Red Star in the Morning, Business Warming: A Recent Visit by the Chinese President to the Middle East Shows the Growing Importance of the Arab World for China's Burgeoning Economy. Eamonn Gearon Examines the Different Aspects of This Cooperation and Wonders If America Should Be Worried
Gearon, Eamonn, The Middle East
THIS APRIL, CHINESE President Hu Jintao visited Saudi Arabia and Morocco, where he met with the leaders of both countries to sign a number of agreements, as well as laying the groundwork for future business deals. The timing of Hu's trip to the Middle East, immediately after his visit to the US, where Washington is clearly desirous of fostering closer ties with China, had many observers asking if it did not contain an implicit message or perhaps even a warning to the Americans not to imagine they are the only power with a role in the region.
President Hu's decision to visit Saudi Arabia just three months after King Abdullah was in Beijing also speaks volumes about both countries' recognition of the need for closer relations. Saudi Arabia is now China's biggest trading partner in the Middle East.
Abdullah's trip to China was the first by a Saudi king since the two countries established diplomatic relations in 1990, not to mention the fact that Abdullah chose China as his first overseas destination since his August 2005 accession to the Saudi throne. While in Beijing the Saudis signed a number of trade agreements with the Chinese, which related not only to oil but also to gas and other natural resources.
During Hu's time in the Gulf, the nations of the region made it clear that they all recognise and respect the potential power inherent in increased partnerships with China. This was most ably demonstrated in Hu's meeting with Abdulrahman Al Atiyyah, secretary general of the Gulf Cooperation Council (GCC). The foremost of the region's trade organisations could be signing a free trade agreement with China by the end of the year, according to Al Atiyyah. Such a development would have enormous significance for both sides.
With the Gulf's oil-producing nations benefiting from high oil prices, and with China's economy growing at just below 10% in 2005, there is no reason why such multilateral cooperation should not continue to grow. During Hu's April visit to Riyadh, he and King Abdullah oversaw the signing of a series of agreements on matters relating to security, defence, health and trade. The fact that the terms of these agreements were not initially made public suggests that both signatories are fully aware of how closely their burgeoning business relationship is being monitored by other nations with an interest in the region--America and a number of European states in particular.
By 2005, Chinese imports of Saudi oil accounted for the majority of bilateral trade, worth $16bn. But non-oil trade between the two is growing fast. Consumers among the GCC nations are increasingly discarding a long-held prejudice against Chinese-made products. For years considered of variable quality; in recent years they have gained greater acceptance, and even favour, in part because of lower prices than imports from other parts of Asia and the wider world.
Another factor that has encouraged this growth is a sea change in Chinese domestic policy in recent years. Whereas in the past, China was seemingly driven entirely by ideology, today economics is the driving force.
The resultant boom in the Chinese economy means that the country is now the world's second largest energy consumer (after the US) and since 2002 it has been responsible for a staggering 40% of the increase in global oil demand. By 2005, Saudi Arabia was supplying China with 17% of its imported oil needs, making it China's largest foreign energy supplier.
The energy sectors in both countries are controlled by a handful of giant firms, and many foreign observers describe these companies as little more than organs of the state. By extension therefore, any consolidation of Sino-Saudi energy ties could be seen as an extension of state policy or diplomacy by other means.
In Saudi Arabia, the energy sector giants are Saudi Aramco and Saudi Basic Industries Corporation (SABIC), the Middle East's largest petrochemical company, while in China CNPC, Sinopec, and CNOOC dominate the sector. Since 1999, when the then Chinese President Jiang Zemin visited Saudi Arabia, much progress has been made in development of cross-sector investment. Sinopec and Saudi Aramco have collaborated on downstream projects in China and SABIC has had talks relating to a number of possible downstream projects in China.
