China's Middle Eastern Energy and Trade Relations are Growing

China has grown its involvement in the Middle East over the last few decades in an effort to secure energy supplies that are crucial to its economic and industrial expansion. Several Chinese enterprises have increased their presence in Iraq and Saudi Arabia. Prior to this engagement, Chinese industrial output was characterized by low-quality and substandard commodities that were subjected to fierce competition from Western countries. The increased availability of energy has not only enhanced China's industrial technology, but also its people and financial capacities. Unlike in previous interactions, China has increased its political involvement in the Middle East, which has increased its trading capacity. For the past two decades, China has been following the political unfolding in Middle Easter countries closely mainly focusing on oil which is a common factor among all the rising powers. This has facilitated a long-term access to hydrocarbons which are critical for its industrial expansion. China and the United States are headed in opposite directions when it comes to energy and industrial matters. While the United States becomes increasingly self-sufficient in terms of energy, China is expanding its commercial ambitions in the Middle East. This, therefore, means that by the year 2030, China is likely to overtake the United States as the largest consumer of energy globally. China has taken this opportunity to secure new labor markets and investing its capital in Middle East.

Aim

The following research paper evaluates the benefits of Chinas’ expanding energy and trade relations with the Middle East on its economy. The paper also explores the economic and the political impact this expansion has had to both China and the Middle Eastern countries. Lastly, the paper also explores ways way in which the expanding relations are likely to impact on China’s quest to be a world’s super power and the resulting relations with other nations such as the United States within the international system.

Literature Review

Historical Background

Contact between China and the Middle East can be traced more than 15 centuries ago (Pham 177). Both Arab and Persian merchants and diplomats used the Silk Road which is the present-day Xi'an. For centuries, China has reviewed the importance of binding its ties with other countries either by direct conquest or through building concrete commercial ties. However, China's interests in in Middle East were limited when the People's Republic of China was founded in 1949. During this period, China's foreign policy was related to that of the Soviet Union which focused on mutual assistance, friendship and alliance (Pham 178). However, Sino-Arab relations have been not been continuous as they have been halted severally owing to political and territorial differences. However, after both gained independence in 19th and 20th Century respectively, the relations between China and Middle Eastern countries has been expanding with time (Zhongmin 6). Owing to its unique geopolitical position, the Gulf region has been critical to China’s expansion especially in terms of trade and a source of energy for its industrial expansion. In addition, China has adjusted its diplomatic strategies in order to better position at the heart of political and economic ties within the Gulf region. During the Cold War, the Sino-Arab relationship was adversely affected as China expanded its relationship with other countries including the Soviet Union and the United States. The volatility of the state of politics in various countries is the primary reason behind China’s diversification in terms of energy supplies. China is the largest oil importer globally and has diversified the sources ranging from Middle Easter countries to Russia and Central Asia (Zhongmin 6).

Relations between 1950s and 1960s

During this period, the international system was characterized by constant confrontations between the Western Capitalists and the socialists. According to Zhongmin, the Soviet Union and the United States were the main actors in the international system. Therefore, after the formation of the People Republic of China in 1949, there was a need to lean towards one these powers. China joined the Soviet Union and, therefore, had to offer support for the national democratic movement in Asian and Africa. Henceforth, this affected the relationship between China and the Middle East countries since the Gulf countries were allies to the West during this period. Countries such as Iraq and Iran joined the Baghdad Pact whose leader was the United States (Zhongmin 7). However, China had a principle of ideology which aimed at supporting all the national liberation movements in the Gulf region. Therefore, China played a role in supporting the revolution in Iraq making it the first country to create diplomatic relations with China (Zhongmin 8). From this point, Iraq acted as the diplomatic center for all China’s operations in the Arab world. By 1960s, the relations between the Soviet Union and China had worsened. Therefore, not supporting both the Western powers and the Soviet Union, China opted for the Gulf region as the most strategic point to confront the two powers.

