Chindia in the Middle Eastern orbit: the next ‘big thing’?
Since the late 1920s, the Middle East has emerged as the world’s most important source of energy and the key to the stability of the global economy. Home to 65 per cent. of proven global oil reserves and 45 per cent. of its natural gas, the Middle East also controls a significant portion of the hydrocarbons that are yet to be discovered. According to the most recent US Geological Survey, over 50 per cent. of the undiscovered reserves of oil and 30 per cent. of gas are concentrated in the region, with Saudi Arabia, Iran, Iraq, Kuwait, the UAE, and Libya as the most likely candidates.
The concentration of so much of the world’s hydrocarbons in this geographical location, in turn, means that for as long as our economies remain dependent on the supply of oil and natural gas, the Middle East will inevitably play a key role in global politics. Barring a major technological transformation, therefore, global dependency on the region is only going to grow, leading to heightened geopolitical competition amongst developed and developing nations in their attempts to secure their access to the region’s vast resources.
At the same time, the International Energy Agency (IEA) estimates that between now and 2030, world oil addiction will rise by about 60 per cent. with China and India set to witness the highest rate of growth in their energy consumption. It is not surprising, therefore, that Chindia’s, as they are commonly referred to, interests in the region have grown steadily in pace with their energy interests, resulting in an ‘Eastern type’ of socio-political activism in regional affairs. Worried that such activism might potentially diminish their regional dominance, Western powers, and in particular the United States, have begun to voice concerns over the consequences of a more aggressive Chinese and Indian diplomacy in the Middle East.
It ought to be remembered that neither China nor India are total strangers to the region, as some western analysts and politicians assume them to be. As the ‘jewel in the crown’ of the British empire, India was intimately involved in nearly all the major wars and/or armed conflicts in which Britain was a participant. Indian troops participated in major military campaigns across the region and were indeed instrumental in the defeat of German forces in the Western desert, the Vichy French forces in Syria, and the pro-Nazi government in Iraq. However, after Britain abandoned the subcontinent in 1947, its role diminished dramatically as India was preoccupied with its own security and economic challenges.
China too has ancient roots in the region. Historical records reveal that from the first century AD, merchants from Aden and Muscat sailed down the Malabar coast to trade with India and then on to Ceylon to meet Chinese merchant ships. Arab traders exploited the ‘maritime silk road’ to China via the Straits of Malacca. During the 15th century, Zheng He, a Chinese Admiral, famously sailed ships as far as East Africa. These historic ties, however, were severed in the period of Chinese weakness in the 1800s and the 1900s. In the decades after the establishment of the People’s Republic of China in 1949, there was little interaction between Middle Eastern states and China as an overwhelming majority of regional actors disapproved of the militant atheism and communism espoused by the PRC leadership.
This diplomatic passivism began to change in the 1980s as both countries embarked upon a path toward astonishing economic development and therefore increased energy needs. In other words, as emerging, yet resource-poor, powers they have both become important players in the Middle East. With their economies projected to expand at a rate of 7 to 9 per cent. over the next decade, Chindia is under pressure to secure long-term access to oil and gas resources in the Persian Gulf. Hence, the fundamental driver of Chindia-Middle East relationship is energy, but it is not the sum of it.
Chindia views the Middle East not only in terms of its value as a source of oil, but also in the context of its huge potential as an oil services market and trade partner. By 2001, for example, China had signed almost 3,000 contracts with the six GCC states for labour services worth $2.7 billion. Meanwhile, the GCC is home to over 5 million Indian nationals who are estimated to generate $15 billion of annual remittance flows to India; an issue that made India extremely nervous about the spill-over effects of the Manama uprising, to the extent that the Indian Prime Minister deemed it necessary to reassure the Gulf monarchies of India’s ‘steadfast support’ for the regimes there.
While oil wealth drives the economies of the GCC and Iran, they are also major aluminium and phosphates producers with various estimates judging they account for 18 per cent. of the world’s aluminium output by 2015. Considering that the smelting process required for producing aluminium is oil intensive, both Beijing and New Delhi are now eyeing the GCC and Iran as major suppliers of their much needed aluminium. This is clearly evident in the Aluminium Corporation of China decision to open an aluminium production plant in Saudi Arabia. These two Asian giants are also interested in the GCC as a key player in the global plastics conversion market given that the block accounts for up to 11 per cent. of total market share.
