2 October 2018

The Middle East is key to China’s global ambitions


Across Asia, China is beginning to face a backlash against its landmark Belt and Road Initiative. Last month, Malaysia’s Prime Minister accused Beijing of turning its foreign investment into a “new colonialism”. In the Maldives, the China-backed president, Abdulla Yameen, was recently ousted.

However, one region where the Belt and Road Initiative is taking off is the Arab world. Last week, Saudi Arabia agreed to invest in the China-Pakistan Economic Corridor (CPEC). The CPEC is a $64 billion project to connect western China to the Arabian Sea through the Pakistani seaport of Gwadar. Saudi Arabia’s involvement will likely have major economic and geopolitical ramifications.

For one thing, the deal deepens ties between the Arab states and China. The Middle East is of critical importance for China’s ambitions – the world’s second largest economy is energy poor and relies on the Gulf for over a third of its oil imports. Its expanding economy makes it one of the few growth areas in an otherwise sluggish oil market. From an estimated 6.6 million barrels of oil imported in 2015, the US Department of Energy predicts that this will rise to 9.7 million barrels a day by 2035. From helping Egypt with a new Suez Canal to building a 10-billion-dollar industrial city on the Omani coast, the pace of investment has been unrelenting.

The cooperation with Saudi Arabia on CPEC could also provide a critical ballast to the Belt and Road at a time when it is struggling. The term has become synonymous with a whole range of China’s overseas activities. Since being inaugurated by president Xi Jingping in 2013, the project has been an all-encompassing term that has become tied up with an impression of China’s growing global ambitions. Growing reticence from partner countries has forced Beijing to backtrack, with the country’s foreign minister insisting that China is not trying to create a new Marshall Plan.

By bringing in third parties such as Saudi Arabia, China hopes to fend off accusations of a creeping imperialism. What’s more, it would stave off US efforts to derail the CPEC. Secretary of State Mike Pompeo has called on the IMF to reject a Pakistani bailout request that he argued would leave it picking up the bill for China’s predatory lending. The US has ramped up its criticism of the Belt and Road more generally and has now launched a rival infrastructure programme in the Indo-Pacific region.

The involvement of Saudi Arabia is also important for the Kingdom’s 32-year-old Crown Prince, Mohammed Bin Salman. In August, his “Vision 2030” reform plan faced a massive blow as its major source of financing, the public listing of the state oil firm, Saudi Aramco, was shelved. The involvement with CPEC will provide a further means of underwriting these reforms while likely increasing its share of China’s growing oil demand.

It also marks a step change in Saudi-Pakistan relations. Since the 1960s, Saudi Arabia has given more aid to Pakistan than any other country outside the Arab world, but by directly investing in the country’s infrastructure it will now take on a more direct role in political decision-making. The young ruler’s aggressive foreign policy has left him embroiled in a conflict in Yemen. The Pakistani government has tried to maintain a neutral position in the conflict which has pitted Saudi Arabia against its regional rival, Iran. Its continued refusal to support the Saudis with boots on the ground has caused considerable upset.

This opens up a further point of tension created by the tripartite CPEC deal – the role of Iran. In recent weeks both Saudi and Iranian officials have been striving to exert influence over the new Pakistani Prime Minister, Imran Khan. In the first months of his premiership, he has struck a notably more conciliatory tone towards Tehran. Saudi investment in critical Pakistani infrastructure could make this balancing act trickier. On top of this, Tehran is desperate to maintain close relations with China as renewed US sanctions hit in November. China is the only economy big enough to withstand US pressure to enforce its sanctions against Iran. However, by developing CPEC and building energy connectivity with Saudi Arabia, China’s dependence on the Iranian corridor will also decrease.

Finally, the move carries great significance for America’s relationship with Saudi Arabia. This has always been an extremely important strategic partnership for Washington but Trump’s administration has fawned over Riyadh. To join a project that Washington openly lambasts shows the direction that the Kingdom sees its long-term future going.

Recently, China published its Arab Policy Paper in which it sought to present a distinct alternative to American involvement in the region. At the recent forum of Arab leaders in Beijing, China’s representative, Li Chengwen, reiterated a more neutral approach, saying “the root problems in the Middle East lie in development and the only solution is also development”. Yet the conflicting interests surrounding CPEC suggests that a more active political role may become inevitable.

Daniel Rey is an intern at CapX.