With America’s sanction waivers on Iranian crude oil ending on May 2, the battlelines in the Middle East are sharply drawn. On one side is Sunni Saudi Arabia along with its allies the UAE, Egypt, Bahrain, Oman and Kuwait. On the other is Shia Iran, boxed into a corner by US oil sanctions that could cripple its economy.
But while the Sunni Arab powers have a powerful ally in Washington, Iran isn’t friendless. It is backed by Russia and Turkey as well as Iraq and Syria, both with large Shia majorities. In this cauldron, a new entrant has quietly established its presence: China. Most notable is the Saudi-China axis based on a marriage of geopolitical and economic interests.
As The Economist reported recently: “For decades the Middle Kingdom saw the Middle-East as a petrol station. About half of China’s oil came from Arab states and Iran. Little went in the other direction. In 2008 the region got less than one per cent of China’s net outbound foreign direct investment (FDI). Skip ahead a decade and Chinese money is everywhere: ports in Oman, factories in Algeria, skyscrapers in Egypt’s new capital. Last year it pledged $23 billion in loans and aid to Arab states and signed another $28 billion in investment and construction deals.
Trade between China and the Arab world is lopsided. In 2017, Tunisia imported $1.9 billion worth of goods from China, nine per cent of its total imports. It exported just $30 million to China. The trinkets hawked to tourists in souqs are usually made in Chinese factories, not Arab workshops. In the occupied West Bank even the makers of keffiyehs, a symbol of Palestinian identity, cannot keep up with their Chinese competitors. A few Arab states hope that China’s growing taste for olive oil will lower their trade deficits a bit. But China will not put millions of unemployed Arabs to work.”
The business model the Chinese are following in the Arab world—from north African nations like Tunisia and Algeria to the sheikhdoms of the Middle East—is eerily similar to its investments in Sri Lanka, Bangladesh, Myanmar and Malaysia. The common feature is high-cost, unsustainable debt and “ghost” infrastructure with empty buildings and deserted airports.
The Saudis don’t seem to mind. They see the US as an unreliable long-term ally. US Congressmen are still deeply upset with Riyadh for complicity in the murder of Jamal Khashoggi, a Washington Post columnist and former Saudi insider who had turned a bitter critic of the Saudi royals. The personal rapport between US President Donald Trump’s son-in-law Jared Kushner and Saudi crown prince Mohammed bin Salman has kept the US on Riyadh’s side. But for how long? The next US president, in 2020 or 2024, is unlikely to be as strong an ally of Saudi Arabia as Trump.
Enter China. The Saudis see China as a counter to an inevitable estrangement with Washington once Trump demits office. For now Trump and Kushner need Saudi Arabia in their bid to isolate Iran, Saudi’s sworn enemy. With the imminent withdrawal of US troops from Syria and Iraq, Russia will play an increasingly pivotal role in the Middle East. Russia, Saudi Arabia and the US are the world’s three largest crude oil producers with a combined output of over 30 million barrels a day.
A complication in the region is Qatar with whom a Saudi-led group broke all ties in 2016. Qatar is not only the world’s largest natural gas producer but closely involved in the fraught negotiations between the Taliban, Pakistan, US special envoy Zalmay Khalilzad and the Afghan government. Qatar has, to Saudi anger, grown closer to Iran and Turkey. It also hosts the largest US military base in the Middle East.
As the geopolitics of the region plays out, Russia will increasingly assume a dominant military role while China focuses on enlarging its economic footprint across the Middle East. As The Economist reported: “Arab officials who once ignored China talk of it as a rising regional power—a softer sort than America or Russia. An influx of Chinese tourists has led to hotels in Cairo teaching staff to speak Mandarin and cook Chinese dishes.
Diplomats from Beijing often have a command of Arabic that puts their Western counterparts to shame. When Lebanon’s PM formed a government in February after nine months of deadlock, his first visit came from the Chinese ambassador. But China seems to have little interest in sorting out the civil war just over the border in Syria. Mercantilism is its priority, not fixing the region’s many problems.”
India’s own role in the region is growing. Millions of Indians have long lived in the Gulf—over three-and-a-half-million in the UAE alone. Indian entrepreneurs have a strong presence across the Middle East and Africa. The Indian diaspora has centuries-old links with the region, unlike China which has only arrived on the scene with money and men in the past decade. Airtel was an early investor in Africa’s mobile telecom market and runs a profitable business in dozens of African countries.
Geopolitically, India’s expanding security relations with Saudi Arabia, the UAE and across the region could make it the fourth major player along with the US, Russia and China. A combination of soft power (Bollywood) and hard power (space technology) are formidable weapons. They now need to be deployed with care and precision.