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Future Chinese-US conflict over Middle East? 31, October 2009

Posted by thegulfblog.com in American ME Relations, China, China and the ME.
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Usually I find myself firmly on the more passive side of are China evil/viciously expanding their Navy/a mortal threat to the future of America. I firmly believe that China are simply expanding their Navy – if and when they do – in the remit of their own state interests and not as some hegemonic power-play. I don’t see some inevitable clash of civilizations or of powers or of pretenders.

However, when China’s former Special Envoy to the Middle East, fluent in Arabic and a former Ambassador to Saudi, Iraq and Iran, says that he sees an American-Chinese conflict as inevitable, then it would seem prudent to take note.

Obama’s new Middle East policy is only a strategic change. Yet America’s global goals and hegemonic complex cannot change. America always tries to hold the world’s main oil ‘switch’. There is thus competition and cooperation between China and America. In particular, America views China as a strategic competitor. And bilateral discord and clashes are unavoidable. China must not drop its guard in the Middle East over its oil interests and security.

Having duly taken note, I now ignore his advice and still firmly believe that there will be no such conflict. It will take light years before China can compete militarily with America in any meaningfully way, shape or form. True, smaller perhaps proxy conflicts are possible, but these are far from the order of magnitude that usually referred to with this kind of topic. Here’s hoping that I’m right.

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China-GCC Free Trade Agreement? 22, September 2009

Posted by thegulfblog.com in China and the ME.
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chian gcc

China’s integration into Middle East’s markets continues apace. Plans have been announced to form a free-trade zone between the GCC and China. According to Qatar’s daily newspaper, The Peninsula, the first round of talks were held in Riyadh and were successful.

Key to the GCC’s thoughts are the removal of custom tariffs. As for China, they will welcome any kind of increased or deepened relationship with the GCC. China’s thirst for energy is increasing at seemingly inexorable rates whilst their domestic supplies are in their twilight years. The confluence of these factors (discussed here) rightly has the Chinese leadership searching for better links with oil producing areas of the world to bolster their energy security (discussed here). Indeed, it is thought that China’s so-called ‘string of pearls’ – naval bases strung around the Indian Ocean including a key one in Gwadar in Pakistan right at the Straits of Hormuz – are aimed first and foremost at guarding the life-line of oil and gas from the GCC to their mainland (more here and here).

However, not all of China’s best made plans are coming to fruition. Ben Simpfendorfer’s excellent New Silk Road blog mentions two setbacks recently for the red state.

Libya has rejected a $417 million bid by China National Petroleum Company (CNPC) for Verenex, a Canadian oil-exploration company with Libyan oil leases. Libya’s national company has since purchased Verenex at 30% less than CNPC’s offer price. I’m [sic] not sure if Libya’s response was specific to China itself, or a de-facto attempt to nationalize some of its oil assets. But the response is interesting given that Libya, alongside Algeria, is one of few countries in the Middle East to receive large numbers of Chinese workers. In fact, I heard from a Libyan central bank official in June that 6,000 Chinese workers had applied for visas in the previous month alone. And I wouldn’t be surprised if this has caused some friction.

Iraq may blacklist China’s Sinopec for its purchase of the Geneva-based oil-exploration company Addax, which owns several licenses directly issued by the Kurdish Regional Government. The licenses are in breach of an Iraqi law requiring all oil deals are made in Baghdad.

China & the Middle East: An Unfolding Courtship 16, September 2009

Posted by thegulfblog.com in China and the ME.
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This is something that was published sometime ago. Yet, it is only now that I have found a suitable (but still not perfect) way of uploading it here. Use the arrow pointing downwards on the right to make it larger or click the ‘full screen’ button (the one furthest to the right) to have a read.

(PS. No, “an unburdened Panda” was not my idea)

Originally published in the Kuwait Times : 09/02/08

View this document on Scribd

Another Chinese-Iranian faux pas 15, September 2009

Posted by thegulfblog.com in China, China and the ME, Iran.
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bismillah

Following not long after a Chinese company exported Jaffa Oranges (i.e. Israeli) to Iran leading to a predictable kerfuffle involving strenuous statements, angry rhetoric, various denouncings and a few sackings, now it transpires that some enterprising Chinese exporter has exported jeans to Iran with ‘بسم الله الرحمن الرحيم‘ (“In the name of God, the compassionate, the merciful) on the back pocket. The quicker ones among you will realise that this means that wearing such jeans would involve sitting, so to speak, on Allah’s name. This has not gone down well. Cue strenuous statements, angry rhetoric, various denouncing, a few sackings…

China No.1 exporter to the ME 7, September 2009

Posted by thegulfblog.com in China and the ME, Middle East.
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Here’s a quick note of an interesting article in – of all places – the Torygraph, by the author of the New Silk Road Blog. It highlights the trend of China’s ever growing exports to the Middle East to the tune that they are now the number one exporter to the Middle East at $60bn (up from just $4bn a decade ago).

