EUROPE ASIA FOUNDATION - INSIGHT
China’s strategic diplomatic and economic moves in the Middle East may blindside the West
The unprecedented support showed by many Middle East countries to China over the visit of US Speaker Nancy Pelosi to Taiwan in August reflects the changing political alignment in the region. China’s fast-growing influence started with economic engagement such as trade and investment in the region. Considering the political sensitivity of the region, China has been quietly engaging with countries [SF1] in building infrastructure through its Belt and Road Initiative (BRI), an effective tool for leveraging political influence. Arab Governments, however, have also adopted the ‘One China’ [SF2] policy to remove needless complications in their external relations.
The perceived disengagement of the US from West Asian and North Africa (WANA) has enabled China to incrementally deepen its engagement in the region. China’s interest in the Middle East has primarily been economic – as well as to secure energy supplies - but it is now turning to a more strategic focus.
However, China’s engagement with the Middle East will face several challenges in its move from economic engagement to a strategic one. First, notwithstanding increasing economic engagement with China, neither the Gulf States nor Turkey display any intention of fundamentally altering their security relationship with the United States. Secondly, China is not yet a major power player in the region[SF3] . The dynamics is different in the cases of Saudi Arabia, the UAE, and Turkey just to name a few. Nevertheless, China is focusing on economic engagement with these countries in the hope of using this to reduce tension among them and as an instrument to lever opportunities for strategic engagements with the countries of the region later down the line.
China has unrivalled regional trade dominance, investing 330 billion USD in 2021. And it continues to diversify its activities. 2022 began with visit of Secretary-General of the Gulf Cooperation Council (GCC) and Foreign Ministers from Bahrain, Saudi Arabia, Kuwait, and Oman to the China’s coastal province of Jiangsu as well as a series of meetings with Chinese Foreign Minister, Wang Yi. Participation of Gulf countries in the Beijing Winter Olympics, despite US resistance is the proof of growing Chinese clout in the region. China continues to strengthen relations with the GCC.
Trade imbalance has seen a surge as Chinese products enter the Middle East in recent years. Analysts point out that people in the region are becoming accustomed to Chinese products and developing their familiarity with them. China’s state-owned and private companies have invested over USD 250 billion in development projects in Saudi Arabia, the UAE, Egypt, Iraq, and Turkey.
Last month, there was hectic bilateral cooperation advancement by Beijing in the region. Saudi Aramco and China’s state-owned China Petroleum and Chemical Corporation (SINOPEC) signed an agreement to collaborate in the oil and gas sector and enhance synergy between ‘Saudi Vision 2030’ and China’s BRI. Both the countries are also exploring an opportunity for the establishment of a local manufacturing hub in the King Salman Energy Park in the Eastern Province of Saudi Arabia. In a major infrastructure cooperation, China Harbour Engineering Company (CHEC) won a bid for the design and construction of twelve bridges for the Saudi Red Sea Tourism Development Company, which is in turn owned by the Saudi Public Investment Fund. Saudi Arabia’s once marginal relationship with China has grown into a comprehensive strategic partnership. Chinese engagement with the Kingdom went up to Saudi Deputy Defence Minister Prince Khalid bin Salman and China’s Minister of National Defence Wei Fenghe discussing defence cooperation in January.
In cash-starved Iraq, China is pursuing a different kind of game plan. An Iraq-China Agreement Projects Account has been established for funding Chinese projects in Iraq, sourced from Iraqi export of 1 lakh barrels of oil per day to China. Chinese firms are also attempting to enter Iraq’s banking system software services in collaboration with Huwaei.
The Chinese presence is also growing in Morocco and Egypt. It plans to extend technical assistance to the Moroccan Government to build the second line of high-speed rail between Casablanca and Agadir and offered the use of Chinese expertise and experience in drought management and food security to Moroccan authorities.
In Egypt, a Chinese firm Harbin Electric International (HEI) has submitted a bid for an ultra-supercritical coal fired power plant (2 x 1320 MW) proposed at Ayoun Moussa in the north-east Gulf of Suez.
China is deepening ties with countries in the Middle East, offering new opportunities for Middle Eastern businesses to expand in China. To facilitate business activity and investment, China has signed a range of tax agreements and bilateral investment treaties that offer fair treatment and protection for foreign investors with many countries in the region. At the same time, Beijing is in the process of negotiating free trade agreements.
Huawei, which had been condemned by the West on charges related to security related issues, consolidated its position to become a fully integrated tech partner for Gulf States and other Arab countries, focusing on rolling out 5G and cloud services. Now, Washington faces a new threat and believes this regional embrace of Huawei endangers sensitive information and technology in US military and naval bases scattered across the Middle East.
Apart from trade and investment activities, Beijing is pushing positive coverage in the Gulf region. Mass opinion polls in Arab States highlight China’s popularity while favourable coverage in Arab media is constant. Beijing’s narrative is being pushed. It was demonstrated by recent responses in regional newspapers to Nancy Pelosi’s visit to Taiwan. The sympathetic coverage in Arab media is shaped by broad support for the ‘One China’ policy amongst Arab governments, supported with Beijing’s economic incentives, reaffirmed by the Arab league recently.
Meanwhile, the Islamic world has largely been silent on China’s crackdowns in Xinjiang, which gives Beijing upper hand to approach its diplomacy from a transactional framework in the region. The Middle East countries’ silence on the repression and incarceration of Muslims in Xinjiang is seen as a double standard, or even diplomatically flawed, given their harsh criticism of India on stray political utterances regarding Indian Muslims who otherwise enjoy full constitutional rights without any discrimination.
China’s outreach in WANA is increasing; however economic benefits are asymmetric and in favour of China. In the initial stages, the engagement sought by China is primarily economic, which it aims to take to strategic engagement in later stages. Beijing has been careful in building its influence in this politically volatile geography, managing the regional fault lines and remaining at a distance in order not to get embroiled in local geopolitics. Beijing’s approach in the Middle East has now started giving results.
Despite the problems being faced by world economies due to the Ukraine-Russia conflict resulting in high energy prices and sluggish domestic economic growth, Beijing has continued its unabated engagement in the Middle East, laying the ground through economic engagement and by developing strategic engagement overtime. China’s status as the region’s largest trading partner, investor, and energy importer remains unwavering. Whether China would become a meaningful political actor in the region is yet to be seen, but Beijing is putting all its weight behind it. However, the America’s top allies in the Middle East are careful enough not to get too close to China in security and military matters. From a European perspective, whilst its promising to see strong rhetoric recently from EU leaders on both the Taiwan Straights crisis and on Chinese human rights abuses, it cannot be denied that Europe is still closely linked to China both in terms of supply chains and trade flows. The EU must continue to work closely with its Asian and Middle Eastern allies and, along with the US, work towards ensuring China does not gain undue influence in the region.