In addition, both Indian and Chinese business elites and policymakers are pursuing opportunities in investment, sale of consumer goods, and tourism throughout the region. Due to their geographical proximity, China and India are looking strategically to export goods and services to third markets in Africa and Eastern Europe, using MENA countries as a platform to access these markets. For instance, Hebei Zhongxing Automobile of China has partnered with the Iyas Company for Manufacturing Automobiles, Jordan’s first car manufacturer, and the Jordan Investment Board to build a $30 million facility to produce cars for sale in Arab and Eastern European markets. Similarly, Dubai has now become the main hub for rebranding and re-exportation of Indian products destined for African markets.
Also significant are the low-level, but potentially important, military-to-military contacts between Chindia and Middle Eastern states including Iran, the GCC, and Israel. To be sure, Beijing and New Delhi tread far more lightly compared to the US, Russia, and the EU when it comes to military affairs. China’s military engagement in the Middle East has included arms sales and the transfer of dual use technologies to Iran, Saudi Arabia, Jordan, Syria, and Egypt, participation in the UN peacekeeping mission in Lebanon, and very limited military-to-military contacts. For its part, India has limited its defence cooperation with the region to the signing of MoUs for the establishment of bilateral strategic consultation groups as well as joint military exercises with the GCC, particularly Oman, and Iran.
However, it is Chindia’s arms purchases from Israel that are a constant irritation to the US. Their interest in Israel’s, and by proxy, America’s weapons, is at a record high with Israel as their second largest weapons supplier, next only to Russia. Despite its small size, Israel remains an important investor in both Chinese and Indian development projects and supplier of high-technology weapons. In fact, it is fair to suggest that Israel’s superiority in military affairs was the main reason behind both China and India’s efforts to improve ties with Tel Aviv in the early 1990s. Even the Israeli Prime Minister, Benjamin Netanyahu, seems to have acknowledged this when he told Chinese visitors that ‘Israeli know-how is more valuable than Arab oil’.
There are two other elements in the rising Chindian activism in the Middle East. The first one relates to their own domestic fight against Islamic extremist groups and their efforts to obtain diplomatic support from Muslim countries to cut off any financial, political, or other support for these groups. As recent knife attacks vividly illustrate, China has serious security concerns along its north-western border where the 10 million Uighur Muslims in Xinjiang have preserved a distinct, non-Chinese ethnic identity. This explains why Chinese officials were ‘over-the-moon’ when China won the bid to build the first rail line connecting Mecca with nine holy sites in Saudi Arabia in 2009. Officials in Beijing are of the opinion that such projects are valuable public diplomacy tools helping China to improve its image in the Muslim world. India too has its own legitimate concerns with Islamic extremism as it is home to the second largest Muslim population in the world. In this regard, Saudi Arabia is of paramount importance to India given Saudi’s unrivalled influence over India’s historic adversary Pakistan. The second element, put briefly, is their desire to expand their support base in the UN. China is keen to cultivate its close ties with the region in order to have the regional states backing in the UNSC, whereas India seeks to utilise the goodwill that exists between herself and the region in order to boost its UNSC membership bid.
Regional states themselves have been receptive to the increasing presence and involvement of Chindia in regional affairs. Middle Eastern countries recognise the capability of these countries to play major roles in international stability and security based on their political positions and membership of international organisations, their economic and industrial achievements, and last, but certainly not least, their nuclear power status. Arab League persistence on Chinese and Indian involvement in the Arab-Israeli conflict is a case in point.
Further integration between Chindia and the region, moreover, is considered a win-win situation economically thanks to the complementarity of their interests in each other’s markets. Chindia is now the single biggest market for Middle Eastern oil and those oil producing nations have all attempted to ensure that they have a stake in those markets.
Deterred from developed markets by hostile US and European reactions to Arabs’ holding sizeable stakes in Western companies, which was epitomised in the row over Dubai Ports World’s bid to manage a set of American ports, sanctions as in the case of Iranian investors, and the current economic stagnation in the West, a considerable number of Middle Eastern investors have been pushed to consider the alternative markets that Chindia offers. The Middle East is both a supplier and a recipient of capital. As a supplier, it seeks markets that promise the highest returns, and Indian and Chinese markets offer them just that. One high-profile example is the purchase by the Kuwait Investment Authority of $720 million worth of shares in China’s largest bank, the Industrial and Commercial Bank of China.
Regional states, including Israel, are clearly not in favour of putting all their eggs in one basket anymore. Travelling in the region and talking to locals and officials alike, one senses a general belief, and at times excitement, that the 21st century belongs to Asia. Therefore, regional states are now willingly pursuing a new strategy in order to forge separate alliances in the security and economic spheres with Asian powers; a policy that is commonly referred to as the ‘look East’ policy. In all likelihood, this is not a replacement for their traditional ally – the US – but it could very well be an effort to restrict Washington’s influence, especially since the US response to the Egyptian uprising has utterly diminished Arab royals’ trust in Washington’s steadfastness at difficult times.
