Iranian Oil Deal with China Ignores Poverty in Al-Ahwaz

On 16 August 2017, Iran and China met in a joint Economic Commission to discuss China's role in acquiring oil reserves in the Al-Ahwaz region of Iran, which is home to millions of indigenous Ahwazi Arabs. Despite living in one of the most oil rich regions of Iran, the indigenous people continues to live in poverty and fear of persecution under the Iranian regime. There is concern that China's intervention will continue to ignore or even worsen the ethnic discrimination and poverty faced by Ahwazi Arabs. This concern is reinforced by the Iranian government’s refusal to consider the region’s parliamentary representatives’ appeal for the contracts with China to include redistribution of oil revenue to the Ahwazi. 

Resource grabbing in Ahwaz will be the central theme of the 16th Iran-China Joint Economic Commission meeting, which starts today in Beijing.

Oil is central to the Iranian regime's security. Under international sanctions, China offered an economic lifeline, raising its trade to over US$50 billion from 2014 - a rapid change from the US$300mn reported in the mid-1990s.

Oil exports have been the crucial to relations between the two countries, totalling 500,000 to 600,000 barrels per day in 2015 at an estimated value of US$7-8 billion. Revenue was at least twice this level when oil prices were high and trade was unimpeded.

Following sanctions, Iranian oil exports are booming, reaching 1.7 million barrels per day in March. Most of this oil is pumped from the Ahwaz region, the first oil producing region in the Middle East. None of the revenue is directly transferred to assist with alleviating endemic poverty among the indigenous Ahwazi Arab population, which numbers four to five million. As such, the development of the Iranian economy and the stability of successive regime has always required the impoverishment, displacement and persecution of Ahwazi Arabs.

Iran holds the world's fourth largest oil reserves. Onshore reserves account for 70% of Iran's reserves and 80% of these are located in the Ahwaz region. The three largest oilfields in the Ahwaz region are: Marun (22 billion barrels), Ahwaz (18 billion barrels) and Aghajari (17 billion barrels).

China is in an aggressive drive to acquire these resources. Last month, Chinese oil producer Sinopec announced it would undertake the development of Phase II of the Yadavaran field, which is partly shared with Iraq and currently yields 100,000 barrels per day of oil. Yadavaran is 70km southwest of Ahwaz. Phase II will increase daily output to 180,000 barrels, worth up to US$3 billion per annum. Yadavaran field alone is estimated to contain up to 31 billion barrels, potentially worth around US$1.5 trillion.

The China National Petroleum Corporation (CNPC), which owns oil company PetroChina, is also involved in Phase I of the North Azadegan project, which is expected to yield 75,000 barrels per day. CNPC has agreed on a US$2 billion deal to eventually expand daily production to 120,000 barrels. It is already the operator of the Masjed-e Suleiman field with design capacity of 20,000 barrels per day and there were pre-sanctions plans to improve recovery rates.

China is also a major destination for Iran's petrochemicals industry, which utilises oil and gas resources to make chemicals such as ethylene and raw materials for the Chinese plastics industry. Iran has the Middle East's second largest petrochemicals industry after Saudi Arabia. Around 40 per cent of Iran's petrochemicals exports are sold in Asia, mostly on the Chinese market.

Chinese industry transforms the petrochemicals products into finished goods for export to Europe, North America and elsewhere. Petrochemicals are used to manufacture car parts, white goods, construction materials, packaging and electronics

In the Ahwaz region, petrochemicals complexes produce a large bulk of Iran's petrochemicals output using the country's oil and gas resources. In Mahshahr, PETZONE is Iran's first specialised economic zone with seven complexes representing a total of 40 per cent of the country's polymer capacity, making it one of the world's biggest concentrations of petrochemicals production.

Chinese investors are reportedly preparing to back at total of 21 petrochemicals plants in Iran. By 2016, US$12 billion of the finance had been referred to the Central Bank of Iran for receiving facilities. In March 2016, Chinese investors agreed to back the US$4 billion Masjid Soleyman's petrochemical plant, which should come on stream in 2018 and become the world's largest producer of chemical fertiliser.

Consumer products in the West are produced with resources plundered from the Ahwaz region. Yet, these petrochemicals plants stand accused of contributing to environmental problems, dangerous working practices and ethnic discrimination against Ahwazi Arabs.

Iran requires a substantial amount of investment to support growth in its oil and gas sector, with the oil ministry estimating around US$200 billion of foreign investment is required. Iran is planning to introduce new oil contracts to achieve the production target of 4.7 million barrels per day by March 2021. This will be crucial to maintaining the

 However, proposed new contracts have proven controversial within the establishment. The constitution forbids direct foreign ownership of oil resources, but oil producers are insisting on more favourable terms than the previous buy-back arrangements.

The terms of the new contracts are not yet fully known, but will include full cost recovery, fee-per-barrel linked to the oil price and extraction complexity and contracts will be extended to up to 25 years, including exploration and production periods.

However, the Iranian government continues to cast aside demands for oil revenue redistribution lodged by members of parliament for the Ahwaz region. Majlis members have repeatedly requested 1.5 per cent of oil revenue be held for poverty alleviation and social development in the Arab populated areas, but this has been blocked by parliament.

Meanwhile, the powerful Guardian Council - the group of clergy who determine whether legislation is constitutional and Islamic - has stated that oil contracts do not need to be voted on by parliament. Ahwazi Arabs and their representatives in the Iranian parliament have been denied a voice as China and other nations continue to acquire resources for profit.

Source: UNPO