Chinese power in the Middle East and Its limits

The discourse surrounding China’s influence in the Middle East often swings between exaggeration. Some suggest China’s expanding presence challenges US primacy in the region; others argue that despite its growing clout, Beijing has little power to affect any meaningful change. In between, there lies a complex reality in which Chinese capabilities, while increasingly formidable, are counterbalanced by equally formidable constraints.

China’s regional presence is certainly not trivial. China is the largest importer of oil worldwide, roughly half of which comes from the Middle East. It has also become the largest trading partner for most countries in the region and an important source of investment, infrastructure and advanced technology. According to the State Council of the People’s Republic, China-Middle East trade reached $507.2 billion in 2022. Today, Beijing has comprehensive strategic partnerships with Iran, Saudi Arabia, Egypt and the UAE, enjoys strategic partnerships with seven other Middle Eastern nations and a “comprehensive innovation” partnership with Israel.

Many assume that such interdependence affords China substantial influence over these countries. This assumption was perhaps best exemplified when US officials asked China to use its leverage to pressure Iran and other Middle Eastern nations to prevent the Israel-Hamas war from engulfing the entire region.

However, the rationale underlying this request fundamentally misrepresents the nature of power in global politics today. Indeed, there are glaring asymmetries in the Iran-China relationship. China constitutes over 30 percent of Iran’s total import and export activities, while Iran makes up less than 1% of China’s trade market. Beijing provided a lifeline to Iran in the face of Western embargoes, and China’s oil imports from Iran today continue to break records as Iran ramps up output despite the threat of further US sanctions.

Make no mistake: China isn’t doing Iran any favors. Throughout 2022, China offloaded around four million barrels of Iranian crude oil into state reserve tanks. These stockpiles mitigate the economic impact of future price hikes and provide an important buffer against disruptions caused by geopolitical shocks. When Iranian-backed Houthi rebels launched drone attacks on Saudi Aramco facilities in September 2019, the price of Brent crude increased roughly 20%, and China found itself paying $97 million more daily for oil.

If China were to exercise its influence over Iran by threatening to cut trade and investment, there is simply no guarantee that Iran would comply with Beijing’s demands. Iran’s tolerance of Western sanctions in the face of their devastating economic impact serves as a cautionary tale. 

What’s more, Teheran has cultivated strategies to assert itself despite its weaker position: advancing its nuclear program, leveraging its regional influence, and using asymmetrical warfare tactics – all of which serve to offset external pressures.

Even in the face of recent Houthi rebel attacks on naval shipments in the Middle East, China’s nascent regional military presence, which includes just 200 marines and a modest naval deployment in the Gulf of Aden, is insufficient to protect Beijing’s ME interests. If it were, Chinese container carrier OOCL might have been more reluctant to suspend all shipments to and from Israeli seaports amid the Israel-Hamas war.

Amid rising tensions with the West, China is depending more on the Middle East.

Foreign investment in China has dried up, making Gulf Cooperation Council states with their massive sovereign wealth funds (currently valued at $4 trillion) an increasingly attractive source of finance capital. According to media reports, Chinese startups are flocking to Saudi Arabia in a “Middle East gold rush.” 

When it comes to trade, A November 2023 Asia Times report revealed that “China now exports more to the Muslim world ($42 billion a month) than to the United States ($38 billion a month).”

Moreover, Middle Eastern countries have become essential to China’s efforts to rally the Global South as a counterweight to the American alliance network. All these realities factor into Beijing’s calculations when assessing the feasibility of pulling any levers. Strategists in Zhongnanhai understand that doing so is not without unintended consequences.

China will continue to speak loudly while engaging the Middle East cautiously.

Beijing will continue to engage the region cautiously, embracing low-risk opportunities to undermine the United States and its allies. Or, as one Chinese scholar put it, “doing nothing, opposing something [at the UN].” At the same time, China will avoid engaging in actions that could harm its relations with local players –except perhaps Israel– or those that risk embroiling China in the region’s tumultuous conflicts. 

This is especially true regarding matters that pose little threat to core Chinese interests. China’s caution, however, is no reason for complacency on the part of policymakers. 

Over time, China endeavors to gradually recalibrate the asymmetries in its favor through its infrastructure, financial and technological partnerships. Beijing’s approach is subtle: a series of incremental gains that individually may not always seem significant enough to warrant scrutiny but collectively advance broader strategic objectives. This includes exerting more control over vital economic arteries in the Middle East and beyond. The risk of developing undesirable path dependencies looms. 

Local actors are not oblivious to these realities. Nevertheless, Middle Eastern efforts to mitigate these geoeconomic risks pale in comparison to the de-risking measures under consideration in many European capitals. Unlike Italy, Middle Eastern nations have shown little desire to eject Chinese entities from their economies or officially withdraw from the Belt and Road Initiative. Even amid tensions between Israel and China over Beijing’s response to the Gaza war, Israel’s ambassador called on Chinese entrepreneurs to invest more in Israel’s technology sector. 

Perhaps ironically, the inclination by many countries in the Middle East to deepen economic ties with China in the first instance emanated partly from their desire to hedge against perceived US retreat from the region. Recent years have seen countries like Egypt, Saudi Arabia and the UAE embrace a multi-vector foreign policy that involves engaging with multiple partners from East to West. 

By engaging with a wide range of actors and institutions, Middle Eastern nations seek to enhance their strategic autonomy. While the US will remain the Middle East’s primary security guarantor for the foreseeable future, these realities hinder the prospects of America forming any exclusive US-block in the region to contain China.

Its not a zero-sum equation, The US and Middle Eastern countries should continue to welcome the more positive aspects of China’s engagement with the region, especially those that promote stability and development. At the same time, countries in the Middle East would benefit from conducting a comprehensive economic security audit: mapping out the asymmetries in their relationships with prominent powers to identify points of vulnerability (and power) and cultivate strategies to mitigate any looming risks.

Israel, in particular, may want to draw inspiration from Europe and convene policymakers from relevant ministries to discuss what de-risking from China might look like in practice.

This article first appeared in Asia Times.