil and Iran is getting some free manufactured goods or infrastructure in exchange. I doubt that Iran is paying USD to repay Chinese loans that fund Iranian agricultural production. They're most likely paying in oil. That will make the cash amount look much smaller than the actual value. When Sri Lanka paid for oil with tea, the transaction probably counts as $0, but it's obviously worth something

Biscuits said:

I think it has a point of putting more of the global oil reserves under Yuan control.

China needs to start aggressive to eat up as much exclusive contracts as possible. It can tone down later, with the added benefit that it will be considered a goodwill gesture.

Iran might flip flop from going at it alone to going at it together with SCO, but they've never flip flopped from being against US since the Shah got deposed.

Like many others, I also think political change must come to Iran. But talking politics now would likely cause Iran to just go lone wolf.

However, if China can work through the brokers of power within the Iranian government, through business interests, investment and through education, then eventually, there will be real popular support for political reform.

Just having Iranian tourists be able to freely access China, exchange students, open up a world class consumer goods choices for Iranians, while at the same time slowly buying the loyalty of the pragmatic oil/business elite, that alone will have vast impact on Iran's politics, more than any demands China can make verbally right now.

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Yes, cultural exchange, getting Iranian students to come to Chinese universities similar to Chinese cooperation with many African countries etc would be great. The Iranian supreme leader is going to die soon, political change will come after that. The cultural revolution in China also could only die when Mao died and political change followed

enroger said:

TBH I'm not too fond of this kind of short term exploitation if it is true. I'd much prefer if China is able to establish some long term institutional change in Iran that is irreversible and firmly put Iran into China's camp and prevent them from flipflopping every few years.

In comparison buying some cheap gas just seems so short sighted.

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I wouldn't pay too much attention to the article that was posted. It's from a western website and only quotes "anonymous sources". Not any different to the "debt trap" nonsense we hear when China invests in African countries.

The important thing is Iran and China are trading openly and in yuan, despite Iran's nuclear programme developing amidst western sanctions. The big Anglo-Zionist seethe will come when China makes a similar deal with the GCC.

solarz said:

What does non-convertible yuan even mean? How is it different from regular RMb?

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There is the onshore and offshore rmb. Offshore is cnh and onshore is cny. Offshore is basically free floating currency. If they got Iran to take onshore version, then that means Iran has to spend the money in Chinese products and build up reserves in yuan.

solarz said:

If you agree to accept China's currency in trade, isn't it a given that you will be buying Chinese goods with it? Sounds like normal trade to me.

Seems to me if Iran can exchange their oil for the everyday essentials and consumer goods China produces, they are getting a pretty good deal. After all, what's their alternative? Keep their oil in the ground and not being able to buy anything from the West due to sanctions?

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That's the entire point. Iran has nowhere else to turn to so they need china to develop their infrastructure and sell them the equipments and materials they need to run their economy.

In fact, china has made a similar deal with gcc but at more equal terms because gcc countries arent sanctioned.

But more or less, china is the only alternative to west and a really good one since it has a whole set of its own system. No other country has whole line of manufacturing goods, energy products, telecom products, space and satellite products, pharmaceutical products, semi and computing platform. The collective west has this as a whole but not with any individual country. That's what china has to offer.

Andy1974 said:

If China is getting this deal from Iran, what is Iran getting from China?

Something BIG.

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All of what I just mentioned.

Biscuits said:

I think it has a point of putting more of the global oil reserves under Yuan control.

China needs to start aggressive to eat up as much exclusive contracts as possible. It can tone down later, with the added benefit that it will be considered a goodwill gesture.

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Yes it can. It's the largest importer of crude and imports more than it needs so then it can export the additional refined products around the world. It's doing the same with lng. In another decade, it will be building up its own green hydrogen export operation. Also, it's going to control uranium sales from central Asia. All these can and should be done in rmb.
They can do this slowly and use their size to pressure the market.

Biscuits said:

Iran might flip flop from going at it alone to going at it together with SCO, but they've never flip flopped from being against US since the Shah got deposed.

Like many others, I also think political change must come to Iran. But talking politics now would likely cause Iran to just go lone wolf.

