|
China neither has strong historical ties with no
long-term strategic interests in the Gulf and Middle East. Yet, its
relationship with the region has assumed dynamic proportions, chiefly due
to its energy requirements to feed its thriving economy.
China is now the second largest oil importer in the
world, accounting for 12 percent of the worlds energy consumption, with a
third of its supply coming from abroad. The International Energy Agency
(IEA) predicts that over the next 25 years, Chinese industry is expected
to account for over 20 percent of growth in world energy demand. China
currently imports 32 percent of its oil, a figure that is likely to double
over the next five years. Its gas imports are projected to increase from
zero in 2000 to 20-25 million cubic meters by 2010.
If it is energy that is forcing China to look toward
the Gulf, it is oil again that is engaging the Gulf with China. For
example, Iran and Saudi Arabia together now account for almost two-thirds
of Chinas Middle East oil imports. This coincides with the Gulf
considering East as a preferred market and investment destination. The
commercial aspect has also been enhanced as an indirect result of Sept.11,
with the Gulf producers finding that the suspicion and scrutiny that
greets Arabs in the West does not exist to the same degree in
Asia.
But the partnership between China and the Gulf
Cooperation Council (GCC) countries is mutually beneficial due to other
reasons too. First, both have come to terms with the need for greater
liberalization and are positioning themselves to take advantage of a
globalized business environment.
Second, China has expanded into the oil services
sector in the region by signing almost 3,000 contracts worth $2.7 billion
in the GCC countries since 2001. Chinas growing economic ties with the
GCC countries have included a Framework Agreement on Economic, Trade,
Investment, and Technological Cooperation in 2004 and negotiations for a
China-GCC free trade zone.
Finally, China is scouting for nonenergy raw
materials to feed its industries, thereby expanding its investment
portfolio in the region. It is in this context that the visit to China of
Custodian of Two Holy Mosques King Abdullah from Jan. 22-24 assumes
significance. This is the first-ever trip to China by a Saudi king since
the two countries established diplomatic links in 1990. More
significantly, this will also be the first official visit to another
country by King Abdullah since he ascended the throne.
Saudi Arabia is Chinas No. 1 trading partner in the
Middle East and is poised to maintain it. China hopes to increase
bilateral trade with Saudi Arabia from about $15 billion in 2005 up from
$5 billion in 2002 to $20 billion in 2010. The Kingdom shipped crude oil
worth $4 billion to China in 2004. The Saudi share of Chinese oil imports
is sure to grow, especially since Beijing aims to stockpile up to 100
million barrels of petroleum one months consumption.
Topping the list of Chinese exports to the Kingdom
are cars, textiles, processed and packaged foods, heavy industrial
equipment and electrical products. Demand for cement is also high in Saudi
Arabia with the government spending heavily on infrastructure
projects.
Throughout the 1990s, Beijing cultivated its
relationship with Saudi Arabia, which culminated in the 1999 Strategic Oil
Cooperation Agreement. In return for opening their domestic market to
Chinese investment and allowing China to pursue upstream oilfield
activities in the Kingdom, the Saudi companies have begun participating in
Chinas downstream refining business. In doing so, China hopes to upgrade
its refineries with Saudi finances. With the Saudi Arabian Investment
Authority putting the Kingdoms private sector investment abroad at about
$5 billion annually, China Petroleum and Chemical Corp. (Sinopec) has held
talks with Saudi Aramco for a stake in a $1.2-billion refinery in Qingdao.
Saudi Aramco also joined hands with Sinopec in a $3.5-billion venture in
Fujian province, which involves ExxonMobil too.
At the same time, Saudi Arabia plans to export LNG to
China. As part of opening its potential holdings to private Chinese
exploration, a contract to explore and produce natural gas in the Rub
Al-Khali Basin in Saudi Arabia has been signed. Saudi officials desire to
diversify their exports beyond oil, to include gas, bauxite and
phosphates.
While some assert that the energy deals are simply a
result of mutual economic interests, others argue that they stem from new
strategies in both Riyadh and Beijing. In fact, Saudi motives combine
economic with political purposes; Saudi Aramco now does almost half its
business in Asia and has more offices there than anywhere else in the
world. As part of this plan, Riyadh seeks to expand its share in China.
Although it already supplies 17 percent of Chinas oil imports, this is
proportionally less than what Saudi Arabia sells to other Asian
markets.
This does not mean that there are no potential
problems that could negatively impact the relationship. For example, the
two countries must consider the Xinjiang factor the mineral-rich
province is home to 7.2 million Uighurs, who are Muslims and have been
subject to the government-led war against terror. Following the Chinese
governments harsh response to the 1997 Uighur riots, Saudi clerics called
upon Riyadh to help Chinese Muslims financially and diplomatically. This
kind of instability has necessitated improved Chinese relations with
Muslim countries.
Another aspect of concern is the relationship between
China and Iran. The two share a special affinity that is too close for
comfort for the GCC countries given the lack of confidence between them
and Iran.
Chinas Iraq policy has been ambiguous from the GCC
perspective. But in a break from the past, China has also engaged in
hectic conflict resolution since the beginning of the Iraq crisis. In May
2004, China submitted to the United Nations Security Council an
unofficial document offering revision of the US-UK draft resolution.
Though its suggestion for the US-led multinational force to withdraw from
Iraq by January 2005 was not adopted, the resolution and its emphasis on a
larger UN role were in line with the regions views.
The economic ties between GCC and China have also led
to closer relations in the political and security fields. With both sides
preferring a faster pace of economic rather than political reform, the
priorities within the relationship are well calibrated. In this context,
Chinese criticism of the US anti-terror campaign and democracy plans for
the region are in sync with the governments of the GCC
countries.
However, the chief advantage of Chinas role in the
region is its lack of political baggage. Chinas agenda may well be
dictated by economic interests and its ideological differences with the
US. This can be substantiated by pointing to Chinas success in
simultaneously preserving good relations with both Israel and Iran. Since
one of the commonalities between the two sides is the preference for a
faster pace of economic reform compared to political change and because
China has criticized the US anti-terror campaign and democracy plans
which too go well with the regions beliefs scope for better ties
between the two sides remains unlimited.
Abdulaziz Sager is the Chairman of the Gulf Research Center,
Dubai. | 
