The announcement of the Belt and Road Initiative (BRI) in 2013 signaled a confident and assertive turn in Chinese foreign policy. No longer content to wait in the wings, China would, according to President Xi Jinping, “be proactive in seeking achievements.” Five years into the initiative, we are at a point where we can start to take stock of its impact. In some states and regions, China’s ambitions have bumped up against economic and political challenges. In the Persian Gulf, a particularly volatile regional security complex, the BRI has been largely welcomed. The Gulf monarchies (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates [UAE]) have actively engaged China in BRI projects, drawing Chinese investment into their states as they implement ‘Vision’ development plans to diversify their economies. These deeper relations are not a short-term anomaly; China’s power in the Gulf is rising.
What is the Belt and Road Initiative?
The BRI has its roots in the “Going Out” policy of the mid-1990s, with the realization that Chinese companies needed to expand their interests and investments beyond the domestic market in order to become internationally competitive. This led to Chinese state-owned enterprises expanding their presences in states in regions where China did not typically have much of an economic footprint; by the end of the first decade of the 2000s, Chinese citizens and assets had gone global. Significantly, Chinese companies had accumulated substantial foreign reserves - approximately $3.2 trillion in 2013 when the BRI was formally introduced.
At this point, the architecture of the BRI had already been established in several regions. Projects like the New Eurasian Land Bridge, the China-Pakistan Economic Corridor, and the China-Myanmar-Bangladesh-India Economic Corridor all predate the BRI, leading one observer to describe it as “a new slogan on stuff they’ve wanted to do for a long time.” What was new, however, was packaging all of these projects together under the BRI brand. The overland Eurasian component, the Silk Road Economic Belt, was rolled out in a speech by XJP in Kazakhstan, and the Indian Ocean region component, the Maritime Silk Road Initiative, was introduced in an address to the Indonesian parliament a month later. Taken together, it provided a framework for understanding China’s westward expansion.
An important feature of the BRI at this stage was the emphasis on it as an initiative, rather than a strategy. Whereas a strategy is typically understood as being against a third party, an initiative is inclusive. So it is with the BRI, as Chinese leaders underscore that the BRI is open to all, described by Foreign Minister Wang Yi as a symphony, not a Chinese solo. Its economic benefits are highlighted, with hard power and military issues conspicuously absent. The BRI’s guiding document, “Vision and actions on jointly building Silk Road Economic Belt and 21st-Century Maritime Silk Road,” lists five cooperation priorities – policy coordination, facilities connectivity, unimpeded trade, financial integration, and people to people bonds – all of which are meant to be politically neutral, highlighting development and economic goals, with Beijing’s consistent ‘win-win’ refrain.
The development focus in the BRI is crucial for understanding its appeal for partnering states. A report from the Asian Development Bank estimated an $8 trillion gap in Asian infrastructure needs between 2010 and 2020, and existing lending institutions like the World Bank, International Monetary Fund, and Asia Development Bank had nowhere near the available capital to address this shortfall. On top of that, their policies and procedures contribute to the perception that the projects they do fund are slow. Chinese firms, in contrast, have established a reputation for fast infrastructure with no political strings attached.
When the 19th Party Congress was held in October 2018 and the BRI was officially included in the Chinese Communist Party’s (CCP) constitution, it was clear: the BRI, linked to the leadership of both Xi Jinping and the CCP, is not going away. It will undergo different manifestations as it gets field tested in high-risk environments where China has relatively little political and security experience. It has also faced reputational problems as smaller economies get saddled with long-term Chinese debt. It is, however, the centre of China’s foreign policy, articulating a vision of Chinese power and influence from the East China Sea to the Mediterranean. In short, it is an important feature of global political and economic order, and states and regions around the world are starting to recalibrate their foreign policies in response, either to accommodate it or keep it at bay.
Situating the GCC in the BRI
The Gulf monarchies are among those states welcoming deeper Chinese engagement, and are well-positioned to take advantage of the BRI. As with other participating states, China-GCC relations pre-date the BRI, and the foundation of the bilateral relationships are consistent with the five cooperation priorities. This makes it easy to graft the BRI onto pre-existing economic and political ties.
From the Chinese perspective, the Gulf monarchies offer three unique and important factors that contribute to the success of the BRI: geography, energy, and Islam. In terms of geography, the BRI is about connectivity, and the Arabian Peninsula’s geostrategic importance makes it especially important. Linking South and Central Asia to the broader Middle East and East Africa, the GCC states occupy crucial BRI real estate. With global maritime choke points on either side of the Arabian Peninsula and the Red Sea providing access to the Mediterranean, the region would be an important strategic consideration for any aspiring Indian Ocean power.
That it is home to thirty percent of the world’s oil reserves features in China’s logic as well. China has become the world’s largest importer of oil and is projected to continue at a pace of 11 million barrels per day by 2030. With over fifty percent of its oil imports coming from the Middle East, this adds another important consideration for China in the Gulf. The attraction is mutual; the Gulf monarchies see in China a growing long-term market for their energy exports. Saudi Arabia is consistently China’s largest or second largest source of overseas oil, providing it with 16% of its imports, and Oman (10%), the UAE (4% percent), and Kuwait (3%) export substantial quantities as well. As China moves toward making liquified natural gas (LNG) a larger source of its energy consumption – the goal is 10% by 2020 - Qatar too is becoming an important energy source for China, as seen in the 22-year contract for LNG signed in 2018.