However, if China can work through the brokers of power within the Iranian government, through business interests, investment and through education, then eventually, there will be real popular support for political reform.

Just having Iranian tourists be able to freely access China, exchange students, open up a world class consumer goods choices for Iranians, while at the same time slowly buying the loyalty of the pragmatic oil/business elite, that alone will have vast impact on Iran's politics, more than any demands China can make verbally right now.

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That's more of a long term project. The problem is racial stereotype. People in much of the world don't think of china as advanced or sophisticated. They think that way about westerners. It's unfortunately going to take years to turn around. Historically speaking, we have never seen a country like china that has succeeded in getting to the front of technology in every front in just 30 years. People don't change their mind that quickly.

tphuang said:

That's more of a long term project. The problem is racial stereotype. People in much of the world don't think of china as advanced or sophisticated. They think that way about westerners. It's unfortunately going to take years to turn around. Historically speaking, we have never seen a country like china that has succeeded in getting to the front of technology in every front in just 30 years. People don't change their mind that quickly.

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I've worked in Africa and the Middle East, that may have been the case 20 years ago (or in western countries today), but is not the perception in Middle East or Africa. Many high tech products previously only available from the west now are made in China for a fraction of the price. People aren't stupid, they know where things are coming from.

Minm said:

It's difficult to know what sources to trust regarding Iranian statistics, it's such a divisive issue. What's clear is the Iranian exports have risen substantially in 2022, implying more leverage to negotiate a better price. And what's the price Iran is getting for a Venezuela/Iranian blend?

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What's also clear is that ever since the Obama era sanctions on fuel imports into Iran, they have improved their refining capacity and are now a large exporter of oil products, reducing the importance of crude.

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Iranian exports rose because oil prices as a whole went up big time vs 2021 and 2020. Do you want to see how much Saudi Arabian profit went up by?

Minm said:

And what's China giving in return? The recently announced deal after the visit to China emphased speedy implementation. Iran has often complained, rightly or wrongly, that China promises investments but doesn't deliver. Maybe now they're satisfied that China is really investing in Iran. Charging a nominally low price for oil could also be a method to hide how much China is really investing in Iran. They've engaged in a lot of barter trade with oil. So maybe China is getting some free oil and Iran is getting some free manufactured goods or infrastructure in exchange. I doubt that Iran is paying USD to repay Chinese loans that fund Iranian agricultural production. They're most likely paying in oil. That will make the cash amount look much smaller than the actual value. When Sri Lanka paid for oil with tea, the transaction probably counts as $0, but it's obviously worth something

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You see, China doesn't need to move fast if Iran doesn't want to play. If Iran is willing to play ball with heavy discounts, large Chinese infrastructure projects, then of course it makes sense for China to speed up its investment. You are over thinking all this other stuff.

What matters is for Iran to use Chinese products and standards to build up their national infrastructure so that they are dependent on China for next few decades. China has an entire world of product to offer and Iran has no alternatives. If Iran is willing to play ball with China, then we are all good here.

Abominable said:

I wouldn't pay too much attention to the article that was posted. It's from a western website and only quotes "anonymous sources". Not any different to the "debt trap" nonsense we hear when China invests in African countries.

The important thing is Iran and China are trading openly and in yuan, despite Iran's nuclear programme developing amidst western sanctions. The big Anglo-Zionist seethe will come when China makes a similar deal with the GCC.

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Do you have any evidence that they are not buying oil from Iran at big discounts? Given the availability of large quantity of Russian crude, it's quite reasonable to assume that discounts have gotten larger since the Ukraine invasion. And that all of this is traded in Yuan.

Abominable said:

I've worked in Africa and the Middle East, that may have been the case 20 years ago (or in western countries today), but is not the perception in Middle East or Africa. Many high tech products previously only available from the west now are made in China for a fraction of the price. People aren't stupid, they know where things are coming from.

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Maybe some segment of population, but it takes others more time to change their views. The biggest change in my mind will be when fancy Chinese smart EVs are everywhere. That's when the global south will really view China as technological leader.

enroger said:

In comparison buying some cheap gas just seems so short sighted.

