It is easy to overstate or underestimate the consequences of China brokering an agreement between Iran and Saudi Arabia that has seen the two warring West Asian nations re-establish diplomatic relations and reopen their embassies. It was no doubt a major diplomatic achievement for Beijing, but it is not quite a game changer either for China or for the region.
That China is on a roll was apparent when, on April 17, Chinese Foreign Minister Qin Gang held separate calls with his Israeli and Palestinian counterparts and told them that Beijing was ready to help facilitate peace talks between them. He emphasised the push on the basis of a “two-state solution”. Peace talks between Israel and the Palestinian Authority have been stalled since 2014.
Under the “joint trilateral statement” of March 10, Iran and Saudi Arabia agreed to reopen embassies in each other’ capitals and implement a 1998 economic agreement as well as a 2001 security cooperation agreement. In essence, it is status quo ante as of 2016 when their relations broke down.
Wang Yi, China’s top diplomat and a signatory to the statement, said the agreement showed that Beijing was a “reliable mediator”. The joint trilateral statement itself said the accord was the consequence of a “noble initiative” by Chinese President Xi Jinping. Left unstated were the behind-the-scenes efforts of Iraq and Oman over two years.
So, what does this agreement signal for Chinese diplomacy? A new confidence? An endorsement of its world view? The declining fortunes of the West? How will the US react now?
Given the Saudi-Iran dynamics, which overlays the Shia-Sunni divide, the deal would not have been possible unless both parties wanted it. Iran’s predicament due to stringent western sanctions is well known and has now led to the rise of domestic turmoil. The Saudis, stuck in the quagmire of Yemen, are keen to end the war and focus on the post-oil future that Mohammed bin Salman has been talking about.
The deal is a consequence of some recent Chinese diplomacy that began when Xi Jinping arrived in Saudi Arabia on December 7, 2022, to lead three summit meetings—with the host country, the Gulf Cooperation Council (GCC), and leaders of the Arab League. During the visit, China and Saudi Arabia signed a number of MoUs worth tens of billions of dollars in the areas of politics, the economy, trade, and investment.
In addition to joint statements from all sides, Xi proposed major joint actions for pragmatic China-Arab cooperation spanning eight sectors, including development and security and a number of cooperative initiatives. Even allowing for some overstatement, it cannot be denied that China has come far in West Asia.
China has been an energy importer since 1993, importing more than 70 per cent of its oil and 40 per cent of its natural gas from the region, with Saudi Arabia alone accounting for 20 per cent of the total. Just before the Xi visit, China and Qatar inked a $60-billion, 27-year agreement to supply China with four million tonnes of liquefied natural gas annually.
China’s interests in West Asia have grown far beyond energy. It has been the Arab world’s largest trading partner since 2020, accounting for more than $330 billion in two-way trade in 2021. It emerged as the largest foreign investor in the region with $29.5 billion during Xi’s first visit in 2016, though there has been a decline in its investments since.
China signed a 25-year agreement with Iran in March 2021 and forged strategic partnerships with 12 Arab countries. Its ties have managed to cut across the rivalries of the region.
Policy of non-interference
In keeping with its tradition, China has been careful not to take sides in line with its “non-interference” policy. But it has not hesitated to offer mediation in Iraq, Libya, Sudan, Yemen and in the Israel-Palestine conflict. But it has done so carefully, and that is one reason why its efforts have not yielded significant results.
West Asia is an important destination for the Belt and Road Initiative. More than 200 large infrastructure and energy projects have been completed in the region since Xi Jinping announced the initiative in 2013. Today, the region has scores of Chinese-built or bankrolled ports, railways, highways, power stations, pipelines, landmarks, and even entire cities linked to Chinese industrial parks, ports and free trade zones.
- China brokered an agreement between Iran and Saudi Arabia that has seen the two warring West Asian nations re-establish diplomatic relations and reopen their embassies. It was no doubt a major diplomatic achievement for Beijing, but it is not quite a game changer either for China or for the region.
- The deal is a consequence of some recent Chinese diplomacy that began when Xi Jinping arrived in Saudi Arabia on December 7, 2022, to lead three summit meetings—with the host country, the Gulf Cooperation Council, and leaders of the Arab League.
- China’s interests in West Asia have grown beyond energy. It has been the Arab world’s largest trading partner since 2020, accounting for more than $330 billion in two-way trade in 2021.
- China has been careful not to take sides in line with its “non-interference” policy. But it has not hesitated to offer mediation in Iraq, Libya, Sudan, Yemen and in the Israel-Palestine conflict.
As for the US, it has landed itself in the predicament of being on the wrong side of two of the three principal countries of the region—Saudi Arabia and Iran. The Biden administration’s ties with Israel, too, are not particularly strong.