More than just Energy
China’s role in the GCC’s economy is denser and more diverse than just energy trade. Between 2000 and 2017 China-GCC trade has grown from just under $10 billion to nearly $150 billion per year. Chinese foreign direct investment into GCC states has increased substantially as well, with over $60 billion invested between 2005 and 2017. And the financial sector has planted roots in the Gulf as well, with China’s four largest banks having opened branches in Dubai to service the growing number of transactions. The Chinese renminbi (RMB) is growing in use, and both Qatar and the UAE have signed currency swap agreements with China. Activated in 2017, the UAE swap was used to clear more than $7 billion in transactions in 2018. The growth in relations was further cemented during Saudi Crown Prince Mohamed Bin Salman’s 2019 trip to China, when 35 Memorandums of Understanding were signed, valued at tens of billions of dollars. Discussing the state of China-Saudi relations, he described China as a good friend and partner, and claimed that “Over such a long period of exchanges with China, we have never experienced any problems.”
Yet another consideration for China is the importance of the Arabian Peninsula, and Saudi Arabia in particular, in Islam. Islam will be an important factor in China’s success in implementing the BRI as it passes through many Muslim-majority states. China itself is home to a diverse population of more than 23 million Muslims. However, the mass detainment of Uighurs in Xinjiang, framed by China as a domestic concern and a response to internal security issues, could seriously undermine its credibility along the Silk Road. Other than the recent condemnation from Turkey, China has not drawn public criticism from other Muslim-majority states, and as the custodian of Islam’s holiest sites, Saudi Arabia’s silence on this issue is helpful for Beijing. This was reinforced during Crown Prince Mohamed Bin Salman’s recent trip to China, during which he described the situation in Xinjiang as a domestic political consideration, saying “China has the right to carry out anti-terrorism and de-extremization work for its national security.”
The opportunities for Islamic investment in BRI projects will also be an important feature, and one which the UAE is poised to profit from. Islamic finance was estimated to be valued at over $2 trillion in 2016, making it a significant consideration in BRI investment. Dubai is home to the world’s largest Islamic Sukuk hub, listed on Nasdaq Dubai, and has been holing annual conferences with Chinese institutions to explore partnerships in Islamic banking and finance.
Given these natural endowments, it is not surprising that each of the Gulf monarchies have been deepening their relations with China, using the BRI as a framework. This is especially important as each GCC state has embarked upon economic diversification programs: Saudi Vision 2030, Abu Dhabi 2030, New Kuwait 2035, Qatar National Vision 2030, Oman Vision 2040, and Bahrain’s Economic Vision 2030. In each of these programs, Gulf states are working to build stronger private sectors and diversify their economies, and infrastructure and construction projects are central to much of what they intend to accomplish. As such, the already strong Chinese experience in Gulf infrastructure is seen as a way to coordinate ‘Vision’ plans with the BRI.
The most important indicators of China’s BRI ambitions for the Arabian Peninsula are the prominence of the UAE, Saudi Arabia, and Oman in Middle East connectivity projects. During the 2018 CASCF Minister’s Meeting, China unveiled the awkwardly-named “Industrial Park – Port Interconnection, Two-Wheel and Two-Wing” approach for linking states and markets within the BRI. The interesting part is the parks and ports focus, under which Chinese-developed industrial parks in the UAE, Saudi Arabia, and Oman will be linked with regional ports in Oman, the UAE, Djibouti, and Egypt, where China has also been developing facilities. This physical connectivity will link supply chains across the Middle East, and the Arabian Peninsula will clearly be the hub.
In this approach, the focal points are the Duqm Special Economic Zone Authority (SEZAD) in Duqm, Oman, the Khalifa Port complex in Abu Dhabi, the UAE, and Jazan, Saudi Arabia. SEZAD has generated the most notice thus far. Situated on Oman’s Arabian Sea coastline, Duqm is a project that the Omani government has been developing since at least 2006. With an oil refinery and the Middle East’s largest oil storage fulcrum, SEZAD offers an energy hub that avoids the Hormuz Strait chokepoint. Oman Wanfang, a Chinese consortium, has begun projects in SEZAD worth over $3 billion, and has signed contracts that are expected to bring the value of Chinese investments in Duqm to over $11 billion.
In Abu Dhabi, the Khalifa Industrial Zone Abu Dhabi / Khalifa Port Free Trade Zone is another joint park-port complex where a Chinese consortium is creating a deeper footprint. The Jiangsu Provincial Overseas Cooperation and Investment Company Limited (JOCIC) signed a 50-year lease in 2017 and has made investments of over $1 billion to date. Both Chinese and Emirati officials have linked JOCIC’s Abu Dhabi presence to the BRI and the UAE’s own domestic development program, Abu Dhabi Economic Vision 2030.
The third Arabian Peninsula Chinese industrial park is in Jazan, in south-west Saudi Arabia. This takes advantage of Saudi’s Red Sea coastline to link with two Chinese port projects: Egypt’s Port Said, at the north of the Suez Canal on the Mediterranean Sea, and the People’s Liberation Army Support Base in Djibouti. Taken together, these three park and port complexes are a physical manifestation of China’s Gulf presence, as well as the connective tissue fixing the Arabian Peninsula at the center of the BRI in MENA.
For the Gulf monarchies, having a rising power as an engaged partner is especially welcome in the face of a perceived softening of the U.S. commitment to the Middle East. American foreign policy in the region has been inconsistent throughout Pax Americana, and in response Gulf leaders have adopted a two-pronged strategy: more assertive foreign policies and deepening ties to other powers. Among these powers, China’s BRI offers the most clearly articulated path to stabilizing the MENA status quo. The focus on economic and development without political reform resonates throughout the region as well. While the inclusive nature of the BRI means it offers the same opportunities to regional rivals like Iran and Turkey, the Gulf monarchies are betting that they have more to Beijing, and the industrial park – port projects demonstrates that China sees them as the pillars of the BRI in the Middle East.
The author: Jonathan Fulton
He teaches political science at Zayed University in the United Arab Emirates. He is the author of China's Relations with the Gulf Monarchies (Routledge, 2018).
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