For the Middle East's serious oil producers, their product remains crucial in the augmentation of national power: for Saudi Arabia and China oil is central to the survival of their respective regimes. With this in mind, the political subtext or strategy in the growth of China in the region, especially in Sino-Saudi relations, must be carefully considered. For Beijing, a reliable, long-term business alliance with Saudi Arabia is a useful bulwark against not only the growth of regional rivals such as Japan or India, but also the possible deterioration in relations with these nations in any future jockeying for superiority in the Far East.
From the Saudi point of view, the opportunities to guarantee a long-term energy future with China are enhanced by the fact that Saudi oil reserves are so much larger than their neighbours' that they remain in a better position to sell more cheaply. The fact that Saudi Arabian oil is not yet sold on the open market also helps; as does the not insignificant detail that the process of obtaining contracts in the kingdom is not open to inspection. Furthermore, both Riyadh and Beijing know that while it is in their mutual interests to cooperate, with oil prices at all-time highs, Saudi Arabia currently occupies the stronger bargaining position.
The growing closeness between China and the Gulf nations has not gone unnoticed in the rest of the world, most notably in America. Increased Chinese demand for Gulf oil must be viewed by the US as a potential threat to their precious supplies. Indeed, Chinese recognition of Washington's unease led the Chinese vice foreign minister, Yang Jiechi, to suggest the possibility of future joint US-Chinese energy exploration projects. In an April press briefing, Jiechi was quoted as having said, "In terms of developing new energy, renewable energy sources, and conserving energy, China and the US have tremendous scope to further their cooperation." If such statements ease American worries over oil supplies, they do little to ease fears that China may also be extending its military influence in the Middle East. Since 1988, when an arms transfer agreement saw China delivering intermediate-range ballistic missiles and missile launchers to Saudi Arabia, there has been genuine concern that China may have been trying to buy into the lucrative Gulf arms market. However, there is no evidence of further significant arms deals between China and the Gulf since the late 1980s, whether in missiles and missile technology or conventional small arms.
Since the 1990s, China has enjoyed a much healthier trade in military equipment with Iran rather than the Gulf. Ironically, as relations between China and the GCC are now growing stronger, China is more likely to sell increased quantities of arms and weapons technology to a Gulf worried about the military imbalance that exists between themselves and Iran, an imbalance that China has been instrumental in creating. While Saudi Arabia is likely to be the biggest weapons buyer on the Arabian Peninsula, the US, if it wishes to maintain its advantageous position there, must reassure the Gulf nations that their security interests remain safest with them and not the Chinese.
As things stand, China may be able to capture a significantly higher percentage of the arms market share in the region but it is no position to offer anything approaching the military and security assistance that Washington currently provides. Nevertheless, America would do well to take note of any growth in arms and oil trade with China, however benign such deals may appear to be.
There is another factor that makes China an attractive trading partner for the Middle East, namely the absolute lack of interest in interfering in one another's domestic policies. This April, in a speech to the Shoura, the Saudi Arabian council that advises the king, President Hu said: "Countries should have the right to chose their own social systems." He added: "Both Saudi Arabia and China have formulated systems that suit their capabilities, culture and traditions."
Such comprehensive acceptance would be a most unlikely declaration for a Western leader. Indeed, trade agreements between certain nations and the West can raise howls of indignation from those sections of the electorate who do not believe that it is right to ignore another country's record on human rights or, in the case of China, the ongoing occupation of Tibet. In the Arab World, such objections will not be heard from a public that is far more interested in political change at home rather than in China.…
Questia, a part of Gale, Cengage Learning. www.questia.com
Publication information: Article title: Red Star in the Morning, Business Warming: A Recent Visit by the Chinese President to the Middle East Shows the Growing Importance of the Arab World for China's Burgeoning Economy. Eamonn Gearon Examines the Different Aspects of This Cooperation and Wonders If America Should Be Worried. Contributors: Gearon, Eamonn - Author. Magazine title: The Middle East. Issue: 369 Publication date: July 2006. Page number: 26+. © 2009 IC Publications Ltd. COPYRIGHT 2006 Gale Group.
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