Relations between China and the Middle East in the 1970s

According to Zhongmin, the Soviet Union became China’s biggest enemy owing to border conflicts. Therefore, China opted for the foreign policies which were opposed to Soviet’s intention to expand to the third world. The Soviet Union signed two major agreements with both India and Ira in 1971 and 1972 respectively. Therefore, China had to co-operate with the United States in terms of its policies regarding the Gulf region (Zhongmin 4). China stopped supporting the revolutionary groups in the Middle East. However, in the seventies, Britain withdrew from the Gulf region. Therefore, China, fearing that this vacuum will be filled by the Soviet Union, developed better relations with the Gulf region. Therefore, China regained a better position in the international system after regaining its seat in the United Nations and developing better ties with the Middle East and opposing the Soviet Union.

Relations in the 1980s

China’s diplomatic relations in the 1980s were based on its reliance on the United States in opposing the Soviet Union (Zhongmin 6). However, with time, China developed a balanced relationship between the Soviet Union and the United States. China became more involved in various political events in the Gulf region such as the Iran-Iraq war as well as Iran’s Islamic revolution (Zhongmin 6). Through its foreign policies, China was able to stop the Soviet's expansion in the Middle East and at the same time prevention the expansion of Iran-Iraq war in the Gulf region. Zhongmin relates China’s current ties with the Middle East to the fact that it was neutral and the fact that it is the only permanent member of the United Nations Security Councilthat involved diplomats in the Gulf region in mediating between Iran and Iraq (Zhongmin 7). Its key role in establishing peace in the Middle East has earned China admiration among the countries within the Gulf region which are rich oil deposits thus making China among the biggest beneficiaries of these energy resources. Due to the continued development of China's relations with Saudi Arabia, other countries in the Gulf region including the United Arab Emirates, Bahrain, and Qatar also established diplomatic relations with China in the 1980s. Part of the reason why China has achieved tremendous economic development in terms of expanding trade in the Middle East is China’s improvement of its religions practices (Zhongmin 7).

Relations in the 1990s

After the Cold War and the collapse of the Soviet Union, the United States established its dominance in the Middle East, especially during the Gulf war. In addition, the Iraq crisis became quite a test for China at the time. Therefore, China focused on improving its deteriorating relations with the West as a means of maintaining its energy supply within the Gulf region. China took a middle ground by condemning both Iraq’s invasion of Kuwait and at the same time condemning the military intervention by the bigger powers within the international system. Therefore, unlike the Western powers who opted to actively undertake military intervention against Iraq, China engaged Iraq through active mediation and condemned the United Nations sanctions imposed against Iraq (Zhongmin 8). China’s effort to reconcile all the powers involved in the crisis improved both its relations with the Middle East and the United States.

Expanding Relations in Energy and Trade

According to Abdel-Khalek and Korayem, China did not view its diplomatic relations to be economically viable until in 1995.China used its relations with the Middle East in the past to expand in terms of economic and industrial development through energy supplies. Currently, China enjoys viable trade in goods and services as well as Foreign Direct Investment (FDI) through its established oil companies in Middle Eastern countries (Abdel-Khalek and Korayem 397). These trade relations have expanded tremendously since the accession of China to the World Trade Organization. Being a major player in the Middle East, Abdel-Khalek and Korayem suggest that this has also influenced China’s position at the global scale. In a related study, Dorraj and English explore China's position in its strategic Middle East activities and how this will affect its relationship with the United States. China uses $3 trillion in foreign currency reserves as a way of securing long terms energy reserves in the Middle East (Dorraj and English 173). According to Dorraj and English, Chinese companies have embarked on projects to pump up the volume of oil and gas which is targeted to flow to the mainland in the 21st century. This has been facilitated by bank loans as well as upstream and downstream joint ventures (Dorraj and English 173). In addition, to the energy supplies which China is getting from the Middle East, it is also embedding itself deeper in the economies of the Middle Eastern countries so as to make its position in the region more permanent. China has expanded its bilateral trade in the region which has also promoted its monetary strength. In addition, Dorraj and English suggest that China has achieved this position as the most preferred nation in the Middle East due to its involvement in military intervention. This has given China an expansive access into the region. Scholars such as Dorraj and English suggest that China’s continued expansion in trade and energy access in the Middle East is likey to result in a new realignment of the great powers in the region.

