Geopolitics, Investment

Analysis: China’s growing influence in the Middle East

For a long time China had viewed the Middle East as a US influence zone. But, as a reflection of its growing power and ambitions, it is now becoming a more visible actor in the Middle East. Beijing’s involvement in the region is primarily motivated by its economic interests. Qatar is China’s top gas provider and Saudi Arabia is its second largest oil supplier. The United Arab Emirates (UAE) serves as a distribution centre for China as most Chinese exports to the Gulf Cooperation Council, West Asia, Africa, and Europe go through the UAE. As demonstrated in the table below, its trade relations with the region have also grown tremendously and are likely to grow further. In fact, it has recently signed a major deal with Saudi Arabia that worth nearly $65 billion and agreed to increase bilateral trade with Iran to $600 billion in the next ten years.

 

China’s trade volume with S. Arabia, Iran, Egypt, Turkey, and UAE in 2005 vs. 2015

 

 

Saudi Arabia

Iran

Egypt

Turkey

UAE

Year

Export

Import

Exports

Imports

Exports

Imports

Exports

Imports

Exports

Imports

2005

3,824

12,246

3,297

6,787

1,934

211

4,254

622

8,730

2,046

2015

21,684

30,151

17,831

16,035

11,963

916

18,63

2,961

37,069

11,532

Note: Total Import / Export Value in millions of US Dollars – current value.

Source: Compiled from the World Integrated Trade Solution database (World Bank), which is available at http://wits.worldbank.org/CountryProfile/en/Country/CHN/Year/2005/TradeFlow/EXPIMP/Partner/ARE/Product/all-groups

China’s interest in the Middle East is also related to its ambitious “Belt and Road Initiative” (BRI). In 2014 Beijing launched this $40 billion project that aims to revive the Silk Road, its ancient trade network, to connect China to Central Asia, the Middle East, Africa and Europe through roads, railways, ports, and oil and gas pipelines. There are already noteworthy achievements. For example, in 2016, a freight train made the journey from China to Iran in just 14 days, significantly shortening the regular 45 days delivery time via sea route. Beijing is also currently negotiating a free trade agreement with the Gulf Cooperation Council (GCC) and working with Israel on a railway proposal to connect the Red Sea to the Mediterranean that bypasses the Suez Canal. Once completed, the BRI will significantly boost China’s trade and economic relations globally.

There are also political motives that might explain the recent momentum in China-Middle East relations. Beijing’s most important foreign policy conflict involves the South China Sea (SCS), which is one of the most strategic commercial shipping routes in the world and also contains significant natural resource reserves. Beijing claims sovereignty for nearly the entire SCS. However, the United States doesn’t recognise Beijing’s claim, viewing it as a violation of international law and maintains a strong military presence in the region to challenge China. As a rising power, China first needs to secure control of its neighbourhood. Its greater involvement in the Middle East may help China in this regard by diverting US attention away from the SCC to the Middle East. In fact Beijing announced its first “Arab Policy Paper” in 2016, recently opened its first overseas naval base in Djibouti and started the construction of an arms factory in Saudi Arabia to manufacture armed. Others had previously refused as China has grasped the opportunity.

Beijing also actively promotes the Shanghai Cooperation Organisation (SCO) in the Middle East, a security organisation jointly led by China and Russia. Iran applied for SCO membership in 2008 and Turkish President Erdogan mentioned in 2016 that Turkey could also seek SCO membership. India and Pakistan have recently become full members, and China’s Deputy Foreign Minister Li Hailai stated that Beijing “welcomes and supports Iran’s wish to become a formal member of the SCO” and would also consider Turkey’s membership if it files an application. China’s Ankara ambassador also stated in May 2017 that Beijing “is ready for Turkey’s membership.”.

China is now a more active player in the Middle East, not only in economic but also in political terms. China’s active engagement in the Middle East may actually contribute to stability in the region. A stable Middle East serves China’s interests better as conflicts within the Middle East such as the Qatar crisis pose a threat to its energy supplies, free-trade negotiations, BRI project, and regional trade prospects. Beijing emphasises sovereignty, territorial integrity, and the principle of non-intervention and avoids taking a clear side in political conflicts in the area. It maintains good relations with both Iran and Saudi Arabia and has no major enemy in the region. Beijing appears to be an honest and impartial broker in Middle East conflicts and may soon play a greater role in mediating disputes, which may further strengthen its standing in the region in future.