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Abu Dhabi, UAESunday 19 August 2018

China’s economic and diplomatic footprint in the Gulf region will expand as its investments grow

Beijing's requirement for secure sources of energy will be the defining long-term factor, writes Alan Philps

Xi Jinping, President of China, on his visit to the UAE last week. Mohamed Al Hammadi / Crown Prince Court - Abu Dhabi
Xi Jinping, President of China, on his visit to the UAE last week. Mohamed Al Hammadi / Crown Prince Court - Abu Dhabi

Last week's state visit to the UAE by President Xi Jinping of China came at a time when the prospects of economic co-operation are unprecedented. This is due in part to China’s rising economic interests in the Gulf region being matched by a decline in interest from the United States, as it approaches energy independence due to rising domestic production of shale oil and gas.

This economic calculus, bolstered by the failure of the hugely costly Iraq war to turn the region to American advantage, has resulted in a rebalancing of US priorities in the region and beyond. This is what prompted the “pivot to Asia” under the Obama administration, as a way to put the US at the heart of the fastest-growing region of the world.

Under Donald Trump, the prioritising of economic advantage has gathered pace. With his focus on reducing US trade deficits, military actions in the Middle East – and even such minor interventions as the launching of cruise missiles at targets in Syria – do not feature in his cost-benefit analysis. It seems that Mr Trump would be happy to outsource Syria to Russia's Vladimir Putin.

China has not announced any “pivot” to the Middle East or Europe but its economic focus is moving westwards with its plan to upgrade the old Silk Road for the 21st century with high-speed rail from China to Europe. This is the signature policy of Mr Xi, the Belt and Road Initiative, which aims to bring investment to the neglected regions of Central Asia and in the process, spread wealth domestically from the developed coastal cities to the restive western hinterland of Xinjiang.

Kevin Rudd, former Australian prime minister and a long-term student of China, says the aim is to make China “the indispensable economic power in Eurasia”. This is a development which cannot be ignored in the Gulf.

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For the UAE, as a shipping hub between East and West, the most important element is the maritime part of the Belt and Road Initiative which stretches to Africa, where Chinese investment is already widespread and still growing.

Inevitably, China’s economic and diplomatic footprint in the region will expand as its investments grow. The chance to broaden partnerships will be welcomed at a time when the US is distracted and unpredictable and when Russia is flexing its muscles.

The Gulf states have raised the level of relations with Moscow in recent years but the truth is that Russia is never going to be a replacement for the US, given its partnership with Iran in supporting the regime of Bashar Al Assad in Syria.

China is careful never to speak of any aspirations to exert military power in the Middle East or to challenge the hegemony of the US in the region. When Mr Xi said last year that “China is determined to become the keeper of peace and stability in the Middle East”, it was understood he intended that Beijing would support the United Nations and multilateral approaches to the problems of the region.

China of course has its own strategic aspirations in its immediate neighbourhood, such as advancing its maritime interests, pushing the US away from its shores and fracturing its alliances. There is no suggestion of any intention to do the same farther afield.

Questions have been raised about China’s first foreign naval base, in Djibouti at the mouth of the Red Sea, where the Americans also have their only base in Africa. China has stated that its purpose is to support anti-piracy patrols and the growing number of Chinese troops on UN peacekeeping missions in Africa and those training African forces. At the moment this seems more like an experiment than an exercise in power projection around the region.

For any power operating in the Middle East, the question arises of how it will navigate the region’s divisions. America’s moment in the Middle East was characterised by lack of balance – in Cold War times, by betting on the Shah of Iran and then allowing its foreign policy thinking to be dominated by Israel. As for the Russians, their allies and close partnerships were reduced to Syria, Algeria and Libya but thanks to years of patient diplomacy, they now aspire to be the indispensable power that everyone needs to talk to in the region.

For China’s Belt and Road Initiative, there is one inescapable geographical fact. High-speed rail connections between China and Europe have to go through Iran; that is why China is bankrolling the electrification of the 926km stretch of railway between Mashhad and Tehran, at a cost of $2.6 billion, along with other rail projects. The alternatives – through Russia or by ferry across the Caspian Sea to Azerbaijan – are not so practical.

China has been the largest importer of Iranian oil in the past and has made clear that it intends to continue what a foreign ministry spokesman called “normal and transparent pragmatic co-operation with Iran”, despite tightening US sanctions. Still, China imports far more oil from Saudi Arabia than it does from Iran.

In an uncertain global environment, there is plenty of scope for China to improve relations both economic and diplomatic with the UAE and its allies.

China’s requirement for secure sources of energy will be the defining long-term factor. Beijing will not want to be caught on the wrong side of any of the Middle East disputes so it is normal that it wants to hedge its Iran-related risk by strengthening relations with the UAE and Saudi Arabia.

Similarly, the Gulf states must also hedge the risk of an unpredictable America – one that might set in motion a global trade war or even pull back from the region and shrug off its burden of keeping the Gulf sea lanes open. As ever, much still depends on Washington and what its political system throws up next.

Alan Philps is editor of The World Today magazine of international affairs

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