It contains a few interesting nuggets of information such as the existence of ‘a virtual Arab market town’ not far from Shanghai as so many buyers from the Middle East apparantly go there to look for products and it also cautions as to the effects of cheap Chinese products flooding Middle Eastern cities. Whilst Kuwait City and Doha need not worry so much, Damascus and Cairo, with their enormous populations, the young-age of many and their skills sets, have something to fear from this. The author concludes that this can only draw on a protectionist backlash at some stage.

China increases ties with Saudi Arabia 27, July 2009

Posted by thegulfblog.com in China and the ME, Saudi Arabia, The Gulf.
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A Chinese company has been selected to build 200 new schools in Saudi Arabia that when completed will accommodate 153,000 students.

Relations between China – the world’s second largest oil importer, and Saudi Arabia – the worlds top oil producer, are concentrated mainly on energy cooperation but China hopes to be able to increase bilateral trade from an estimated  $15 billion in 2005 to $20 billion in 2010.

Since 2001 China has signed some 3,000 contracts totaling $2.7 billion with the member states of the Gulf Cooperation Council (GCC) which includes Kuwait, Saudi Arabia, Qatar, Oman, Bahrain and the United Arab Emirates.

In 2004 an agreement on Economic, Trade, Investment, and Technological Cooperation was signed between China and the GCC and negotiations for a China-GCC free trade zone were initiated.

Meanwhile, the Chinese broadcasting company China Central TV on Saturday night launched an Arabic language channel for the Middle East and Africa as part of the government’s plans to improve its relations with the Arab and Muslim World. The channel is China Central’s fourth foreign language channel after English, French and Spanish.
Hat Tip: The Media Line

Article catch up 29, May 2009

Posted by thegulfblog.com in Bahrain, China and the ME, Egypt, French IR, LNG, Middle East.
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– Interestingly, it is being suggested that Turkey might be acting as an intermediary for America in persuading Kyrgyzstan to retain their US base.

– MEI blog and Marc Lynch on Obama scheduling a visit to Riyadh just before he gives his much-hyped speech in Cairo.

Commentary on Bahrain’s new proposals to augment migrant worker’s rights being significantly watered down by business interests.

Bomb at Iranian mosque in the run up to the elections.

– Thailand building LNG regasification facilities to receive LNG from the Middle East.

– Yemen are about to join Qatar et al in the exporting of LNG.

– On the Middle East’s expected increase in defense spending.

– Marc Lynch on the importance of Arab opinion polls.

– MEI blog on the Iranian un/blocking of Facebook and Microsoft’s bizarre decision to ban Messenger in various embargoed countries and on the French base in the UAE.

– China is now the largest exporter to the Middle East having over-taken the US. Hat tip: Silk Road Economy via the Arabist.

– On the possibility of China creating its own Al Jazeera.

– On the surprisingly close Israeli-Iranian relations below governmental level. See also ‘Treacherous Alliances.’

China’s string of pearls 7, May 2009

Posted by thegulfblog.com in China, China and the ME.
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China's string of pearls

This (somewhat amateurish) map shows China’s string of pearls. This refers to ports that China has invested in to refurbish and use at their discretion. Those of a more alarmist nature see these moves akin to the establishment of Chinese naval bases by stealth. The map below highlights the reasoning behind these moves.

string-of-pearls1

China’s desire to secure the route for their ever expanding dependence on Middle Eastern oil and gas is understandable. No country in the world would want such a vital supply line out of their guaranteed control. Whilst China has frosty but reasonable relations with India and America, the only countries with the navy to challenge China in that part of the world, China can not count on these relations for ever. Indeed, with the ever increasing race for the Gulf’s oil and gas resources with India and the always-fractious issue of Taiwan with America, there are without doubt issues that can potentially arise.

Despite how understandable one may think China’s actions are, for India they must be arousing serious concerns. Having China’s potential military bases to close to their mainland, not to mention encircling them, is not something that the Indian government can take lightly. It is, therefore, no surprise that India are the second largest weapons importers in the world presently. As for America, they will not be overly pleased to see China’s reach extending towards the straits of Hormuz. Moreover, their preeminence in blue water is now coming under more and more of a threat. The military and the US Administration need to be aware, however, that these Chinese ports – despite what they might signify – are not, in and of themselves, a threat. America needs to keep any bellicose language to itself at this stage and save it for when it really matters.

A Chinese military base in Iran? 28, January 2008

Posted by thegulfblog.com in China, China and the ME, Iran, Oil, Western-Muslim Relations.
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After France’s move to secure a military base in the UAE looking out at the Straits of Hormuz last week, it is no surprise that the Iranians are feeling yet more hemmed it. Kaveh L Afrasiabi , an Iranian expert has suggested that it might not be too long before Iran seek a Chinese base on Iranian soil to compensate and reinforce their security. This is, without doubt, a premature forecast. However, the logic at the heart of the argument is sound.

