20.12.2022 Author: Salman Rafi Sheikh

GCC’s Global Relations Follow the Flow of Energy and Development

Saudi officials have confirmed that the Kingdom made investment pacts with China worth US$50 billion during the recently held China summit in Saudi Arabia. This is a pivotal moment insofar as it reflects the tectonic shift that has been taking place in the global system for the past few years, a shift that includes a major realignment in the Middle East from the region’s traditional ties with the US to deep, strategic ties with China – which is the US’ biggest strategic rival at the global level.

When Joe Biden announced to make Saudi Arabia a “pariah” state and subsequently became the president, many in the US argued that the rift was only temporary and that the US-Saudi ties were ‘too deep’ to be uprooted by this. Now, however, we know that these ties were not deep enough to withstand Biden’s assault, as the Biden administration’s decision to implicate Muhammad bin Salman (M.B.S.) in the murder of Jamal Khashoggi unleashed forces of disruption that made realignment in the entire Middle East inevitable. Many were forced to think:

If US and Saudi, otherwise two strategic allies, can fall out, other Gulf states can face the same fate as well. This was especially concerning because of these states’ too much dependence on the US for security and protection from Iran. China, however, is a state that has deep ties with both Gulf and Iran, and it is the best possible option, given the gradual US withdrawal from the Middle East, for the Gulf states to utilise to maintain the balance of power in the region. Hence, increasing Chinese investments in the entire region.

This investment, or strategic realignment, is not one way. As it stands, China is one of the major destinations of Saudi oil. Saudi Arabia is not only China’s largest trading partner but the Kingdom is also at the very top of the list of countries supplying crude oil to China. In other words, Saudi is a country that supplies ‘the material’ Beijing needs to run its economy. China, on the other hand, is a country willing to make large enough investments in Saudi Arabia that can help the Kingdom’s modernisation project. Therefore, with Saudi oil exports going to China more than any other country, Riyadh’s deep ties with Beijing, rather than any other country, make perfect sense.

On the other hand, with Saudi oil exports to the US declining massively over the past few years illuminates how the politico-economic foundation of the US-Saudi ties has receded in the past few years.

The same sense prevails when it comes to China’s gas imports from the Middle East. In November 2022, China signed one of the biggest energy deals ever with Qatar. This agreement is worth US$60 billion. According to the details, Qatar Energy signed a 27-year deal to supply China’s Sinopec with liquefied natural gas. Again, the deal is based upon the mutuality of trade and investment ties between Beijing and Doha. Apart from the Lusail Stadium hosting the ongoing Football World Cup, part of which was built by China, there are already more than 14 fully owned Chinese companies currently operating in Qatar. This is in addition to 181 joint Qatari Chinese firms operating in the tiny Gulf state. According to Minister of Commerce and Industry Ali bin Ahmed al Kuwari, China represents an attractive destination for Qatari investments in shipbuilding, manufacturing, petrochemicals, technology, hospitality, tourism and financial services among other vital industries. Very much like Qatar, Kuwait is another key oil-producing state selling oil to China and deepening its ties.

While this change is unfolding very rapidly, in Washington, there is a concern that Beijing cannot provide these Gulf states with the kind of “security” that Washington has been providing for decades, or can provide in the future. But this concern is flawed.

First, it assumes that the GCC is still trapped in the US “security trap.” Many Gulf states have embarked upon ambitious military modernisation programmes to upgrade their self-reliance in terms of defence. For instance, the UAE is spending billions on fighter jets that it bought from France. This modernisation project has, in fact, been triggered by the US withdrawal from the Middle East combined with Washington’s failure to provide the kind of “security” that it promised as the regional hegemon (US systems failed to protect Saudi establishments against Houthi missile attacks).

Secondly, there is a massive economic modernisation project that many Gulf states have also undertaken. Saudi Arabia has its “vision 2030.” Qatar also has its “National Vision 2030” which aims to diversify its dependence on oil. The US, due to its withdrawal from the Middle East, is unable to facilitate these mega-development projects. In fact, Washington is resisting these programmes, as is evident from the withdrawal of many Western companies from Saudi’s Future Investment Initiative (FII) over the murder of Jamal Khashoggi.

Besides jeopardising these plans, Washington also does not have any major economic plan of its own to offer. China, on the other hand, has a clear economic plan (Belt and Road Initiative) that enhances its profile for these Arab States. That is why China is the best possible option for these two.

In short, there are three key reasons that seem to be converging to chart the course of Chinese expansion in the Middle East and that of the decline of the US. The Chinese have the resources – and a plan – of rapid economic development for Gulf states. Gulf states have the raw source (oil and gas) that China needs for its own economic development. And, China being a country on good terms with Iran means that the former can play an active diplomatic role in defusing Arab-Iran tensions. The US, on the other hand, does not have the capacity to do all of them simultaneously.

Salman Rafi Sheikh, research-analyst of International Relations and Pakistan’s foreign and domestic affairs, exclusively for the online magazine “New Eastern Outlook.

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