For years, the United States has enjoyed a unipolar presence in the Middle East. However, Kemp suggests that the unipolar presence is transitory with the emergence of other key players in the region including China and India. With the good relations with China and in the process of building more ties with India, the United States appreciates the fact that various powers in the International system have different agendas in the Middle East (Kemp 147). According to Rubin, China’s efforts to ensure that peace is sustained in the Middle East is part of its international policy which will ensure that the country continues to acquire energy resources and expand its bilateral trade engagements. Therefore, China ensures non-involvement in regional conflicts in a bid to preserve these relations (Rubin 354). In addition to economic benefits, China chose to stick with Iran during after military interventionby the Western countries due to its technological weakness at the time. It also engaged in diplomacy and mediation during the war between Iraq and Kuwait to limit the United States from selling arms in the region which would potentially affect China's role in the Middle East (Rubin 346). China would ease the pressure imposed by the United States in relation to the sanction on Iran by temporarily reducing its imports to Iran but built back in a month or two. In a related study, Calabrese asserts that the energy cooperation is the key to expanding the relationship between China and Middle East countries. Apart from China’s non-military approach in its foreign relations, its overreliance on Gulf oil imports for its energy requirement has been a critical reason towards this commercial expansion (Calabrese 351). China’s engagement in the Middle East has not come easily. According to Calabrese, China has encountered numerous challenges in its quest to become a key player in the Middle East such as tremendous pressure from the United States as well as regional crisis and conflicts. Therefore, China's success in acquiring energy supplies and engaging in bilateral trade in the Middle East has been as a result of its capability to strike a balance between its economic and geopolitical interests (Calabrese 352).

China’s Premier Wen Jiabao visited Qatar, Saudi Arabia, and the United Arab Emirates despite the growing tension between China and the United States. The purpose of this visit was to increase the existing cooperation between China and these Middle East countries as a way of safeguarding its energy security. In addition, to energy supplies, China also had an intention to expand its economic influence in the Gulf region by promoting bilateral trade. More than half of Chinese oil exports comes from the Middle East. Of this amount, approximately 10% comes from Iran. Therefore, China had to lobby against the sanctions which the West was putting on Iran to protect its energy supply. In addition, China had an important role to play to resolve thecrisis as amicable as possible because further political instability in Iran would increase China's cost of oil imports. In addition to resolving the issue, China had to diversify its energy sources by creating diplomatic and economic relationships with other countries within the Gulf region. Wen's visit to the United Arab Emirates in 2012 was the first since a diplomatic relation was established between the two nations. Although economic activities were going on between the two countries, China opted to take a hands-off approach in the region since it was viewed as a purview of the United States. In addition to renewing its ties with these countries, China also embarked on expanding its energy supplies from other regions apart from the Middle East including Central Asia and Africa.

The 2012 Gulf region visit by the Chinese premier was not only focused on expanding investments in energy resources such as natural gas, but it was also aimed at expanding Chinas economic growth in other sectors including infrastructure, ports, and railways. The domestic development initiative taken by China in individual countries within the Gulf region was to aid creating alternative routes for the oil within the region to reach the export markets. The pressing issue of Strait of Hormuz was also an important issue that China needed to address. Continued military activity in the region would potentially block oil supplies to China and the rest of the world if the route would be temporarily closed. China has a major project, the Abu Dhabi Crude Oil Pipeline. The project was established during the Strait of Hormuz crises in order to allow tankers to load outside the region affected by war. This has been a major form of development pioneered by China not only in the Gulf region but also in other parts of the world where it has contributed towards the establishment of alternative energy supply lines.

