Friday, February 8, 2008

By David B. Roberts

E

China, Middle East and an unfolding courtship
ANALYSIS

Page 51

Perfect partners

veryone wants a piece of the Middle East at the moment. Israel, unfortunately, takes this quite literally and seems intent on forever expanding its borders with uncomfortable overtones of Lebensraum. American companies have, for the most part, been falling over themselves to find GCC cash to bail themselves out of their various woes. The list of those seeking investment is a veritable who’s-who of the American blue-chip elite: Citigroup, Dow Chemicals, General Electric and Merrill Lynch, to name a few. The French seem to have placed, in a rather un-Gallic, decidedly capitalist fashion, a price tag on their cultural heritage. For about $1 billion, you can now purchase priceless French art, plucked from the bosom of the most famous museum in the world, the Louvre. Furthermore, the French have also taken the name of their most prestigious university in vain by building a “Sorbonne Abu Dhabi” with infinitely easier entry requirements. However, not only have the French been handsomely rewarded for loaning a bit of cultural capital, but they now have a military base overlooking the Straits of Hormuz; perhaps they knew what they were doing after all. The British were predictably slow on the uptake and are now desperately searching for Middle Eastern cash to bail out the collapsing Northern Rock bank. Moving further east, Dubai holdings have invested heavily in the Indian bank ICICI, in addition to having taken an estimated billion dollar stake in Sony of Japan. Among those doing their utmost to make friends and influence states in the region are the Chinese. They are doing this, however, in a less brash manner. Indeed, to some degree, they have inverted the Europeans’ treatment of the region by investing in the Middle East. For example, two Chinese state-owned companies are investing some $4 billion in Saudi aluminum production. This is but one-half of an example of reciprocal investment between various Middle Eastern states and China. Expect to see a lot more of it. What makes partners per fect? China is the most natural trading partner for countries in this region. This may seem like something of a bizarre

statement, but it stands up to scrutiny. As any good (or even only mediocre) economics student will tell you, two crucial factors when discussing trade are supply and demand. In terms of supply, the Middle East has oil and money. According to the US Energy

between 1.5 and 2 billion people. Not only will these people need their energy needs taken care of, but, thanks to China’s phenomenal economic growth, many people now have lifestyles that simply require more energy. With greater affluence, for instance, comes greater demand

some land for a French military base, and America’s long history in Saudi Arabia made it possible for similar arrangements there in the past. I would suggest that the latter example is more especially instructive, considering the eventual outcome of the US bases in the

lecture, pressure, castigate or otherwise try to impose its ideals on another state. This is a fundamental pillar of Chinese policy: an absolute and utter respect of sovereignty. Thus, if a state is not appreciative of America’s lectures regarding full democracy or the rule of law (especially regarding the egregious hypocrisy of Guantanamo Bay) then they will certainly know that they would receive no such criticism from China. Along the same lines, China makes it easier for Middle Eastern companies to invest there. While many countries have invested heavily in the West, there is still an element of quasi-racism. This was clearly shown in the Dubai Ports World controversy, where a furor erupted when it was revealed that a Middle Eastern company would be involved with security arrangements at American ports. This would, according to some woefully misguided segments of the American media, lead to security concerns. It is difficult to imagine such security concerns from the Chinese. What West? With significant antiAmericanism in the Middle East, and significant anti-Arab sentiment in America and the West generally, China could offer

various countries in the region for a long time now. More to the point, China is more willing to sell certain weapons that the West is, as a rule, is unwilling to provide, such as ballistic missiles and related technology. China sold these to each side during the Iran-Iraq war, to take but one example. Furthermore, with the amount of industrial espionage in which Beijing currently engages, certain aspects of armaments technology may not be so far behind that of the US itself. Caveats persist, however. First, America is currently the only power capable of offering a meaningful security blanket, such as the one that freed Kuwait and protected Saudi Arabia. Theoretically, were the Chinese to sell an atomic bomb “off the shelf” to the Saudis, doing so could negate the necessity of that particular US role. Such a reckless policy, however, is highly unlikely for the cautious Chinese, beholden as they are to meticulous long-term strategy. Second, the prevalence of American goods, ideas, motifs, restaurants, books, films, TV channels, and music throughout the Middle East, compared to the utter lack of Chinese equivalents, shows that America, or at least its manifestations, is not going anywhere. It does not

Information Administration, as of January 2007, the Middle East had 739 billion barrels of proven oil reserves, more than the combined rest of the world’s 578 billion barrels. As for money, thanks to the bumper oil prices of recent years, the region is awash with cash. In 2007 alone, Morgan Stanley estimates, Persian Gulf countries invested around $75 billion overseas. This excludes the $500 billion that the region’s states are investing domestically to create super-cities. The goal here, of course, is to look ahead to the paradigm-changing day when oil runs out. Crucially, this inflated oil price appears to be with us for the medium term, as do the record profits for Middle Eastern governments and, with those, their ability to generously invest abroad. As for demand, the same economics student would no doubt tell you that demand is infinite. This is often stated in a theoretical fashion, but when discussing China, the theory approaches praxis. China has a population of 1.3 billion people. By 2050, however, the UN population division estimates that the country’s population will increase to a point somewhere

for bigger and better houses and apartments and, of course, bigger and better cars. In 2007 alone, the Chinese car market grew 20 percent and overtook Japan as the world’s second largest automobile market,. With tens of millions of people waiting to dump their bicycles, this market is only going to grow faster in the coming years. These lead us to the nearly shocking conclusion that - to take an estimate from Commentary magazine - China’s demand for imported oil will grow by 960 percent over the next two decades. An unburdened panda Issues of demand and supply, therefore, are suitably poised for a long and prosperous relationship. Yet there remain additional factors to consider. After all, the rest of the world demands oil and will continue to do so for the foreseeable future. So what makes China so special? For one thing, China lacks the historical or colonial baggage weighing upon other states in the region. This could be construed as a good or a bad thing. For example, France’s long standing relationships with the Emirates clearly made it possible for Abu Dhabi to cede

land of the two holy places. China, however, has a clean slate; indeed, it took until 1990 for China to officially recognize all GCC states. There are no old policies whose effects need to be ameliorated or defended. Another aspect that appeals to many governments worldwide is that China is an ideal partner in terms of demands exogenous to the deal itself: That is, there aren’t any. For example, China will never

itself as a neutral alternative to the Middle EastAmerican/Western axis. It is no great secret that parts of the Middle East have security concerns, which are answered in one way or another by the West generally or America specifically. We need only look at arms sales ($20 billion only last week) or instances of outright physical protection, as in the Gulf War. And yet it must not be forgotten that China has been supplying

seem at all likely that McDonald’s will turn into Jowza (dumpling) restaurants any time soon. American culture, therefore, may well be here for the next 100 years, even if the manifestations of American power and trade are not. David B. Roberts, a doctoral candidate specializing in SinoSaudi relations at the University of Durham, taught at the Kuwait National English School from 2005 to 2007.