Renewed US sanctions creates opportunities for China
President Donald Trump re-imposed sanctions on Iran last week, a consequence of his pulling the United States out of the Joint Comprehensive Plan of Implementation (JCPOA), aka the Iran nuclear deal, some months ago. The sanctions, in place for ten years before the JCPOA, when they were lifted in January 2016, put a stranglehold on the Iranian economy.
The re-imposition of sanctions is also likely to be brutal, with the US pressing for Iran to be excluded from the SWIFT international banking transaction system.
French automakers Renault and Peugeot-Citroen had already announced they were withdrawing from Iran, where they imported complete knock-down (CKD) kits, in anticipation of the renewed sanctions. That cargo can amount to hundreds of thousands of TEUs per year. Reports indicate, however, that Chinese automakers will try to take their place.
The Chinese may also benefit from the logistical complications that result from the renewed sanctions. The leading western container lines have withdrawn from services into the Iranian port of Bandar Abbas, requiring shippers to arrange their own feeder services from Dubai. Chinese carriers appear to be the only option for filling that gap.
Bandar Abbas is Iran’s largest non-oil port, and it is in need of redevelopment. Currently, the port is unable to accommodate ships larger than 11,000 TEU. Trucks carrying cargo over the country’s less-than-stellar road system is how most cargo gets to and from the port. The port is in need of rail connections and some development in that area is going on, driven by, you guessed it, the Chinese.
Iran is badly in need of investments in logistics. Western companies are constrained from developing ports, airports, roads, and rail facilities, thanks to US sanctions. That won’t change until political and strategic conditions head in another direction. The vacuum is likely to be filled by China.