Chen reviews China's presence in the Middle East in relation to bilateral trade agreements which China has struck with individual countries in the Middle East. Compared to the past few years, the prices of oil and gas have been rising constantly until the year 2008. The price had risen as a result of low demand for oil with global recession affecting most of the countries which are major users of oil (Chen 1). In addition, to the global economic recession, clime change has also affected the profitability of the oil industry. However, the emergence of countries such as China which are major consumers of oil for industrial purposes has stabilized the oil prices (Chen 3). The presence of Chinese oil companies in Middle East countries has ensured that China as an industrial hub has an adequate supply of energy resources which is part of its economic growth agenda.

According to Daher, China's economic view of the Middle East came in 1978 when it started focusing on modern culture and economic development. Between 1978 and 1985, China embarked on open policy development in order to incorporate as many partners in its economic agenda as possible (Daher 18). Therefore, China embarked on trading activities to become one of the greatest trading powers globally. The open policy was also key to opening China’s relations with the whole region of the Arab countries. Besides, China's rising position in the International system also played a role in expanding its influence especially in energy supply and other economic activities in the Middle East. In addition, China's position in the international political conflicts affecting the countries in the Middle East has also facilitated both financial and technological transfer between the two countries (Daher 19). According to Daher, China has enjoyed an annual growth rate of 9% since the establishment of the open economic policy in 1978. By the year 2003, China was a major oil importer amounting to approximately 5.5 million barrels per day (Daher 20). China signed a Strategic Oil Cooperation Agreement with Saudi Arabia in 1999. Through this agreement, the Arab Gulf States opened their domestic markets to China and which was allowed to pursue the upstream oilfields in the region (Daher 20). Currently, China is a large consumer of foreign oil. It accounts for more than 12% of the world's energy whereby a third of this comes from abroad (Daher 20).

The relationship between China and the Gulf region is based on agreement. While China has exclusive oil exploration rights in the region, there are other agreements on technology, investment, trade and cultural cooperation is which ensure a mutual benefit between the two parties. According to Daher, Saudi Arabia is still the leading trading partner with China in the Middle East. Saudi Arabia imports goods such as textiles, cars, heavy industrial equipment, electrical products, and processed foods from China (Daher 22). Moreover, since the Saudi Arabian government spends a lot in infrastructural development, its demand for Chinese cement is also high. China’s policies do not support any state sponsors of terrorism or terrorist organizations in the Middle East. Therefore, China continues to ensure peaceful co-existence in the region by increasing its diplomatic, military and economic ties with individual countries in the Middle East. In addition, China has been vocal in supporting economic, political and educational reforms in the Middle East as part of its strategy to ensure long-term peace in the region.

According to Leverett and Bader, the 2005 acquisition of Unocal by China National Offshore Oil Corporation triggered a hostile reaction from the United States. The acquisition led to speculation that the global over hydrocarbons will most likely be the cause of major international conflict in the future. However, China has continued with its oil exploration activities in the Middle East which was once a monopoly of the United States. Currently, state-owned Chinese energy companies such as the China National Petrochemical Corporation (Sinopec), China National Petroleum Corporation (CNPC) and CNOOC are engaged in long-term oil exploration activities in Middle East countries following mutual agreements between the involved governments (Leverett and Bader 187). Since the East has become Beijing's only reliable source of sustainable hydrocarbons for its industries, it is possible that China's involvement in the region is going to intensify in the future.China is likely to expand its ties in the region both economically and politically. In addition, China's continued engagement and influence in the Middle East will most likely lead to multiple bilateral damages and frictions with the United States (Leverett and Bader 119). On the contrary, Scobell and Nader argue that China’s growing influence in the Middle East may be critical towards establishing a more stable regional environment as opposed to damaged relations between China and the United States. In addition, continued China-U.S engagement in the Middle East is also likely to alleviate the rising tension in East Asia (Scobell and Nader 2).

Methodology

Key Definitions of Research Terms

The following research will take the form of a desk study which refers to a method of research which involves accessing and reviewing published information and records. The material used in this research will explore ways in which the relations between China and the Middle East have expanded in the recent past especially in energy and bilateral trade. This refers to the exchange of goods between countries which facilitate trade and investment. Countries can do so by either eliminating or reducing import quotas, tariffs and export restraints. The study also seeks to the impact which the energy and trade engagement has had for both China and the Middle East countries involved. Therefore, the study will take both a qualitative and a quantitative approach. The quantitative approach will mostly used figures and numbers as the core units of measurement of value. Similarly,the qualitative approach will apply words to explain about meanings as used in articles and other materials reviewed in the study.

