China’s Growing Role in the Middle East: Regional Geopolitics and US Policy

China’s Growing Role in the Middle East: Regional Geopolitics and US Policy
Introduction to a Panel Discussion at the Arab Center

Ambassador Chas W. Freeman, Jr. (USFS, Ret.)
Visiting Scholar, Watson Institute for International and Public Affairs, Brown University
By video 10 August 2023

The American obsession with a rising China has become nothing short of monomaniacal, diverting needed attention from almost all other foreign policy concerns.  An escalating U.S. ‘forever war’ with Russia is underway in Europe.  The China mainland and Taiwan are drifting toward renewed combat and American involvement in the unfinished Chinese civil war.  With help from Russia, North Korea is enhancing its ability to hold the United States at nuclear bay.  Electoral autocracies are taking root in India and Israel.  Military dictatorships are replacing democracies and French dominance in the Sahel.  Parts of Libya, Syria, and Yemen remain in states of anarchy.  Iran is breaking free of the “maximum pressure” the United States has applied to it. The Israel-Palestine issue is once again erupting in violence.  Much of the world is searching for alternatives to the dollar as a medium of trade settlement. Yet our secretary of state finds time to look for Chinese influence to root out in mid-Pacific ministates.  And here we are at the Arab Center addressing the Washington Beltway idée fixe du jour: China’s increasing engagement with the countries of West Asia.

The relentless American focus on China obscures the reality that over the past three decades every country in the Middle East – including Egypt, Iran, Iraq, Israel, and the six members of the Gulf Cooperation Council (GCC) – has pivoted toward intensified economic and military relationships with Asia – not just China but India, Indonesia, Japan, Korea, Malaysia, and Singapore.  To be sure, trade with China by the region’s largest economy – the Kingdom of Saudi Arabia – is now triple that with the United States and almost twice that with Europe.  Today, about one-fifth of Gulf Arab international economic interaction is with China.  But GCC trade turnover with India has recently grown far faster than that with China, rising by an amazing 58 percent between 2021 and 2022.  The region’s commercial relations with ASEAN are growing too, though nowhere near as rapidly.

Investment flows are following a similar but delayed trajectory.  The importance of the GCC countries in international finance is large and rising.  The region is home to some of the world’s largest sovereign wealth funds (SWF), with more than $3.7 trillion in total assets under management – an amount that exceeds the UK’s 2022 GDP.  Saudi Arabia expects that its main state investment vehicle, the Public Investment Fund, will have more than $2 trillion by 2030, making it the world’s largest.  The GCC’s fund managers remain far more familiar and comfortable with European and American financial institutions, but their co-investment programs with Chinese development banks, funds, and the Chinese Investment Corporation – a counterpart SWF with assets of $1.3 trillion – are expanding apace.

Clearly, “emerging Asia” – with China in the lead – is displacing Western commercial influence in West Asia.  American egocentrism is such that we assume that doing so must have been the Chinese objective.  But there is no evidence whatsoever that this was the case.  No government in the region expects China to replace the United States as a guarantor of its security.  China has an aversion to alliances, which it regards as likely to involve it in quarrels in which it has no direct stake.  And the Chinese saying: 强龙难压地头 “even the strongest dragon would have trouble subduing a snake on its home ground” – encapsulates its skepticism about the risks inherent in projecting military power to distant environments.

But the facts that China and India alone account for over half the world’s economic growth and that ASEAN’s GDP is even larger than India’s have not escaped attention in West Asian capitals, which are actively negotiating free trade agreements with China, India, ASEAN, and ASEAN’s member states.  If these negotiations bear fruit, economists project that trade between the GCC and “emerging Asia” will grow around six percent per year to about $600 billion by 2030.  Qatar’s recent commitment to supply China with LNG through the year 2050 is a noteworthy illustration of what is happening.  The United States, by contrast, is no longer interested in lowering tariff or other trade and investment barriers with any foreign country.  West Asia is no exception.

It’s easy to forget that it was Washington, not Beijing, that first embraced the imperative of Sino-American global competition and launched tariff and technology wars designed to hamstring its proclaimed rival’s economy.  In the name of such competition, the United States has done its best to restrict Chinese trade and investment in other countries and has imposed ever more sanctions, quotas, and tariff increases on the world, including West Asia.  But erecting such barriers to trade is no way to compete with agreements that facilitate and increase it.  It just creates a vacuum that invites greater economic interaction between other countries, including China, as opposed to America.  As trends in West Asia illustrate, this is a recipe for reduced American influence.

Meanwhile, China’s Belt and Road Initiative (BRI) and a variety of bilaterally agreed Sino-Arab funds are increasing connectivity between China and the Persian Gulf region.  Not to be outdone, India and Russia are collaborating to link Moscow with Bombay through the Iranian port of Chabahar.  There has been a lot of American talk about infrastructure investment but nothing concrete has yet come of it.  Blather has never been much of a substitute for hard cash.

Politically, unlike the United States (which has cooperative relations with some West Asian nations and antagonistic relations with others) China has pursued a policy of friendship and economic intercourse with all.  Of course, as the Chinese phrase has it, 广交友无深 – “in practice, friendship with all means devotion to none.”  China is an important interlocutor, not a patron or ally of any West Asian state.  It does not threaten any nation in the region, but it has carefully avoided assuming any commitment to defend one.  China’s aversion to alliances as well as its inability to project power to the region mean that it is not in contention to replace the United States as the guarantor of regional security.  But it is beginning to develop military relationships with the countries of West Asia.

After decades of near total dependence on international arms imports, both Saudi Arabia and the UAE now seek to attract investment in their nascent domestic military industries.  The UAE has bought jet trainers and armed drones as well as alleged military port construction services from China.  Abu Dhabi’s growing military relationship with Beijing was a key factor in queering the purchase of U.S. F-35s it had been promised in return for its normalization of relations with Israel under the so-called “Abraham Accords.”  The gradual emergence of China as a source of advanced weaponry and military technology is a potential deathblow to the traditional American approach of insisting that protected Arab states not buy U.S. competitors’ weapons, while Washington simultaneously refuses to sell them U.S. alternatives.  Saudi Arabia accounts for ten percent of the global arms market. Chinese sales to it have included ballistic missiles, armed drones, anti-drone systems, and artillery.  Both the Kingdom and the Emirates as well as Iran now routinely exercise with the People’s Liberation Army Navy (PLAN).  And this month, the UAE Air Force will join its first exercise with the PLA Air Force (PLAAF) in Xinjiang.

The only country in West Asia that has bowed to U.S. pressure to limit military cooperation with China is Israel, which cannot afford to lose U.S. backing for its “qualitative military edge.”  The U.S. technology war on China is curtailing the previously robust presence of Chinese investors in Israeli start-ups.  Israel has instead turned to India – whose lapse into Hindutva echoes its own religious nationalism and Islamophobia.  India is now Israel’s primary military partner in ‘emerging Asia’ and Israel’s largest overseas arms market.

Let me conclude so that the excellent panel the Arab Center has assembled to discuss the changing geopolitics of the Middle East can get to work.
It’s not all about us.  The trends that Americans find disturbing in West Asia are less the product of predatory Chinese policies than they are the result of American unwillingness or inability to satisfy the economic, political, and military requirements of former client states in the region.  China-bashing, sanctions, and refusals to sell weapons or transfer technology will not retard, still less reverse these trends.  The region is pivoting toward “emerging Asia,” not just China.  If Americans wish to contest this, we will have to adjust our policies and rules of engagement not just with West Asian countries but with the nations to their South and East.