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China is engaging with local actors to secure its trade and investments in the Middle East

October 10, 2023 at 5:20 pm

The main road is decorated with five-star red flags in Chongqing, China, September 23, 2023 [Costfoto/NurPhoto via Getty Images]

Over the past decade, China has been developing its diplomatic relations in the Middle East backed by investment deals worth billions of dollars. The relations between the Gulf States and China are gaining strength, especially investments in the oil industry. As of 2021, the trade volume between China and the Gulf exceeded $200 billion for the first time. Having adopted a more proactive diplomatic approach in the region compared with earlier years, China has also undertaken a mediation role and helped to re-establish diplomatic relations between Iran and Saudi Arabia, hosting talks between them in Beijing.

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The cumulative effect of these relationships and the expanding financial aspects thereof have rendered China increasingly reliant on regional security. Interstate crises, civil wars and terrorism in the Middle East make it harder for China to invest there. More importantly, the security to be provided for the energy imported from the Middle East by China, which depends on such imports, is related closely to China’s national security. Beijing is the world’s largest oil importer at 439.2 million tonnes in 2022, more than half of it from the Middle East. The Gulf is thus of immense strategic importance to China, but the extent to which it can safeguard its interests in the Middle East based solely on financial commitments and diplomatic relations remains an open question.

The security of its trading routes is vital for China

China built its first overseas military base in Djibouti in 2017, which demonstrates that the security of its trading routes is vital. The Chinese military thus has a foothold relatively close to the strategically important Strait of Hormuz, through which nearly one-third of the crude oil transported by sea every year passes. The US Department of Defence has described the strait as a “focus area” for Chinese military officials. The base in Djibouti was China’s first serious military move in the region.

Beijing sent out the message that it could increase its sphere of influence on the energy supply route with the military exercises it held in 2019 with Russia and Iran in the Gulf of Oman. China has characterised both states as allies in its regional policies. In 2022 and 2023, the same exercise was repeated by the Chinese, Russian and Iranian navies. The message was driven home.

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Information leaked to the media by the CIA in late 2021 pointed out that the Chinese army had built a secret military facility in Abu Dhabi, the capital of the United Arab Emirates. This was a bold step. It would be wrong to see China’s security policies towards the Middle East only at the level of military exercises. Beijing’s growing interests in the region, especially financial, give it no option but to prioritise military developments.

Diplomatic tensions between states, as well as armed conflicts, threaten China’s energy routes. Tension between the Arab Gulf countries and Iran has a direct effect on oil prices. The most prominent example of this were the diplomatic crises between Saudi Arabia and Iran, which also affected Iraq. It was thus in China’s economic interests to bring about reconciliation between Riyadh and Tehran.

Ensuring the security of investments made within the Belt and Road Initiative (BRI) stands out as a vital issue in Chinese foreign policy towards the Middle East. In 2022, the BRI’s share of trade with the Middle East increased to 23 per cent compared with 16 per cent the previous year. It was reported that Chinese investments in the Middle East increased by 360 per cent, and construction commitments increased by 116 per cent. Iraq has been a crucial beneficiary of this. In 2021, Beijing provided Baghdad with more than $10 billion in oil and power plant finance. However, it is still being determined how much these investments will be protected by diplomatic relations alone in a geopolitical space such as the Middle East, where security issues are problematic. China has actually acquired local allies by creating a regional safety net. For example, there are allegations that it has been in close contact with Iran-backed militias in Iraq by opening up space in Iran, its most important ally in the region. This ensures that its investments in Iraq are protected by these groups.

This takes the construction of bases and military exercises to another level. China is engaging directly with local actors to secure its investments and trade links.

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The views expressed in this article belong to the author and do not necessarily reflect the editorial policy of Middle East Monitor.