Dr Jorge's blog: Territorial disputes: The Persian Gulf (Part 20) [Post 180]

The Persian Gulf and China

China’s core national interests in the Gulf region currently include geopolitical interests, economic and trade interests, energy interests, and non-traditional security interests.

Its geopolitical interests consist of four dimensions: to refuse any single power’s unilateral control of the whole region, to prevent the emergence of any anti-Chinese regime in the region, to oppose any formal support of Taiwanese independence forces or other separatist forces in China by Gulf countries’ governments, and to pursue possible and potential support from the Gulf region for China’s foreign strategy.

China’s core national interests in the Gulf have been in continuous evolution. Ideological interests have been abandoned and economic and trade interests, energy interests, and non-traditional security interests have emerged gradually during the last three decades. Chinese state-owned oil companies are now aggressively bidding for contracts in the Gulf, and there is a clear Chinese presence in regional commerce.

For many Gulf nations then, Beijing’s interest in the region clearly offers new and expanding business opportunities in the energy sector. However, energy commerce is not the only aspect of invigorated relations between China and Persian Gulf nations, especially Saudi Arabia and Iraq. China’s rise as an export power has also presented Middle Eastern merchants with the opportunity to travel to China in search of cheap goods, while the Persian Gulf is an increasingly important source of capital for Chinese financial institutions.

Historical Background

Since the 19th century the Persian Gulf region has been one of the most strategically important regions in the world in the global competition for power. This is due to three reasons: (1) strategically, for the great sea powers not to allow the Eurasian land power access to the ports in the Gulf (and later to gain control of the oil resources), and (2) due to the vast energy resources located in the region which became even more important after WWII. In addition, it is fair to add a third reason: (3) relations to Israel.

Since 1800 the Persian Gulf region has played a signicant security role in international affairs. For the British Empire the Arab Gulf states (Trucial States) played an important role as a station between Britain and India and they were British protectorates from 1820 up to 1971 when Britain withdrew from the Persian Gulf. In British naval strategy, the harbours of the Gulf have always played a crucial geopolitical role in containing the Great Eurasian land power, whether it was Russia or the Union of Soviet Socialist Republics (USSR), by blocking access to the sea in order to hinder the land power from gaining control of the high seas and thereby becoming a global hegemon.

The strategic role increased considerably as oil became a more important resource, which it especially did in 1912 when the British navy decided to use oil instead of coal, with the southern part of Iraq as the important supplier.

The combination of China’s foreign strategy, core national interests in the Gulf and the Gulf region’s strategic structure all determine China’s Persian Gulf policy, which has witnessed six phases since the late 1950s: (1) a focus on Iraq (1958-1967); (2) a focus on revolutionary movements in the Gulf (1967-1971); (3) opposition to Soviet expansionism (1971-1979); (4) a focus on Iran and Iraq (1979-1990); (5) a focus on Iran (1990-2001); and (6) a focus on Saudi Arabia and Iran (2001 till now).

In the 1950s and 1960s, the typical characteristic of the international system was the all-out confrontation between the Western Capitalist camp represented by the US and the Socialist camp represented by the former Soviet Union. The nature of the political institutions of the People’s Republic of China established in 1949 led to China’s policy of leaning to one side and forming an alliance with the Soviet Union. Against such backdrop, supporting the national democratic movement in Asia and Africa was a part of China’s policy against the West under the confrontation of two camps. The relationship between China and the Gulf countries was restricted by this background.

Currently: Energy, China, the Gulf and the US

At 3.73 million tons in 1959, China’s post-revolution oil production was very low. A century of dependence on imported oil and oil products ended in 1963. In that year, the Daqing oil ﬁeld in northern China produced 4.3 million tons of crude oil out of a national total of 6.48 million. But this self-sufﬁciency did not serve the goal of economic and social development due to China’s relations with other countries. The Soviet petroleum and technological assistance that were critical for China’s oil industry were terminated in July 1960. Moreover, a U.S.-led embargo lasted from 1950 to the Sino-American rapprochement in 1971.

China was self-sufﬁcient in energy, but the economy was on the verge of collapse. In the early 1970s, China’s international relations improved, leading to the expansion of the economy. Oil and coal became primary export commodities in exchange for industrial equipment and technology from developed countries. China took advantage of the 1973 oil crisis to export oil to Thailand, the Philippines, Japan and other Asian countries in order to cultivate a friendly regional environment for domestic modernization and development.

The hard currency earned from oil exports was spent on the import of technology and equipment to develop an export-oriented economy critical for development. China’s crude-oil exports reached a peak of 30 million tons by 1985, but declined afterward due to growing domestic consumption and slower growth in production.

China began to import crude oil from Oman in 1983 as a temporary measure to deal with the problems of transporting crude oil from northern China to reﬁneries along the upper stretches of the Yangtze River. In 1988, Chinese imports of crude oil and oil products began to rise rapidly due to increased domestic demand. In 1993, China became a net importer of oil products and, in 1996, a net importer of crude oil.

China’s trade volume with the Middle East increased tenfold. The Gulf sits at a strategic juncture of the two main routes of China’s Belt and Road Initiative (BRI), and China’s economic interests in the region matches the Gulf countries’ effort to diversify foreign economic relations and restructure their economies away from a reliance on oil. China and national governments in the region have matched the Belt and Road Initiative with the latter’s national development plans, such as Saudi Arabia’s Vision 2030 and Qatar’s National Vision 2030. Bahrain has positioned itself as China’s gateway to Gulf economies just as Hong Kong to mainland China.

The Gulf is Beijing’s largest supplier of oil and second-largest provider of natural gas, while also accounting for about half of China’s exports to the Middle East. As China’s increasing oil import is expected to continue in the coming years with an enlarging gap between demand and domestic supply, Gulf will remain strategically important to China. In 2017, the top sources of China’s crude oil imports came from Saudi Arabia, Angola, Iraq, Iran, Venezuela and other OPEC countries.

China is becoming a major U.S. competitor for political inﬂuence in the Persian Gulf, and the United States is trying to check the growing Chinese diplomatic and political ties with key states of the region, such as Iran and Saudi Arabia. For their part, these states are increasingly turning to burgeoning relationships with Asia as the locus of oil exports. Already two thirds of the oil from the region is exported to Asia, and this is expected to grow.

China and the Persian Gulf