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I don't know if you have noticed, but Europe is going through a long period of deindustrialization right now. European companies are opening factories in China and America due to much lower energy cost. This is not just about cheap gas, it's about Chinese dominance in industrialization and manufacturing. That's what they've spend a decade building with BRI. And once these industries move to China, they are not moving back to Europe.

tphuang said:

Iranian exports rose because oil prices as a whole went up big time vs 2021 and 2020. Do you want to see how much Saudi Arabian profit went up by?

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It's not revenue or profit but volume that I'm talking about. There are many different guesses, but all the estimates referenced in the article agree that volumes increased by a large amount, implying much less pressure of sanction enforcement. Therefore, Iran would be expected to be able to negotiate a lower discount than in 2021

tphuang said:

You see, China doesn't need to move fast if Iran doesn't want to play. If Iran is willing to play ball with heavy discounts, large Chinese infrastructure projects, then of course it makes sense for China to speed up its investment. You are over thinking all this other stuff.

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Yes, exactly, China is probably not paying purely in cash for Iranian oil but in infrastructure or goods (or speedy investments in this case). So you might be right that China is getting a large cash discount but it's a big jump to then conclude that the full price including the non cash component is the same as the amount of cash that changed hands.

I wouldn't trust any single source on Iranian oil trades anyway, all sides are spreading disinformation and both the US has an interest in looking like their sanctions are working and Iranian dissidents have an interest in making the state look incompetent or portray trade and cooperation with China as exploitation. But the difference between the US and China is that America actually does exploit its allies while China pursues "win win cooperation".

Minm said:

It's not revenue or profit but volume that I'm talking about. There are many different guesses, but all the estimates referenced in the article agree that volumes increased by a large amount, implying much less pressure of sanction enforcement. Therefore, Iran would be expected to be able to negotiate a lower discount than in 2021

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All that Reuters article says is that Iranians ended 2022 on a high. Well given the discount they were offering and trading in RMB, it's not hard to see why China would be buying more from them.
It should be obvious to everyone why they'd sell so little in 2020. Covid dropped demand to a very low point and crude prices dropped in the negative territory in April of 2020. With improved economy and higher prices, you would naturally expect a producer that has to discount its oil to be selling more in that environment.

Why would you say it's a lower discount? You have cheap Russian gas as well as cheap Iranian gas now. That's a lot of capacity to unload to China & India. Back in 2021, only Iranian oil was traded at a big discount.

"Lower Chinese demand and Russia's supply to China have been a major challenge for them. Most of its oil still goes to the Far East, ultimately China. Iran also helps Venezuela to export its oil."

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Do you think China will be buying from them if their oil isn't at least as cheap as Russian oil? After all, Russia also its oil to India, Turkey and GCC countries. How many buyers are there for Iranian oil outside of China?

China is only importing this much crude from both Russia & Iran because it wants to control oil trading and export refined oil products. China does not need to import all this additional crude. It's importing this much because it has a bargain at hand.

Minm said:

I wouldn't trust any single source on Iranian oil trades anyway, all sides are spreading disinformation and both the US has an interest in looking like their sanctions are working and Iranian dissidents have an interest in making the state look incompetent or portray trade and cooperation with China as exploitation. But the difference between the US and China is that America actually does exploit its allies while China pursues "win win cooperation".

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China is using market to its advantage. China would be silly to not try to get lowest possible prices.

tphuang said:

Do you have any evidence that they are not buying oil from Iran at big discounts? Given the availability of large quantity of Russian crude, it's quite reasonable to assume that discounts have gotten larger since the Ukraine invasion. And that all of this is traded in Yuan.

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I'm pointing out the tone of the article seems to imply China is exploiting Iran. I can quote any article doing the exact same about a Chinese trade deal with an African country, are you going to believe that?

tphuang said:

Of course, Iran has talked about using more RMB in its trading with China

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and probably that means they will use CIPS also.

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I find it hard to believe Iran didn't use CIPS until now. Probably the whole world uses it already by this point.

In fact regarding Iran specifically, I think they only use CIPS now, for years, because they are banned from the SWIFT.