The Caravan

China & Middle East: Regional Rebalancing

Thursday, October 4, 2018
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zhangzhengand, iStock

The Middle East, a region once embroiled in the Cold War struggle of east and west, is now bearing witness to new geopolitical shifts.   The emergence of Beijing on the Middle Eastern landscape where it is quenching its thirst for energy resources and forging regional relationships through its One Belt One Road Initiative (OBOR) with countries as diverse as Egypt, Iran, Jordan, Oman, Saudi Arabia and the United Arab Emirates (UAE) comes at the expense of Washington’s longstanding primacy.  Many American strategists find China’s encroachment to be a troubling threat to U.S. national interests.  Despite these warnings, President Trump lamenting the $7 trillion cost (with limited return) of US engagement in the region has followed in the footsteps of the Obama Administration and accelerated an ongoing U.S. detachment from the Middle East.  Doing so, has given China an opportunity to capitalize on a growing vacuum of power that, without greater US attention and investment, will gradually reorient the regional balance from west to east. 

China’s historical foray into the Middle East is captured by the old adage that “everything happens in threes”. China’s push to the Middle East has taken three drives.  The first took place during the Tang Dynasty (618-907) where the infamous Silk Road linked the commerce of East and West.  The second occurred during the Ming Dynasty (1368-1644) when Zheng He, an Admiral and a court eunuch, commanded an armada that brought him as far as Persia and Egypt. After the establishment of the People’s Republic of China in 1949, the Mao government, as a second world power, tried to lure many of the third world countries of the region out of the warm embrace of the United States, albeit unsuccessfully. President Xi Jingping’s 2013 announcement of the One Belt One Road (OBOR) initiative designed to expand links between Asia, the Middle East, Africa, and Europe by recreating the ancient Silk Road trade routes by land (the Belt) and sea (the Road) is the third such initiative. The OBOR vision is designed to invest $4 trillion in infrastructure development linking 70 global countries through the creation of new ports, roads, railways and pipelines.  Such connectivity will enable Chinese companies to reap the gains from construction contracts and from long term export opportunities into these markets.   Investment comes in the form of loans allocated by the Asian Investment Infrastructure Bank (AIIB), the Silk Road Fund and the New Development Bank.

The Middle East is the nexus of the project linking both east and west. Since 2010, China has been the largest importer of Middle Eastern oil and the largest exporter of goods to the region. These linkages, while initially economic, have grown in political significance, suggesting that the Middle East might challenge China’s traditional policy of non-intervention established by Prime Minister Zhou Enlai in 1953.  In July 2018, China allocated $20 billion in loans, and over $100 million in aid to Middle East nations, as part of an “oil and gas plus” model designed to revive economic growth in the region.  Part of this package has been specifically allocated to Palestine, Syria, Yemen and Lebanon where Xi Jingping has argued, “the solution to many issues in the Middle East lies in development”.  Beijing’s appointment of new Special Envoys to Syria and to the Middle East Peace Process suggests that China is considering new strategies to support regional stability.

Increased travel, trade volumes and investment between Beijing and the countries of the Middle East reveal China’s relevance and growing interconnectivity with multiple players in the region.  In July 2018, Xi Jingping visited the UAE and in 2016 he traveled to Iran, Saudi Arabia and Egypt, all-pivotal countries for Beijing’s OBOR vision.   Seeking China’s economic assistance in light of forthcoming US sanctions due to the US withdrawal from the Iran nuclear agreement, Iran’s President Rouhani also traveled to Beijing in June 2018.  Without European competition, China will also have an opportunity to step in and replace Western companies in deals such as the French firm, Total’s South Pars investment.  China, as the largest buyer of Iranian crude, is also likely to continue such purchases thereby protecting Iran from US sanctions. 

