China’s historic return to the gulf

http://mideast.foreignpolicy.com/posts/2010/04/02/china_s_historic_return_to_the_gulf

Two Chinese naval warships visited the UAE last week. The warships were refueling and taking on supplies after six months at sea protecting sea lanes from Somali pirates. The visit attracted little attention. But it was the first by the Chinese navy to the Gulf in modern history and, as such, set an important precedent for China's military engagement with the region -- and raises intriguiging questions about the future of the Persian Gulf as an American lake.

Historians will be tempted to draw comparisons with Admiral Zheng He and his visit to the Gulf in the 1400s at the head of a flotilla of treasures ships. Yet, there are important differences. Then, a wealthy and powerful Chinese state was attempting to shock and awe its neighbors. Today's China has far greater insecurities, in spite of its apparent assertiveness.

Oil is obviously a primary concern. China's oil consumption is estimated to grow from 8 to 16 million barrels a day by 2030, and much of the increase will be imported. The gulf is already China's largest oil supplier. But if current trends are sustained, it will supply more one in every three barrels of China's consumption by 2030. It is only natural then that China is increasingly worried about the United States and its strong military grip on the region.

Two recent essays pennned by Chinese Middle East experts illustrate these concerns. Sun Bigan, a former special envoy to the Middle East, wrote in late 2009 that "clashes are unavoidable" between China and the United States in the Middle East. He also worried that if relations between America and Iran were to improve, then American oil companies will "swarm" Iran, and that Iran, in turn, would strive for its "maximum self-interest." Sun is worth listening to. He is a 30-year veteran of the Middle East, a former Ambassador to Iran, Iraq, and Saudi Arabia and, now retired, able to speak his mind more freely.

His worries were echoed by Dai Songyang, an energy journalist writing for the internet-based China Energy Web. He said, "The United States recognizes Yemen's geographic ability to choke China's oil import life lines." He then hints that the United States may bring the war on terror to Yemen, in order to "strangle China's oil imports and its economy." Dai is not an official. But his views are indicative of a popular suspicion that American intervention in the Gulf is deliberately targeting China's economic security.

Yet, while oil is a primary concern, it is certainly not the only concern. Non-oil trade is also at risk. Much of China's trade with Europe travels through the Suez Canal. Somali pirates, for a period, threatened that trade as they hijacked ships. True, pirates don't find container ships easy targets. But the hijackings risked, at the very least, disrupting China's shipments and sending them on a longer, and more expensive journey around Africa. This matters because Europe is now China's largest export market. If China's exports were to slow, as European buyers switched to cheaper or faster suppliers, it would mean factory closures and job losses.

China's commercial relations with the Middle East itself have grown stronger as well -- indeed, in early 2009 China overtook the United States as the world's largest exporter to the Middle East having earlier overtaken Germany and the United Kingdom. It exported around $60 billion worth of goods that year, mainly clothing and home electronics, but also, increasingly, capital equipment.

Certainly China's exports are increasing to most regions of the world. But what makes this trade different is the sheer numbers of people involved. In the small city of Yiwu, a four-hour drive from Shanghai, there is a virtual Arab market. The city receives 200,000 Arab visitors every year. They come to buy the cheap consumer goods so popular with households back home. It helps that China unofficially relaxed its visa policy during the past decade. Whereas many Arab traders found themselves locked out of the West after 2001, they found it relatively easy to visit China. Just a few years ago, it took the average Egyptian trader 18 days to receive a visa to visit the United States. It took just one day to receive a visa to visit China. There are also 200,000 Chinese in Dubai, making it, according to the Chinese press, the largest non-permanent Chinese community abroad. There are fewer found in the rest of the region owing to the restrictions on the ability of foreigners to sell retail in the Middle East. But they are present nonetheless, from Algiers to Sana'a, and are contributing to the rise in trade flows.

Islam also plays a role. China has, officially, 20 million Muslims. While relations between the Uyghur and the Chinese government are poor, the Uyghur account for just eight million of the 20 million. The Hui account for 10 million and their relations with the government are far better. Indeed, the Hui are represented at all levels of government, including the Foreign Ministry. The Hui also study Arabic at what are effectively religious schools. Some then use their studies to work as translators for the Arab traders in Yiwu, and other cities across the country. Indeed, there are 1,000 Arabic-speaking translators working in Yiwu alone. Many also work for the Chinese companies in the Middle East.

The lesson is that China's rise in the Middle East is as much about commercial as political interests. And that makes it important to use a different toolkit in analyzing its growing influence in the region. Yemen offers a good illustration of this point. The Western powers are concerned that Yemen is emerging as a base for extremists. China, by contrast, worries that if Yemen imploded, it would mean that China's container ships and oil tankers must squeeze between two failed states -- Somalia to the south and Yemen to the north. Yet, China's interests in Yemen often go unnoticed because they lie outside the usual analytical framework that focuses on politics rather than economics. Indeed, it is rarely observed that China is building offices for the Yemeni Foreign Ministry or that the government recently closed down a series of Chinese massage parlors in the country's capital.

A similar analysis can be applied to Iran. How so? China's web of commercial interests in the rest of the Middle East is a restraint on its support for Iran. In short, a nuclear Iran and regional arms race would be bad for business. And Chinese academics have signalled that Iran's unpredictable behaviour is challenging China's relations with its other regional partners, especially Israel and Saudi Arabia. While China may not agree to sanctions easily, its support for Iran is often overstated, and the idea of a non-nuclear Iran with still strained relations with the United States is not an unattractive outcome for China's leadership.

China's commercial presence in the gulf has grown far more rapidly than its military presence -- it started with traders, but increasingly includes banks and construction companies. It is also inevitable that the country's military presence will also grow. Yet, it was popularly assumed that this required the creation of a blue-water navy and so would take time. However, Somali pirates appear to have accelerated the schedule and provided the Chinese navy with an excuse to expand its military activities in the region. Yemen might yet offer a similar excuse. The visit by Chinese warships is a far cry from Admiral Zheng He's treasure ships, but it nonetheless point to a new phase in China's relationship with the Gulf.

Ben Simpfendorfer is chief China economist for the Royal Bank of Scotland. He is also author of "The New Silk Road: How A Rising Arab World Is Turning Away From The West And Rediscovering China." He blogs at http://www.silkroadeconomy.com/