Research Approach

There are other studies which were previously done regarding China’s engagement with the Middle East, especially in oil trade as well as other bilateral trade activities. In addition, these studies also describe how the China’s growing influence in the Gulf region is impacting on its relationship with the United States which has previously enjoyed the monopoly in the region. Furthermore, the studies have evaluated how the bilateral relationship has affected the economies of the involved countries over the years. All the above aspects of engagement between China and the Middle East will be researched using academic publications including books and journal articles. The research will apply three primary data categories: These are journal articles, books, and documented reports on China's energy engagement with the Middle East. In addition, special attention will be given to media accounts as well as reports from the global energy sector. Finally, tables and graphs will be used as data analytical tools in order to demonstrate trends in China’s energy consumption and its oil supplies in the Middle East.

Quantitative and Qualitative Data

Both of the above approaches will be applied in the research. The qualitative data will be used to describethe philosophies, the purposes and the views expressed by other scholars and media houses in relation to China’s energy engagement in the Middle East. The qualitative approach will also describe the economic, social, and political outcomes of the growing diplomatic relations between China and the Middle East. This includes improvement in livelihood, infrastructure, and diplomatic relations. However, this approach is limiting since it cannot be applied in situations where the valuables are measurable. Another disadvantage of the qualitative approach which is likely to affect the research accuracy is because it is more subjective and mostly not accompanied by any numerical results to back the views expressed.

The research will use the quantitative approach whereby statistical data such as the changes amount of oil and revenue China is receiving from its continued influence in the Middle East. On the matter pertaining to revenue, the quantitive data is critical and normally serves as the basis for making sound conclusions. Therefore, due to the the limitations which are inherent in each of the research approaches, both will be used interchangeably in order to ensure that all the important aspects of China's energy engagement in the Middle East are addressed. Another way to ensure more accuracy of the research is to ensure that books, journal articles and other publications used in this study are up to date and accurate. This will ensure that bias is minimized as far as possible and that the data and informationportrayed is accurate.

Research Design

This being a desk study, most of the research will entail a cross-examination of all data sources to be used in the study including books, journal articles, and other credible publications. In addition, the conclusions acquired through the secondary data sources will also be applied in the analysis of the study and come up with study findings. Apart from that, the results will be compared to the information acquired during the review of literature in order to establish whether the objectives of the study have been achieved. The secondary data sources will be accessed from different databases to improve the credibility of the study findings by incorporating the views of various scholars. The sources used are also as recent to improve on the validity of the findings.

Findings and Discussion

The Socioeconomic Impact of the Expanding Energy and Trade Relations between China and the Middle East

Study findings based on the reviewed literature indicate that China's expanding energy and trade relations with the Middle East have improved the country's socioeconomic status. Data obtained from various sources indicate that China's economy grew at a rate of 9.5% annually between the year 1978 and 2013 (Orion et al. 83). The economic growth was mainly due to the expanding energy and technological industries in China as a result of the increased oil and gas supply from the Middle East. However, since 2013, the annual economic growth has decreased slightly from 9.5 to 8%. However, this reduction has been associated with Xi's presidency who has requested for structural economic reforms (Orion et al. 83). However, the policies have also sustained China’s economic growth by strengthening the relations which China has with individual countries in the Middle East. One of such initiatives is the One Belt One Road (OBOR) as well as the Asian Infrastructure Investment Bank (AIIB) (Orion et al. 84). Through these initiatives, China has improved its cooperative ventures in the Middle East. For instance, through OBOR, China has been able to establish sea and land infrastructure which is central in the Middle East, China, Europe, and the Central Asia. In addition, the initiative has also seen an increase in infrastructural development in Pakistan, Bangladesh among other Middle East countries in terms of roads, highway and railway constructions by China (Orion et al. 84). Besides, China has acquired and is also operating the seaports in various countries such as Egypt and Israel.



