China and Iran have shared a growing relationship over the years. While it may not always make headlines, China’s economic interests in Iran run wide and deep. Despite global tensions and U.S. sanctions on Iran, China has quietly continued investing in Iran’s infrastructure, energy, and transportation systems.

China Expands in Iran Quietly Amid Global Tensions

In 2021, a 25-year cooperation deal was signed by both countries. Experts believe that this agreement aims to strengthen long-term trade and energy relations, even though the complete contents have not been made public. But the agreement’s real implementation has been sluggish.

One of the main reasons Chinese companies have been cautious in Iran is the fear of facing penalties from the United States. Because of this, many big Chinese state-owned companies have kept their distance.

Despite these concerns, China has still invested nearly $4 billion directly into Iran by the end of 2023, according to data from China’s commerce ministry. This is lower than its investments in other countries. For example, China has poured more than $8.1 billion into the United Arab Emirates and nearly $15 billion into Saudi Arabia since 2007.

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Oil and Energy: How China Fuels Its Ties with Iran

China is Iran’s biggest oil customer. China purchases over 43 million barrels of Iranian oil every month. That amounts to about 90% of Iran’s total oil exports. This accounts for roughly 13.6% of China’s crude oil requirements. One of the busiest oil routes in the world, the Strait of Hormuz, is where the majority of this oil passes.

Iran’s natural gas resources had previously been the target of an investment attempt by China’s National Petroleum Corporation (CNPC). It signed a $4.8 billion deal with France’s Total and an Iranian business in 2016 to develop the South Pars gas field. The value of CNPC’s 30% stake in the transaction was around $600 million. However, due to pressure from the United States, the corporation withdrew by 2019.

Earlier, in 2009, CNPC had signed a deal to develop the North Azadegan oil field. The initial phase had a value of almost $2 billion. In 2016, that field shipped two million barrels to China for the first time.

Sinopec, the largest oil refiner in China, also established itself in Iran. It committed to investing $2 billion to develop the Yadavaran oil field in 2007. Sinopec agreed to modernize a significant oil refinery in Abadan in 2017 for a total of $2.1 billion. The construction of that project is currently ongoing.

China’s LDK Solar and Iran’s Ghadir Investment Group signed a renewable energy contract in 2024. With an estimated investment of 1 billion euros (about $1.16 billion), the objective is to construct a sizable solar power facility. Once completed, it is expected to produce 2 billion kilowatt-hours of solar energy each year.

Rails, Roads, and Metals: Infrastructure and Beyond

China has not limited its interest to just energy. It has also invested in improving Iran’s transportation system. In 2018, China National Machinery Industry Corporation reached an agreement to renovate a railway connecting Tehran to the cities of Sanandaj and Hamedan for 5.3 billion yuan, or roughly $738 million. This was aimed at improving travel and trade across western Iran.

That same year, a branch of the China Railway Construction Corporation signed a 3.5 billion yuan contract to build a 263-kilometer railway between Kermanshah and Khosravi, also in western Iran. This project was supposed to be finished in 48 months.

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In 2018, Norinco International, a Chinese company, committed to construct the first tram line in the city of Qazvin. The estimated cost of the project was $150 million.

In order to modernize and electrify a 926-kilometer railway line between Tehran and Mashhad, in eastern Iran, China Eximbank and an Iranian bank inked a $1.5 billion agreement back in 2017. China’s Belt and Road Initiative included this. However, conflicts over funding have caused work to stop.

China has investigated Iran’s metals sector as well. The Sepid Dasht steel plant received an investment of approximately $350 million from the Metallurgical Corporation of China (MCC) in 2017. A contract to design a pelletizing plant was also awarded to MCC. However, local reports say that both projects have faced delays due to funding issues.