Will the Gaza War Disrupt China’s Middle East Strategy?

Evaluating the Impact of the Israel-Hamas Conflict on China’s Economic, Political, and Strategic Interests in the Region – A Special Commentary by Dr. Sakariya Kareem”

Israel’s war against Hamas is going on full throttle with the Israeli Defence Force (IDF) claiming to kill hundreds of terrorists by bombing their hideouts in Gaza. There is a fear that ongoing war against the outfit may escalate into a full-blown conflagration with its impact across the length and breadth of the Middle East region.

Iran is raring to confront Israel, while in the wake of attacks from Lebanon and Syria on Israel, Israel’s fight against Hamas has already turned into a multi-front war. Indications suggest that the Israel-Hamas war will become consequential and ruthless in days to come. But China seems to be extra cautious in its approach towards Israel’s counter-action against Hamas. Historically, China has been sympathetic to the Palestinian cause and as such, it has reservations in condemning Hamas attacks on Israel.

However, by openly supporting Israel, Beijing also does not want to offend Islamic countries in the Middle East. In fact, the region serves as a great source of China’s trade and investments. Given this, China seems to be highly worried about the unfolding situation in the region. If the ongoing Israel-Hamas war is not stopped immediately, Beijing will suffer hugely on economic, political, and strategic fronts, feel analysts.

According to Xinhua, the value of overall trade between China and the Middle East countries reached $431.4 billion in 2022, up from $330 billion in 2021. The Middle East is the largest supplier of oil and gas to China.

Atlantic Council, an American think tank, said in 2022, more than 41% of all crude imports to China came from the Gulf Cooperation Council, comprising Saudi Arabia, the UAE, Oman, Qatar, Kuwait and Bahrain. Import of crude oil by China from the region rose from 145 million tons in 2006 to over 508 million tons in 2022, the American think tank said.

Beyond the rubric of oil and gas, China is involved in the development of infrastructure in the region. From 2005 to 2021, China invested $36.16 billion in the UAE. In 2019, it signed a $10 billion deal with the UAE to set up a new industrial city in the Gulf country, China Briefing, a consultancy firm operating from multiple places across the world.

Earlier, China built the $10 billion Yanbu refinery in Saudi Arabia. Operational since 2014, the Yanbu refinery has a capacity to refine 400,000 barrels per day of oil. China’s petrochemical company Sinopec has a 37.5% stake in the Yanbu refinery, while Saudi Arabia’s Aramco has a 62.5% stake in it. In August this year, on the sidelines of the Saudi-Chinese Business Forum in Beijing, Riyadh and Beijing signed a $1.33 billion deal for the development of several housing and infrastructure projects. China and Saudi Arabia inked 35 investment agreements worth around $30 billion during the visit of Chinese President Xi Jinping to Riyadh in December 2022, according to Arab News.

Across Gulf countries, Saudi Arabia is a major destination for Chinese investment. Between 2005 and 2021, as per China Briefing, Beijing invested $43.47 billion in various projects in Saudi Arabia, including its rail and road projects. China is also involved in the $500 billion mega-city project, NEOM. Recently, Riyadh and Beijing set up a $20 billion investment fund to link Saudi Vision 2030 with China’s Belt and Road Initiative.

Oman, the third most influential country in the GCC after Saudi Arabia and the UAE, has strong bilateral economic ties with China. Beijing has invested heavily in Oman’s infrastructure. It is busy in constructing Duqm port and industrial zone in the strategically located area near the Strait of Hormuz. For this project, China and Oman signed a $10.7 billion agreement in May 2016. The project is a part of China’s Belt and Road Initiative.

Between 2005 and 2021, China invested $1.42 billion in Bahrain’s infrastructure projects, China Briefing said. But it does not include multi-billion worth of projects underway in Bahrain under BRI. In accordance with Bahrain’s economic vision for 2030, Chinese companies are involved in the Bahrain Metro Railway Project, East Sitra Housing Project and Al Dur Power Station Project.

As per Bahrain’s The Daily Tribune, the East Sitra Housing Project being developed by China Machinery Engineering Corporation will be the largest social housing project in the Gulf country. It is being developed by reclaiming 720,000 square metres of land, The Daily Tribune said.

Kuwait has also attracted a large number of investments from China under BRI. The first phase of the $130 billion Sheikh Jaber Al Ahmed Al Sabah Causeway—connecting Kuwait’s capital with its northern shores has been completed. Work is on connecting Kuwait’s capital with five nearby islands. Kuwait Times said that more than 40 Chinese firms are currently operating in Kuwait as part of China’s contributions towards national development projects, related to smart cities, energy, ports, road, and rail.

Last month, during the visit of Kuwaiti Crown Prince Sheikh Mishal Al-Ahmad Al-Jaber Al-Sabah to Hangzhou to participate in the opening ceremony of the 19th Asian Games, the two countries signed seven agreements for construction of projects related to Mubarak Al-Kabeer Port, renewable energy, creation of a low-carbon recycling green system, water treatment station, economic free zones In Qatar, China has enhanced its footprint both in energy and infrastructure sectors. In April this year, Chinese petroleum firm Sinopec agreed to take 5% take in a train with a processing capacity of 8 million tons a year. It is part of the North Field East LNG export project that is under construction and is expected to begin shipping gas in 2026, Bloomberg said.

Qatar has aligned its national vision for 2030 with China’s BRI with a special focus on the energy sector. Following a deal with Beijing in June 2023, Qatar agreed to supply four million tons of gas annually to China, The Jordan Times said. In 2021, as per Xinhua, bilateral trade between China and Qatar reached a high point of $17 billion, up 57% compared to 2020. In the first three months of 2022, the two-way trade rose by $19.5 billion, China’s state-backed news agency said.

On the infrastructure front, Lusail Stadium which was the host to the 22nd FIFA World Cup last year, is considered as a signature construction work of China Railway Construction Corporation. It had won a $764 million contract to build the stadium. China was also involved in building Qatar’s other stadiums like Education City Stadium and Stadium 974. From sea ports to strategic reservoirs, energy, and communication projects—there are multiple projects in which more than 200 Chinese companies are currently involved in Qatar, Global Times said.

China’s engagements with non-GCC countries on trade and investments have been equally strong and forward-looking. In Iran, China has agreed to invest $400 billion over 25 years in exchange for a steady supply of oil to feed the engine of its growth. The New York Times said promised $400 billion Chinese investments will be made in dozens of fields, including banking, telecommunications, ports, railways, health care and information technology. China’s investments in Iraq and Syria have grown significantly in recent years.

However, along with economically oriented moves across the Middle East, China has been seen taking a well-calculated step to increase its political influence in the region. Its reflection can be seen in its mediation in the normalisation of ties between Saudi Arabia and Iran. “By successfully bringing two of the Middle East’s bitterest rivals to the negotiating table, China aims to build credibility as a capable partner in the region,” Carnegie Endowment For International Peace said in a recent article.

To enhance its influence among the countries of the region, Beijing helped push the UAE, Saudi Arabia, and Iran to become BRICS members at the group’s summit in Johannesburg in August this year. In the China-dominated Shanghai Cooperation Organisation, Iran has already become a member, while dialogue partner status has been granted to Qatar, the UAE, Saudi Arabia, Bahrain, and Kuwait.  But there is a fear that once Israel targets Iran for its support to Hamas or Tehran attacks Israel in its support to the Palestinian cause, there will be no stopping from turning the current Israel-Hamas fight into a full-blown war, taking the Middle Eastern countries in its avoidable infernos. If that happens, China will be a great loser, experts say.

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