China’s ever expanding need for importing fossil fuels is well known. Indeed, in the coming years, China will be – from their perspective – worryingly dependent on shipments from both sides of the Persian Gulf. They have tried to compensate for this in many ways. For example, recently China has been exploring the potential of overland pipes from various Central Asian countries through to the west of China. However, no matter how optimistic projections are about such a project, the lion’s share of fuel would still need to be shipped from Iran and the Gulf countries through the Straits of Hormuz to China. Bearing this in mind, there seems to be no way that China, in the long run, would simply accept American stewardship of a sea passage so crucial to Chinese interests. At the moment, the Chinese have a naval base in Gawdar, Pakistan (just around the corner), from which they have limited power projection to the Straits. However, compared to the massive American bases in Kuwait, Bahrain and Qatar, the Chinese base is far from adequate. The fact that the French have just announced that they will soon have a base in the region too is no deal breaker, but it certainly does not help ease China’s nerves, especially since the recent French-American rapprochement under Sarkozy.

As far as Iran are concerned, China are excellent trading partners. They have a guaranteed growing demand in the long term for their fossil fuels, they have the means to pay for it (in goods or cash), they have fairly sophisticated weaponry to sell to the Iranians, they have no (or at least, certainly fewer) compunctions about selling such weaponry or indeed nuclear related technology, they have a meticulous approach to never criticising other governments internal policies and as they are a member of the P5 on the UN Security Council, they have a casting and blocking vote there. They are, thus, very useful allies to have. Additionally, Iran are currently uncertain and not a little perturbed about American intentions regarding their nuclear activities. China too, whilst having good relations with the US right now, are by no means close to America. To choose just one example, the issue of Taiwan – deeply, deeply important to Beijing – is a divisive issue that reoccurs periodically between the two powers. Add to this the afore mentioned point about China not wanting America to be able to cut off their supplies so easily, and there is a definite dove-tailing of interests here: a Chinese base in Iran doesn’t seem so far fetched all of a sudden.

However, China are a country with a long-term view of things and there are no pressing needs right now to do something as drastic as establish a base in Iran, especially with their moment in the sun – the Olympics – coming up. However, the West generally, and America specifically need to be wary about forcing China and Iran closer and closer together. Such a situation, with a worried and recalcitrant China sated for fossil fuels and with an emboldened Iran with access to sophisticated weaponry and even advanced nuclear technology, is not that much short of a nightmare scenario.
http://www.atimes.com/atimes/Middle_East/JA29Ak03.html

China and the Middle East – made for each other 27, January 2008

Posted by thegulfblog.com in China, China and the ME, Oil, Saudi Arabia, Western-Muslim Relations.
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Everyone wants a piece of the Middle East at the moment. Israel, unfortunately, takes this quite literally and seems intent on forever expanding its borders with uncomfortable overtones of lebensraum. American companies have, for the most part, been falling over themselves to find GCC cash to bail themselves out of their various woes. The list of those seeking investment is a veritable who’s-who’s of the American blue chip elite: Citigroup, General Electric, Dow Chemicals, and Merrill Lynch to name a few. The French seem to have placed, in a rather un-Gallic, highly capitalistic way, a price tag on their cultural heritage. For about $1 billion, you can now purchase priceless French art, plucked from the bosom of the most famous museum in the world, the Louvre. Furthermore, the French have also taken the name of their most prestigious university in vain by building ‘the Sorbonne Abu Dhabi’ with infinitely easier entry requirements. However, not only have the French been handsomely rewarded for the loan of their culture, but they now have a military base overlooking the straits of Hormuz, so maybe they knew what they were doing all along. Britain were predictably slow on the uptake and are now desperately searching for Middle Eastern cash to bail out the collapsing Northern Rock bank and moving further east, Dubai holdings have invested heavily in the Indian bank ICICI, as well as taking an estimated billion dollar stake in Sony of Japan.

Among those doing their utmost to make friends and influence states in the region are the Chinese. However, they are doing this in a less brash manner. Indeed, to some degree, they have been doing the opposite way by investing in the Middle East. For example, two Chinese state-owned companies are investing some $4 billion in Saudi aluminium production. This is but one half of an example of reciprocal investment between various Middle Eastern countries and China, and, more to the point, you’re going to be seeing a lot more of it.

China are the most natural trading partner for countries in this region. This may seem like something of a bizarre statement, but it stands up to scrutiny. As any good (or even only mediocre) economics student will tell you, two crucial factors when discussing trade are supply and demand.