Egypt’s Abdel Fatah al Sisi plans to visit Beijing in September 2018 to build on Beijing’s early interest in Egypt’s strategic location.  To date, Beijing is Egypt’s largest trading partner, it has negotiated a free trade agreement and committed $20 billion in infrastructure spending in Cairo alone.  Its resources are also behind the Suez Economic and Trade Cooperation Zone connecting trade between Europe and the Middle East.   Following Netanyahu’s trip to Beijing, China and Israel have also ramped up trade ties particularly in the science and technology fields.  China has also shown interest in a proposed Red-Med railway project connecting the Red Sea to the Mediterranean that if developed would provide an alternate transit line to the Suez Canal.

Trade and investment also shed light on the growing importance of China in the Arab Gulf.  Indeed, many regional development plans, such as Riyadh’s Vision 2030 or Jordan’s Vision 2025, have been linked to OBOR investment opportunities.  Beijing’s largest trading relationship in the Middle East is with Saudi Arabia.  Saudi King Salman traveled to Beijing in 2017 signing $65 billion in trade deals.  It has also been rumored that China might be the principle investor in the state oil company, Saudi Aramco’s, initial public offering. In July 2018, Beijing also hosted an Arab Summit attended by 21 Arab countries where plans to negotiate a free trade agreement with the bloc were announced.   The UAE enjoys the second largest trading relationship in the GCC after Riyadh with China and also benefitted from the signing of numerous trade and investment deals upon Xi Jingping’s visit. 

In light of waning US attention to the Middle East, the costs, benefits and challenges of Beijing’s drive into a once American preponderant domain should be examined.  For China, the benefits of this shift westward is a natural extension and expansion into a region with demographic and economic potential foreshadowing its growing power and domestic imperatives. In the region, China’s policies while economically motivated have strategic undertones that balance its domestic investment needs against its longstanding foreign policy of non-intervention.  Greater cooperation with Middle East countries could also stem the threat of Islamic activism among China’s own restive Muslim minority.

Beijing’s OBOR dreams and success is predicated on stability in a notoriously unstable region.  Challenges stemming from the minefield of regional conflicts in Syria and Yemen, the threat of Islamic terrorism, the influence of non-state actors, the Israeli-Palestinian conflict and tensions with Iran over the nuclear agreement loom on the horizon and could, in the absence of US activism, necessitate growing Chinese diplomatic interventionism to stabilize the investment environment.  Important to note, though, is that any such change to its longstanding foreign policy would expose Beijing on the issue of Taiwan and open the door to outside interference in its own sphere of influence.  As such, for the time being, Beijing has used the twin carrots of its neutrality and economic investment as enticements. 

Building on this, President Xi has affirmed the centrality of the region by stating that “Instead of looking for a proxy in the Middle East, we promote peace talks; instead of seeking any sphere of influence, we call on all parties to join the circle of friends for the Belt and Road Initiative; instead of attempting to fill the “vacuum,” we build a cooperative partnership network for win-win outcomes.”  Beijing has thus far successfully navigated relations with competing powers in the region ranging from Saudi Arabia to Iran and Israel without wading into their internal conflicts. Time will only tell if this policy of neutrality will be tested.

For Middle East states too, the implications and opportunities stemming from this geopolitical shift are equally profound. On the one hand, the OBOR initiative opens the door to geostrategic diversification, increased eastern linkages and much needed ‘no strings attached’ economic investment which in the short run has been very well received.  Conversely though, China’s growing military sales to the region should also be considered within the context of regional militancy and ongoing tensions. Over the long run, the absence of American checks and balances will likely exacerbate regional rivalries portending further conflict and economic competition in the Middle East.  

These ties suggest that Beijing’s growing economic clout will undoubtedly give it greater regional influence in the years to come.    In light of these growing economic trends and early political signals of Beijing’s commitment to the Middle East, America should not avert its gaze from the region.   Now more than ever, the US should engage multilaterally to protect its interests and diplomatic and economic relationships in the Middle East.   Working alongside China and regional actors, the United States should maintain its relevance as an arbiter and work to balance against the shifting geopolitical sands. 

Sanam Vakil is a Visiting Fellow at the Hoover Institution’s Working Group on Islamism and the International Order and a Senior Consulting Fellow at Chatham House’s Middle East and North Africa Programme. 

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