Figure 1: Trends in Chinese Trade with Iran (Shi)

The location of Middle East is also important to the economy of China. According to Orion et al., China has invested more than $120 billion in North African and the Middle East over the last decade. Another reason why China has expanded its energy engagement in the Middle East is because it targets to reduce its consumption of coal and embrace the less polluting energy sources (Orion et al. 85).The infrastructural development in the Middle East is also contributing towards a rapid population growth in the region. Therefore, as the population grows and the region opens up, it will also act as a future market for Chinese exports. According to Orion et al., more than 50% of the oil imports in China was from the Middle East. This indicates a growing mutual economic benefit and dependence between the two regions.



Figure 2: Growing dependence in Crude oil between China and the Middle East (Ermito)

China's Diplomatic and Military Involvement in the Middle East

Compared to the United States, China has traditionally opted to engage in trade and investment as opposed to diplomatic, extensive humanitarian aid or military intervention in the Middle East. Despite the growing economic and security involvement in the Middle East, China’s military involvement in the region has remained minimal over the years. Additionally, unlike the United States, China does not have enough experience in maintaining overseas military bases on carrying out comprehensive military operations. However, in the recent past, due to China's growing influence in the region for purposes of energy supplies and trade, China has adopted various military techniques and reforms to provide security to investors and protect its investments and interests in the Middle East. China is now participating in various military operations such as implementing international operations against pirates as well as defending its international trade routes. However, generally, China is minimizing its involvement in Middle East politics and military activity to pave the way for more economic engagement. Since the year 1990, China’s arms export to the Middle East has declined accounting to only $920 million in the last decade (Orion et al. 86). The instability of the region, however, still makes a potential,market for Beijing.

Impact of China's Growing Influence in the Middle East on its Relations with the United States

China’s economic growth has boosted its involvement in the Middle East becoming the largest oil importer. China has already overtaken the US in terms of oil imports. Unlike China, the US engage in both economic and diplomatic relations with the Middle East, especially in realizing peace, security, and stability in the region. On the other hand, China is only concentrating on its economic relations with the region. However, there are concerns on whether is capable of bringing about stability in the region given is non-military involvement. The rise of China as an economic and political power and its expansion in the Middle East is likely to shape the international politics. Therefore, there are likely to be more international conflicts between the two powers due to a rise in common interests. According to the scholars such as Minzer, due to the growing commonality of the interests, the US is likely to confront the issue sooner or later. However, studies also suggest that China's economic growth and expansion of its energy engagements in the Middle East does not reflect a competition with the United States. Rather, the expansion is natural given that China has a population of 1.3 billion people (Minzer 2). Therefore, given the rate at which its economy is growing, China’s new position will affect the geopolitical position of the United States.

There is a common perception that China’s economic growth and influence especially in the Middle East, a way of seeking worldwide confrontation with the United States. However, China restrains as much as possible from any military or political involvement. Moreover, most of its policies usually prioritize on the domestic issues. Therefore the growing influence which China is enjoying in the Middle East is not a threat; rather it is a challenge to the United States. Sustained investments are more likely to counter the challenge better than economic protectionism (Minzer 2).

Conclusion

China's economic growth and expansion of its influence in the Middle East among other countries is among the important international occurrences in the 21st century. For many years, the United States has enjoyed a hegemonic influence globally. However, with China's expanding influence and soft power, the geopolitical position enjoyed by the United States is likely to change with time. China's economy is the fastest growing worldwide at approximately 8-9% annually. Therefore, with the kind of growth as well a technological and industrial expansion, China requires an enormous supply of energy to support this growth. This has seen it rise the global ranks to become the biggest importer of oil in the world. This is the basic economic reason why China is expanding its diplomatic as well as economic ties with various Middle Eastern countries.In the recent past, China has also started to engage in various military operations mainly due to the instability in the Middle East. These operations are mainly aimed at protecting China’s interests in the region and ensure that all its international trad...