In terms of supply, the Middle East has oil and money. According to the US Energy Information Administration, as of 1st January last year, the Middle East as a whole had 739 billion barrels of proven oil reserves, more than the rest of the world combined which amounts to 578 billion proven barrels. As for money, thanks to the bumper oil prices of recent years, the region is awash with cash. In total, Morgan Stanley estimate that in 2007 alone, Persian Gulf countries invested around $75 billion overseas. This, therefore, excludes the $500 billion that is being investing domestically in creating new super-cities, trying to look ahead to the paradigm changing day when oil runs out. The crucial point here is that this inflated oil price appears to be with us for the medium term, and, therefore, so do these record profits for Middle Eastern government and thus their ability to generously invest abroad.

As for demand, the same economics student would no doubt tell you that demand is infinite. This is meant in a theoretical way, but when discussing China, the theory becomes a lot more practical. China has a population of 1.3 billion people. By the year 2050, however, the UN population division estimates that (depending on which report you read) the population will rise to between 1.5 – 2 billion people. So not only do these people need their energy needs taken care of, but thanks to China’s phenomenal growth, many people have ever growing energy needs. With greater affluence comes greater demand for bigger and better houses and apartments and, of course, bigger and better cars, to name but two energy consuming factors. In 2007 alone, the Chinese car market grew 20% and overtook Japan as the world’s second largest automobile market, and with tens of millions of people waiting to dump their bicycles, this market is only going to grow faster in the coming years. The staggering conclusion of these factors is that, according to Commentary magazine, China’s demand for imported oil will grow by 960% over the next two decades.

Issues of demand and supply, therefore, are clearly suitably poised for a long and prosperous relationship. Yet there are many more factors to consider. After all, the rest of the world demands oil and will continue to do so for a long time yet. So what makes China so special?

For one thing, China do not have any historical or colonial baggage in the region. This could be construed as a good or a bad thing. For example, France’s long standing relationships with the Emirates clearly made it possible for Abu Dhabi to cede some land for a French military base, and America’s long history in Saudi Arabia made it possible for similar arrangements there in the past. I would suggest that the latter example is more instructive, especially considering the eventual outcome of the US bases in the land of the two holy places. China, however, has a clean slate; indeed, it was as late as 1990 when they officially recognised all GCC countries. There are no old policies to appease, apologise for or defend.

Another aspect that appeals to many governments worldwide is that China are very good partners to have in terms of demands exogenous to the deal itself: there aren’t any. For example, China will never lecture, pressure, castigate or otherwise try to impose their ideals on another state. This is a fundamental pillar of Chinese policy: the absolute and utter respect of sovereignty from criticism or interference. Thus, if a state is not appreciative of America’s lectures regarding full democracy or the rule of law (especially regarding the egregious hypocrisy of Guantanamo Bay) then they will certainly know that they would receive no such criticism from China.

Along the same lines, China make it easier for Middle Eastern companies to invest there. Whilst, as it was shown above, many countries have invested heavily in the West, there is still an element of quasi-racism. This was clearly shown in the Dubai Ports World controversy, where a furore erupted when it was revealed that a Middle Eastern company would be involved with security arrangements at American ports. This would, according to some woefully misguided segments of the American media, lead to security concerns. It is difficult to imagine such security concerns from the Chinese.

Lastly, with significant anti-Americanism in the Middle East, and significant anti-Arab sentiment in America and the West generally, China could offer themselves as a neutral alternative to the Middle East-American/Western axis. It is no great secret that parts of the Middle East have security concerns, which are answered in one way or another by the West generally or America specifically. For example, answered in terms of arms sales ($20 billion only last week) as well as physical protection, as in the Gulf War. However, it must not be forgotten that China has been supplying various countries in the region for a long time now. More to the point, China are more willing to sell certain weapons that the West are – generally – not willing to, such as ballistic missiles and related technology, which were sold to both sides during the Iran-Iraq war, to take but one example. Furthermore, with the amount of industrial espionage that Beijing currently engages in, certain aspects of their armaments technology may not be that far behind the US itself.

However, there are a few caveats. Firstly, America is currently the only power capable of offering a meaningful security blanket, such as the one that freed Kuwait and protected Saudi Arabia. Theoretically, were the Chinese to sell an Atomic bomb ‘off the shelf’ to Saudi, that might negate that particular US role, but such a reckless policy is highly unlikely for the cautious and long-term thinking Chinese. Secondly, the prevalence of American goods, ideas, motifs, restaurants, books, films, TV channels, and music throughout the Middle East, compared to the utter lack of Chinese equivalents, shows that America, or at least, its manifestations are not going anywhere. It does not seem at all likely that McDonald’s will turn into Jowza (dumpling) restaurants any time soon. American culture, therefore, may well be here for the next 100 years, even if the manifestations of American power and trade are not.