Written by Catherine Sancho
Since 2013, Chinese diplomacy has shown noticeable signs of expansionary and cooperative interest in the Middle East. Some of China’s most successful initiatives have been through the form of foreign direct investment in technology and infrastructure, like the Belt and Road Initiative (BRI), which aims to integrate many of the world’s economies, including those of developing countries in the Middle East. Also, China has encouraged members of the BRICS bloc to extend invitations of membership to Saudi Arabia, Iran, the UAE, and Egypt. These indications of Chinese influence in the Middle East may destabilize US international influence in unprecedented ways.
Background
China’s BRICS invitations do not come as a surprise. While oil remains at the center of the China-Middle East trade relationship, there is opportunity for both countries to take this relationship further. In the case of the Middle East, non-oil trade allows for a diversification of the economy, relying on other goods for revenue. For China, investment in technology and infrastructure is beneficial for the larger BRI project. Since 2020, China has been the largest non-oil trading partner to both Saudi Arabia and the UAE. It is estimated that in 2022, trade between Saudi Arabia and China reached $106 billion, a 21% increase compared to the year prior (Nahari, 2023). Non-oil trade between China and the UAE reached $72 billion in 2022 (Zawya, 2023), a nearly 18% increase compared to $60.85 billion in 2021 (Middle East Briefing, 2022). These current engagements only serve to incentivize Middle Eastern countries to conduct further engagements with China. Furthermore, a continuation of this economic relationship means that the Middle East will most likely turn to China in the decades to come for support on matters such as agriculture, investment, and technology (Akcay, 2023).
How is the US feeling about China’s presence in the Middle East?
In the United States, officials approach this new cooperation with skepticism and curiosity. As China approaches new countries (some of which are known allies of the United States) in efforts to engage economically and politically, the United States keeps a watchful eye, careful that their influence is not replaced by China’s. On the other hand, the US and China share some aligned interests which, with channels of communication remaining open, can prove themselves beneficial to all countries’ overall well-being.
In many cases, points of contention existing between the US and China are those related to dynamics of power and issues of corruption. US officials have expressed caution when addressing China’s interests and potential long-term objectives in the Middle East. Many scholars have identified China’s ‘debt trap diplomacy,” a practice where China gives predatory loans to undercredited countries with important ports, cities, or governing structures as collateral. After collecting its collateral, China readily extends its political influence into the country through the structures it acquires. As Dr. Julian Gerwitz, Director for China at the US State Department’s National Security Council, puts it, China has a “clearly stated goal of making other countries more dependent on China, as China makes itself less dependent on the world” (Gerwitz, 2023).
A notorious example of this practice is Sri Lanka’s Hambantota port, which was handed over to China in 2017 after Sri Lanka proved unable to pay back on five loans for the port’s construction. Some of these loans were accompanied with interest rates at 6%, and whose sums reached $1.263 billion (Moramudali, 2020). Many critics believe that China, well aware of Sri Lanka’s relatively humble economic capabilities, capitalized on this power difference, and used it to undermine Sri Lankan sovereignty.
The US, which maintains an active political, economic, and security role in the Middle East, sees this kind of diplomacy as a concerning way for their own position to be disrupted, and therefore proceeds with heavy scrutiny. For now, the US is working on maintaining open lines of communication with its partners, ensuring that they are fully aware of the benefits and risks associated with engagement with the People’s Republic of China.
The Yuan as a Medium of Exchange
Perhaps not a front and center concern on the US agenda, but imperative nonetheless, is China’s expressed desire to expand the use of its currency, the yuan, in the international market. Along with bartering new business deals, China has managed to conduct certain trades, such as those of oil with Saudi Arabia, in yuan. This medium of exchange allows China to expand its reign and ability to create financial dependency from other nations on the Chinese economy and governmental institutions.
This act has the potential to severely undermine the United States dollar’s role as the main tool in conducting international trade. For the past 20 years, USD dominance has remained relatively stable, being considered by many as a reliable medium of exchange (Bertaut et al, 2023). This faith in the USD on an international level raises its demand, especially in times of economic crisis, and therefore makes it more resistant to shock. Historically, this respect towards the USD has enabled the United States to make advantageous geopolitical decisions, such as applying sanctions, at the expense of its allies’ currencies (Rafi Ahmed, 2022). While a complete global shift to yuan is not probable in the short term, it should and will garner particular attention from the US and all countries currently conducting trade in USD.
Potential for Collaboration
Despite these incompatible interests, the US and China do share incentives in some endeavors. Both nations rely on the Middle East for energy. Regional stability and peace amongst and within Middle East countries guarantees such an energy supply. Two esteemed US State Department officials, Dr. Julian Gewirtz and Chris Backemeye, acknowledge the potential net-benefits of China’s presence in the region. In fact, in March 2023, China brokered a successful peace talk between two longterm rivals, Saudi Arabia and Iran. If China can hold the Iranian government accountable and compliant, then a more peaceful Middle East is within grasp, satisfying the aligned interests of both China and the US (The Atlantic, 2023).
It is also within both nations’ interests to work in tandem regarding transnational issues, such as preventing nuclear proliferation and dissemination of weapons of mass destruction, forging of peace in war-torn regions, and curbing climate change, forced migration and water scarcity. The United States remains the preferred security partner to many Middle East countries. In fact, in March 2023, Saudi Arabia asked the US to continue providing security guarantees and developing its nuclear civilian program. China has not demonstrated intention to involve its military with its Middle Eastern efforts, leaving the US unchallenged. Still, for the US, maintaining a powerful voice in the region’s decision-making processes likely means demonstrating interest in engaging with the Middle East beyond just the oil-for-security exchange.
Conclusion
China has proven that it can be a beneficial partner, above all, financially, to numerous Middle Eastern countries looking to expand infrastructure and technological investments, as well as diversify their economies. The United States still holds reservations about China’s true, long-term economic and political intentions, and will, therefore, strive to prove itself a dependable partner who is willing to go beyond its traditional role as a security enforcer. In order to achieve this aim, it is likely that we will see the US get involved in the construction and well-being of the Middle East’s economic and political landscapes, in addition to that of regional security. Regardless, China’s presence in the Middle East, as an investor, trading partner and diplomatic facilitator will only continue to grow.
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