China one up on America

Distinguished Fellow, Observer Research Foundation

It is almost a truism to say that the world is undergoing huge changes, unprecedented, perhaps, in a century. Nowhere are geopolitical tectonic plates shifting most distinctly than in the Middle East. The change is not surprising since the world’s premier power, the US, had more than a decade ago promised to pivot away from the region to East Asia. But the actual process has been messy and incomplete.

US policy to deny Egypt and Saudi Arabia arms, impose curbs on Iran, and chastise UAE has not won it friends.

The countries of the region, as well as interested regional powers like China and India which depend on the oil of the region, have reacted by policy changes to enhance ties with the region where we are witnessing something of a rearguard action by the US.

Washington’s primary interest today is the revival of the Joint Comprehensive Plan of Action (JCPOA), or the Iran nuclear deal. It is otherwise clear, after pulling out of Iraq and Afghanistan, that its areas of interest lie in the Indo-Pacific and Europe. It has also cut sales of weapons earlier to Egypt and more recently to the Saudis and even pulled out its advanced ballistic missile defence systems from Riyadh.

In these circumstances, the possibility of a US-Iran deal leading to a reinstatement of the JCPOA encourages the Gulf countries and Saudi Arabia to reach out to China which has already amassed considerable influence in Iran. In March 2021, Iran and China signed a 25-year strategic partnership which seeks to enhance the latter’s access to oil and, in turn, provide Tehran with Chinese investments in energy and infrastructure. There is also an unspecified, but important military relationship as well. Given Tehran’s developed defence industry, that can be serviced by technology transfer, rather than products which can be tracked.

There was a time when India successfully balanced its Middle-Eastern ties by managing good ties with Israel, the Arab world and Iran. But New Delhi lacks the economic or military heft to compete with China. Today, Beijing seems to have taken a leaf from India’s playbook and is walking the same delicate path of balancing its relations all around.

The Gulf is the most important external region for India, given India’s dependence on oil from there, the fact that nearly 8 million Indians work there and that the UAE is a major entrepot for Indian trade. In the last few years, the UAE has been developed by the Modi government as an important focus of India’s outreach to the region.

In October, India joined Israel, the US and the UAE in creating what was termed as the Middle-Eastern Quad. Many, especially in India and the US, saw this as a pushback to growing Chinese influence in the region. But like the Indo-Pacific Quad, its Middle-Eastern counterpart is more of an economic and political forum than any kind of a military alliance.

But where the former is clearly aimed at curbing Chinese influence, its Middle-Eastern counterpart has no such ambitions, given that neither Israel nor the UAE have any desire to contain China. Both have good ties with Beijing, though they are under intense American pressure to pull back on these. But the logic of their relationship comes from their growing China trade and investment ties. China (minus Hong Kong) is currently Israel’s third largest trade partner. The UAE, on the other hand, is China’s largest investment destination in the Arab world and the second largest trade partner in the Arab region.

But now the flames of US-China antagonism have begun licking at the feet of the Persian Gulf’s sheikhs. In November, the UAE was forced to halt construction at a facility within the Chinese shipping port near Abu Dhabi following allegations that this was a military facility. Days after the confirmation that the construction had stopped, the UAE pushed back by suspending the negotiations for US F-35 aircraft it had planned to acquire because the US was imposing the condition that the UAE drop Huawei Technologies from its telecom network.

Since the 2000s, even as the US was busy with the conflicts of the region—in Syria, Yemen, Libya and Iraq—China, with its penchant for not interfering in internal issues, was building its trade and economic relationships. Where the US, which has a huge military presence in the region, has used diplomatic coercion, as in the case of the UAE, to get its way, China has offered trade and investment. The US has been pushing Abu Dhabi to drop Huawei, but it has no competitive option to offer. Last year, the US arm-twisted Lebanon into accepting Chinese investment in its infrastructure, but it has yet to offer anything to the beleaguered country’s flailing economy.

There are other signals of the signs of times. Earlier this month, China and the Gulf Cooperation Council have agreed to set up a strategic partnership whose major goal is to enhance trade through a China-GCC FTA. All the Gulf sheikhdoms and Saudi Arabia are members of the GCC.

So far, Beijing’s footing has been faultless, all it has had to do was to follow where the US refused to go. Its policies — deny Egypt and Saudi Arabia arms, impose an embargo on Iran, and chastise the UAE — have not won it friends.

Even now there remains one joker in the geopolitical pack—Donald Trump. With the Biden presidency slowly imploding, the prospect of a return by Trump is increasing. This could once again torpedo the JCPOA and bring on another uncertain churn in the geopolitics of the region.