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China's complex relations with the Gulf States


June 8, 2014 - Untangling the complex relations between China, Russia, the Gulf states and "the West"is no easy task. Although Beijing and Moscow have long kept a small hand in Gulf affairs, there is growing activity between the four parties – each with differing interests, overlapping activities and sometimes schizophrenic approaches to their foreign policies. With their own petroleum fields depleting, rising domestic demand and increasing regional uncertainty – China has not only grown to become the largest net importer of petroleum in the world, but has diversified its energy suppliers to include Oman, Iraq, the United Arab Emirates, Angola, Venezuala and Russia. But Saudi Arabia maintains the title of top supplier to the huge Chinese market – and in 2013 provided 19% of China's 5.6 million barrels per day...


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China's complex relations with the Gulf States

Alastair Sloan

June 8, 2014


Untangling the complex relations between China, Russia, the Gulf states and "the West"is no easy task. Although Beijing and Moscow have long kept a small hand in Gulf affairs, there is growing activity between the four parties – each with differing interests, overlapping activities and sometimes schizophrenic approaches to their foreign policies.

With their own petroleum fields depleting, rising domestic demand and increasing regional uncertainty – China has not only grown to become the largest net importer of petroleum in the world, but has diversified its energy suppliers to include Oman, Iraq, the United Arab Emirates, Angola, Venezuala and Russia. But Saudi Arabia maintains the title of top supplier to the huge Chinese market – and in 2013 provided 19% of China's 5.6 million barrels per day.

The forecast for GCC exports to China, however, has been challenged recently, following a new energy deal signed between Beijing and Moscow last month. Russia, increasingly cut off from European energy markets but still heavily reliant on gas and oil revenues to keep government services going, signed a thirty year contract starting in 2018.

The energy alliance will see 38 billion cubic metres of gas, or roughly eleven percent of China's gas needs, delivered through new pipelines worth up to $90bn. In terms of dealing with Russia's new problems on the European front, China will be taking on roughly a quarter of the usual exports to Europe, giving them a strong insurance policy against further isolation from traditional customers in the European Union.

The implication for the GCC states is that China will remain an important, but mildly less hungry, customer. Meanwhile Russia, as a top exporter of gas and oil – is effectively in competition with the GCC.

"China's is a top energy consumer, while Russia is a top exporter," says Naser al-Tamimi, a London based Middle East analyst.

"Competition with Russia could emerge between Qatar (and possibly Iran later on)," he goes on. "Both will be competing for liquified natural gas exports to Europe and Asia."

But al-Tamimi also sees the China-Russia energy deal as a "clever way to exploit" increasing competition between Saudi Arabia and Russia over global oil markets – with China coming out on top as they play one international supplier against the other.

Meanwhile, Kuwait and Saudi Arabia are already investing in China's refineries and the China-GCC Free Trade Agreement has seen non-energy trade volumes between the two countries grow rapidly.

"Another important point for China," adds al-Tamimi, "is how Russia plays a role role in diversifying energy supply routes," explaining that the Strait of Malacca, which currently bears most of the transported oil to China from the Middle East, is a hot topic in China.

As regional security concerns rise, Beijing has increasingly viewed seaborne imports from the Middle East as a key vulnerability. China lacks the naval power to defend the Malacca straits in case of emergency, with one Chinese newspaper proclaiming in 2004 : "It is no exaggeration to say that whoever controls the Strait of Malacca will also have a stranglehold on the energy route of China."

Approximately 60 percent of China's crude oil imports originate in the Middle East, and this figure is expected to rise to 75 percent by 2015, according to the Jamestown Foundation. The new energy infrastructure being put in place in Siberia should see the proportion of Chinese energy travelling through the vulnerable Straits drop dramatically.

But regardless of the Russia-China deal; as a mass consumer of oil and a huge potential market for OPEC, the Gulf states – hurting on oil prices after the global economic crisis, are keen to sell more of their energy reserves to the Chinese.

This diversification strategy has been accelerated as Western energy needs are increasingly serviced by domestic shale gas in the United States, as well as Europe – OPEC, put simply, needs new customers.

But in terms of security co-operation, argues Mark N. Katz, Professor of Government and Politics at George Mason University, Beijing simply wants enough stability to guarantee exports from the region are not threatened.

"The utility of China for Riyadh is that it is an important petroleum buyer, and to some extent, a supplier of certain arms that Riyadh cannot always get from Washington."

"But since China prefers that America bear the main cost of underwriting Saudi security, Chinese and American interests in Saudi Arabia are convergent, and not divergent."

Katz thinks Beijing will try to satisfying all the competing interests in the Middle East, rather than "choosing" between Iran, Israel or the GCC states.

The Russian military establishment is also keen to take a back-seat in security issues along the Gulf, although still wants to score a point or two against the Americans, especially as tensions build in other parts of the world.

Taking advantage of "acrimonious relations," Putin and his Foreign Minister, Sergei Lavrov, have been making some fairly profound incursions into defence markets which were traditionally dominated by Western suppliers – including Egypt and to some extent Saudi Arabia.

Arms deals have also been signed in Iraq, and Russian companies continue to supply Assad's regime in Syria.

Popular opinion is also turning against American influence in the region, though Russia is not seen as a viable alternative by many Arabs.

Only one in five, according to a recent Pew Research Centre survey, have a positive view of America's role in the Middle East, while roughly half of Arabs support China.

Popular opinion about Russia's role is generally negative, especially since the backing of Assad's regime.

But China's non-interference policy, for example, makes them a more reliable ally than the West, who have sometimes pushed for democratic reform in diplomatically sensitive areas such as Bahrain and Egypt.

According to Katz - "Beijing does not want to pay much to ensure stability in the Gulf, and so would prefer that America and the West continue to do so while China "free rides" on their efforts."

Meanwhile, "Russia is not prepared to take over from America as principal security provider from the region. Russia's ability to profit in the region depends on the American-backed security order there continuing."

In any case, Russia and Saudi Arabia would make unusual partners – differing radically on Iran, Syria and approaches to Islamic extremism.

In July 2013, Russian President Vladimir Putin was reportedly warned by the Saudi intelligence chief Prince Bandar Bin Sultan that Wahhabi terrorists based in the North Caucasus region may target the Sochi Winter Olympics.

The Federal Security Bureau (Russia's intelligence service) then alleged, after "concrete evidence" was discovered in January 2014, that the attacks had originated in Saudi Arabia.

"Saudi-Russian interests are too opposed to each other to allow for much cooperation," says Katz in London.

The role of both China and Russia in the Gulf could more usefully morph into a "bargaining chip" for the GCC states.

"Saudi Arabia is increasingly dangling the prospect of diversifying its alliances, by moving closer to Russia and China," says Shadi Hamid, a Fellow at the Saban Center for Middle East Policy. This is a common theme amongst many US allies, he argues.

"Sometimes, allied countries try to use the prospect of moving closer to Russia/China as a kind of bargaining chip to wring out more commitments from the US."

Hamid is sceptical about how far security collaboration between the GCC and Eurasian partners can ever go.

"There can be stronger economic and defense ties with Russia and China but neither can replace the U.S. in terms of providing a security umbrella," adding that the alliance with Washington offers access to tens of billions of dollars of advanced weaponry.



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