Chronicle of the Middle East and North Africa

China Wields Economic Power in the Middle East

Chinese Premier
Chinese Premier Li Keqiang (2nd-L) meets with Saudi King Salman bin Abdulaziz (2nd-R) at Great Hall of the People in Beijing on March 17, 2017. The visit by the 81-year-old king comes as China pursues a charm offensive towards the Middle East, where it has previously kept a low profile. Photo AFP

China Wields Economic Power in the Middle East

At a time when the Middle East is becoming increasingly polarized along the Iran-Saudi Arabia fault line and over the conflict in Syria, China has attempted to remain politically neutral while preserving its economic ties with all parties.

Unlike the Unites States (US) and Russia, China’s recent involvement in the Middle East has been primarily economic, not military or security-related.

In January 2016, China released its first policy paper on relations with the Arab world, which emphasized a commitment to cooperation and economic development. The same year, Chinese President Xi Jinping visited both Iran and Saudi Arabia on one trip.

The visit to Tehran came immediately after the lifting of global sanctions on Iran and led to an agreement to expand trade between the countries to $600 billion over the next decade. Meanwhile, China has also made moves to expand economic ties with Saudi Arabia by signing deals worth $70 billion with the kingdom and offering to buy 5 per cent of oil giant Saudi Aramco’s shares.

China has become the world’s largest importer of crude oil, surpassing the US. Unlike the US, which has now become a major oil producer in its own right, China’s demand for oil is expected to continue to grow, reaching 13.8 million barrels a day by 2030, according to the Chinese National Petroleum Corp.

In terms of oil imports, Saudi Arabia is China’s second-largest supplier of crude oil after Russia. At the same time, China is the largest single buyer of Iranian crude oil and has signalled that it will continue to import from Iran in spite of US President Donald Trump’s decision to back out of the Iran nuclear deal and reimpose sanctions.

Iran will also be key to China’s major economic plan, One Belt One Road, or Belt and Road as it is commonly known, an ambitious economic initiative to connect China with the Middle East, Central Asia, Russia and Europe via massive infrastructure projects, including transport corridors, energy pipelines and telecommunications systems. The plan includes a land route known as the ‘Silk Road Economic Belt’ and a sea route called the ‘Maritime Silk Road’. Iran’s location makes it key to this plan, as it provides a link between Central Asia and South and West Asia.

Given these economic factors, China’s interest is to play the mediator and attempt to tamp down regional tensions. However, it remains to be seen how successful its economic clout will be in that regard or how long China can continue to remain neutral between Iran and Saudi Arabia.

The US and Saudi Arabia could bring considerable pressure to bear with regards to the nuclear deal via Chinese businesses. As an example, the Chinese company ZTE faced a seven-year ban on US companies selling it necessary components in retaliation for violating sanctions on Iran and North Korea. Although the Trump administration eventually reached a deal allowing ZTE to stay in business, the company was in danger of bankruptcy.

China has also previously caved to Saudi pressure on economic deals with the kingdom’s adversaries. Earlier this year, Chinese banks refused to participate in a one-year extension of a $575 million syndicated loan to Qatar’s Doha Bank.

Specials- Hassan Rouhani
Iranian President Hassan Rouhani and Chinese President Xi Jinping (L) walk on the red carpet during a welcoming ceremony on January 23, 2016 in the capital Tehran. Photo AFP

On the Syria front, China has remained on the sidelines in the conflict but is hoping to benefit from participation in the post-war reconstruction there, as it did in Iraq after the US invasion. China has also signalled plans to invest in the post-IS reconstruction effort in Iraq going forward.

Unlike Western states, which have so far insisted that reconstruction aid for Syria would be contingent on a political transition that would remove President Bashar al-Assad from power, China has had no issues dealing with the regime. And unlike the regime’s military supporters, Russia and Iran, China has the economic capacity to make the required investments.

In a visit to a Damascus hospital in February – where China had funded renovation of the emergency department – Chinese Ambassador to Syria Qi Qianjin told China’s Xinhua News Agency, “I think it’s about time to focus all efforts on the development and reconstruction of Syria, and I think China will play a bigger role in this process by providing more aid to the Syrian people and the Syrian government.”

In July 2017, at the First Trade Fair on Syrian Reconstruction Projects, Qin Yong, vice president of the China-Arab Exchange Association, revealed plans for $2 billion in Chinese investment in Syria to build industrial parks.

Qin, who made four trips to Syria in 2017, told the South China Morning Post that Chinese companies are lining up to work with Syria. “We get phone queries every day. They see huge business potential there, because the entire country needs to be rebuilt,” Qin said.

President Xi made a plea to the Arab League last year for a political solution and economic development: “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 are building a cooperative partnership network for win-win outcomes,” he said.

China’s interests in seeing an end to the conflict in Syria are not merely economic. While it has not been militarily involved, China does have a security interest of its own in stabilizing the Middle East, as ethnic Uighurs – Muslims from the far western Chinese region of Xinjiang – have travelled to Syria and Iraq to join militant groups, including the Islamic State. The group has threatened attacks on China for its treatment of Muslims.

China has also shown signs of becoming a more active party in Israeli-Palestinian negotiations, since the US lost its credibility with the Palestinians as a mediator after Trump’s controversial decision to recognize Jerusalem as the capital of Israel and move the US Embassy there. In December 2017, Beijing hosted its own peace talks between the two sides, which eventually resulted in a non-binding call for a two-state solution. However, Israeli officials made it clear that they were not prepared to have China supplant the US in the role of mediator.

Clearly, China would prefer to continue to increase its clout in the Middle East via the soft power channels of economics and trade. Yet as the region becomes increasingly divided and combustible, it may have a difficult time avoiding being sucked into the many interlocking conflicts.