What is more, regional actors are at ease dealing with Asian countries because they carry no excess political baggage. India and China are not interested in linking political reforms to economic ties. Both have come to terms with the need for greater liberalisation and are positioning themselves to take advantage of a globalised business environment. China’s emphasis on economic reform over political reform and its criticism of Washington democratisation plans for the region are definitely in sync with literally every single ruler in the Middle East, with Israel as an exception.
Finally, and putting aside the immense potential for bilateral co-operation between the region and Chindia, especially India, in the fields of IT, science and technology, food security, and tourism, efforts to establish closer ties to China and India could also be seen as an unfolding balancing game initiated by regional actors. Convinced that Iran is a hegemonistic power and is well on its way to becoming a nuclear power, Arab states may be looking to Beijing and New Delhi to act as mediators to influence Tehran’s actions. As a case in point, both Tehran and Abu Dhabi have taken their dispute over the three islands to Beijing and not Washington. As the recent Indo-Saudi oil agreement illustrates, the GCC states may also be keen to use their natural resources in order to prevent Chindia’s growing energy relationships with Tehran from developing strategic dimensions.
For its part, Tehran has been seeking closer ties with Chindia in order to compensate for its isolation in the West and to buy time for its nuclear programme by playing-off China and the US against each other. Convinced that US power is in decline, Iran is trying to position itself as Chindia’s key ally in the region to be able to exert more influence once the opportunity arises. Lastly, Palestinians have demanded Chindian mediation in their conflict with Israel because they no longer believe in the US and Europe as neutral mediators, whereas Israel is seeking to expand relations with them so as to ensure that the Asian heavyweights will not revert back to their pre-1990s stance which saw Israel as a violator and Zionism as a form of racism.
Overall, as political and economic ties have deepened, cultural, religious, educational, and other forms of exchange have also widened. And despite all the difficulties ahead – the general public view on the inferiority of Chindian goods compared to western products, regional actors’ political dilemmas in terms of positioning themselves vis-a-vis the Sino-Indian as well as Sino-American rivalries in the region and further afield, potential flare-ups between the US and China over their control of sea lanes, the possibility of the formation of strategic alliances between extra-regional states against each other and its negative effects on the Middle East security environment, and the near-total dependency of some regional actors on the US for their security which could hamper efforts at greater integration – ties are set to go from strength to strength.
Contemporary Middle Eastern views of Chindia are similar to Middle Eastern views of the US a century ago when many in the Middle East looked to the US to rescue them from European imperialism. The US was in the habit of sending business people, not viceroys, and was welcomed in the region because of it. And today, these views are echoed in the regional perceptions of Chindia. Arab regimes and intellectuals hold China and India as models who are lucrative trading partners and objective observers in international affairs, and yet are absent from their domestic politics. These countries are new to the contemporary Middle East and offer an inspiring model for how ancient civilizations can grow and prosper in the modern era.
This does not and should not mean that any rise in Chindia’s regional influence will come at the expense of US power in the immediate future. Not only does Chindia lack the resources to match American military supremacy, they also prefer to preserve the current status quo as this is a considerably cheaper option for them. In spite of all their differences, Chindia and US tend to share the same strategic interests in the region. These include a Middle East free from nuclear weapons, anti-terrorism, and maritime security. Currently, the US spends approximately $40 to $50 billion per year to protect the free flow of oil from the Persian Gulf to the global economy. Chindia, by comparison, spends virtually nothing on Gulf security, while pursuing their strategy of building political and economic relations with oil-rich countries in order to secure oil for their growing economies. Given the divergence of their strategic interests, therefore, it would be unwise for Beijing and New Delhi to spend money on something that is already being paid for by the US Government. Also, domestic factors in India and China, such as poverty and the need for greater domestic expenditure, will limit governments’ abilities to play the role now hold by the US.
In the long-run, however, all this can, and most probably will, change as China and India continue to increase their presence in the region, while modernising their armed forces. So far, Chindia has avoided taking side in regional affairs, but as their national interests become more intertwined with the Middle East, they will be left with no option but to pick and choose allies. Put differently, it is highly unlikely that Chindia will remain capable of sustaining their hands-off approach to other countries’ internal matters in a region which is so ridden with unresolved ideological, historical, and emotional conflicts. And once this approach is replaced with a more interventionist stance, one can be sure that there will only be minimal changes in the regional security environment: the political realities of the region will remain intact; that is, regardless of who the key security provider(s) is/are, they will have to build and maintain relationships with local regimes in return for oil and gas.