On the campaign trail, Biden had promised to put an end to American support for Saudi Arabia. In 2019, he said the US would end arms sales and make them an international “pariah”. But Biden changed course when he became President and, as the Ukraine war took off, sought to use Saudi Arabia to pressure Russia on oil prices. To this end, he visited Saudi Arabia in mid-2022 and met Mohammed bin Salman, and also participated in a summit of the GCC plus Egypt, Jordan and Iraq. The important part of his mission was to call on Saudi Arabia to delay a decision to cut its oil output. The Saudis refused. Biden promised “consequences”, but nothing has really happened.
US ties with Iran have been strained for the past 40 years or so and, more recently, the US has tried to persuade Tehran to renegotiate the Joint Comprehensive Plan of Action relating to its nuclear programme. But following the war in Ukraine, ties between Tehran and Moscow seemed to be on the mend, with Iran shipping drones and munitions to Russia. For Israel and Saudi Arabia, the Iran nuclear situation is a clear and present danger, but there is little they can do about it minus the US.
Meanwhile, US diplomacy has focussed on encouraging normalisation of ties between the Gulf states and Israel. The Abraham Accords of 2020 have gone some way in doing so between Bahrain, the UAE and Israel.
On the eve of the announcement of the Iran-Saudi agreement, TheWall Street Journal reported that Riyadh was ready to join the Abraham Accords and recognise Israel if the US provided it security guarantees and adjusted its nuclear rules to allow the Saudis to master the nuclear fuel cycle. Clearly, Washington did not bite, and the Saudis went along with Iran and China. Saudi Arabia has made it clear that while it does not want nuclear weapons, it will develop them if Tehran does.
The US is now a net oil exporter. Since 1977, US imports from the Organisation of the Petroleum Exporting Countries have generally declined and in 2021, only 9 per cent of its crude oil imports were from Persian Gulf countries. Oil may no longer have the kind of salience it once had in US policy, but the US still maintains significant military facilities in the region. Its Fifth Fleet is headquartered in Bahrain and the Central Command maintains a forward headquarters at the Al Udeid Air Base in Qatar. Other military facilities are spread out across the UAE, Oman, Iraq, Israel, Jordan, and Kuwait and gives the US the capacity to intervene anywhere in the region.
The US has been keeping a wary eye on Chinese activity in the region. Speaking to a US congressional committee shortly after the Iran-Saudi agreement was revealed, the US Central Command’s Commander General Michael Kurilla claimed that the region “was squarely in its (China’s) crosshairs”. He said while China was dependent on the region for half its crude oil, it was moving beyond energy-based investments to encompass physical and telecom infrastructure. He noted the huge Chinese investments and trade with the region and cited the example of Huawei’s 5G contracts with 19 of the 21 countries in the region. Importantly, he observed that “China’s economic interests, transactional approaches and perceived lack of Chinese bias in internal and regional affairs, will continue to provide inroads in the region”.
According to the Stockholm International Peace Research Institute, in the 2018-22 period three of the top 10 arms importers were from West Asia—Saudi Arabia, Qatar and Egypt. The great majority of the arms (54 per cent) came from the US, France (12 per cent) and Russia (8.6 per cent). Iran received virtually no major arms in this period, though it has now ordered 24 combat aircraft from Russia.
Chinese activities in the region have implications for India, which has huge stakes in the region. While India’s oil imports from the region may have dipped on account of purchases from Russia, it should not be forgotten that West Asian, and particularly Iranian, oil is the closest source of petroleum for India. Even now, India imports more than 50 per cent of its oil from the Persian Gulf. Equally important is the Indian diaspora, some eight million strong, which sends back about $30-40 billion in remittances annually.
Prime Minister Narendra Modi has made special efforts to enhance ties with West Asia and has made several visits to the region. The Saudis have announced intentions of investing $100 billion in India, while the UAE is already a big investor. The presence of Egypt’s President Abdel Fattah el-Sisi as the chief guest of the 2023 Republic Day was a signal of India’s determination to further deepen its ties with this strategic region.
The one major gap for India is its relationship with Iran, which is one of the most significant countries in the region in terms of size and potential. Under US pressure, India scaled back ties and New Delhi’s outreach to the UAE and Saudi Arabia has added to some friction with Iran.
In October 2021, India joined the UAE, Israel and the US in what is called the I2U2 grouping. This has an ambitious agenda in seeking to promote joint investments in water, energy, transportation, space, health, and food security. But the I2U2 is yet to be fleshed out, and there are many issues to be dealt with, such as the US-Israeli antipathy towards Iran and the positive Israel-UAE ties with China, to make this a viable geopolitical grouping.
The fault lines dividing the region have not quite gone away. If they had to choose, the Saudis would still prefer a US security umbrella over a Chinese one. If the Chinese had to choose, they would prefer Iran over Saudi Arabia because the former has considerable strategic heft and a history of hostile relations with the US. Likewise, the tightening relationship between Iran, Russia and China is something that the US is not happy about.
Manoj Joshi is a Distinguished Fellow, Observer Research Foundation, New Delhi, and the author of Understanding the India-China Border: The Enduring Threat of War in High Himalaya.