Should the US worry about China's expanding influence in the Gulf?

Al-Monitor Pro Members

Dr. Karen E. Young

Senior Research Scholar, Center on Global Energy Policy, Columbia University

May 2, 2023

China's hosting of a diplomatic breakthrough in the planned resumption of diplomatic ties and embassy operations between Iran and Saudi Arabia signals a different kind of Chinese interest and willingness to engage in the politics of the Persian Gulf. But China's presence in the Gulf remains largely of an economic nature, with a concern for its energy supply, and a political interest in furthering a support of alternate development models to Western democratic liberalism. If China were to ramp up its regional military and security capabilities, they are more likely to intensify a presence along the African side of the Red Sea corridor and could become a challenge to Gulf interests, as well as to the United States. There is the risk of a broader political schism globally, in which the United States and China are in conflict and low and middle-income economies center around a non-aligned majority that rejects both a democracy club and Chinese domination. In the interim, however, the Arab side of the Gulf remains culturally much more American than Chinese in orientation. But among the ruling elite of the Gulf, a fear of US selective sanctions targeting political leadership and their assets, along with G7 coordinated economic tools like the price cap on Russian oil, make China an attractive interlocutor, though not yet a replacement for the role the United States has played since at least  the late 1970s in the region. 

China's economic interests in the Arab side of the Gulf are substantial, in purchases of oil and gas exports and in general trade (much of it re-export) through the region and its waterways, especially through the Red Sea corridor. The investment interests of China in the Gulf are less well understood. China is an important source of contracting and foreign direct investment in a few key states and in a few key sectors across the Middle East North Africa and Pakistan (MENAP): the United Arab Emirates, Saudi Arabia, Egypt, Turkey and in Pakistan. But even in Egypt, Pakistan and Turkey, the GCC states are often more important sources of greenfield foreign direct investment, job creation and financial intervention via central bank deposits and direct support. China's interests in Iran are consequential but leave a lot to be desired from the Iranian side in attracting investment and development finance. 

For these reasons, an incipient Gulf-China affinity is more a product of a customer service relationship in the oil trade and geopolitical shifts more than shared political ideology, and not a substantial security partnership. The trendline of newer oppositional economic development models to the US-dominated liberal order led by China and the Gulf states within low and middle-income economies, however, is sure to have more lasting institutional and domestic political consequences in the decade to come. And while their models are similar, they are not the same, and in the MENAP geography, it is the Gulf states that often dominate. Within the GCC, Chinese investment and contracting awards are most visible in Saudi Arabia and the United Arab Emirates.