Opportunities and challenges in the Middle East for the Belt and Road

Dr. Mohammed Issam Laaroussi

The Belt and Road Initiative is President Xi Jinping's signature approach to promoting economic development. It is working to reinforce China's links to Asia, Europe, and Africa through networks of roads, ports, railways, power plants, and other infrastructure projects.

C4ADS, a non-profit research institute that specializes in data analysis and security, examined official Chinese policy documents and unofficial reports by Chinese analysts to assess the intentions of Beijing's ambitious economic development program, which seeks to connect 65 percent of the world's population across more than 60 countries.

Chinese Foreign Minister Wang Yi, right, and Omani Foreign Minister Yusuf bin Alawi, second from left, attend a meeting in Beijing, China, May 15, 2018. [Photo: dfic.cn]

The report analyzed 15 Chinese-funded port projects in Australia, Oman, Malaysia, Bangladesh, Sri Lanka, Cambodia, Indonesia, Djibouti, and elsewhere in the Indo-Pacific region. It concluded that projects aren't driven only by "win-win" economic development in the host countries, as Beijing claims; it is driven also by Chinese economic prowess, which could be a soft power that bridges the gaps in the influence of other superpowers, and challenge the hegemonic power strategy of the United States in the Middle East.

While there's no official policy document linking the Belt and Road Initiative to China's national security interests, Chinese observers recognize that a network of maritime logistics hubs throughout the Indo-Pacific, including ports, has the potential to change the region's strategic landscape, with several explicitly describing the role of infrastructure investment in China's grand strategy.

China released a strategic blueprint for building its economic and financial relations with the Middle East in 2016, titled "China's Arab Policy Paper". The blueprint proposes the establishment of a "1+2+3" cooperation framework. One is to build on energy cooperation as the core. Two is infrastructure construction, and trade and investment facilitation – the wings of the policy. And three are the innovations in the high and new tech fields of nuclear energy, satellites, and new energy that China intends to work on developing in the Middle East.

Recently, China and Oman signed the "Memorandum of Understanding on Jointly Promoting the Construction of the Silk Road Economic Belt and the 21st Century Maritime Silk Road between the Government of the People's Republic of China and the Government of the Sultanate of Oman". China is willing to use the 40th anniversary of the establishment of bilateral diplomatic relations as an opportunity to further consolidate mutual political trust, accommodate each other's core interests and major concerns, and inject new energy into and open up new space for bilateral cooperation through the Belt and Road Initiative. Oman attaches great importance to its relations with China. Oman will actively participate in the construction of the Belt and Road, and enhance communication and coordination with China in regional and international affairs, so as to constantly elevate the level of Oman-China cooperation.

China's agenda to implement the Belt and Road Initiative in the Gulf Cooperation Council region takes into consideration the political conflicts that have overshadowed the region over the last few years. Signing the memorandum with Oman means that China is demonstrating trust in this country, which has a unique policy of neutrality and not becoming involved in the main crises in the region, such as those involving Yemen, Syria, and Iran. The economic promotion of Oman is in accordance with sustainable security.

In addition to that, a new globalization template inspired by the Belt and Road Initiative is a central aspect of China's strategy to expand its reach and influence throughout the attractive Middle East market. The promise of no-strings-attached infrastructure financing and the reciprocal flow of energy will provide the pivot for neo-globalization in the Middle East. Chinese companies feature heavily in construction work in Egypt's new capital. The United Arab Emirates, a founding member of the Asian Infrastructure Investment Bank, is building a new Middle East logistics hub along the route of the Belt and Route. And China is and will continue to be the world's largest importer of energy, with the Gulf Cooperation Council, Iran, and Iraq providing 60 per cent of today's imports.

The Belt and Road Initiative will have implications for several other Middle East players too. Iran is one of the endpoints of the China-Central West Asia Economic Corridor. The corridor connects the two states through a multitude of infrastructure investment projects. Iran`s inclusion in the Belt and Road Initiative carries a high level of risk. The American retreat from the Iran nuclear deal starts a new complicated era in the Middle East by imposing economic sanctions on Iran. The Belt and Road Initiative might allow Tehran to avoid the eventual economic boycott. Turkey also features prominently in the Belt and Road Initiative by being the endpoint in the China-Central West Asia Economic Corridor.

Ultimately, the Gulf Cooperation Council states recognize that China and Iran place tremendous value on their bilateral economic relationship. Arab Gulf officials also realize that Beijing sees its ties with Iran as being primarily economic, and that China is interested in maintaining neutrality in the escalating tensions between Riyadh and Tehran. The question is whether China will be able to avoid falling into the trap of picking sides in Middle Eastern conflicts with ethnic and sectarian undertones, while also maintaining its overall excellent relations with all the major oil and gas producers in the region.

There is a massive opportunity, however, as many countries along the Belt and Road need to improve their infrastructure stock. There is opportunity for China and the Gulf Cooperation Council sovereign wealth funds to partner, co-invest, and co-finance, as well as develop public-private partnerships that co-finance the development of Belt and Road infrastructure projects. This will bring the Middle East even closer to China.

China`s multi-lateral financial institutions, working with the Gulf Cooperation Council sovereign wealth and economic development funds, can also participate in financing the reconstruction and development of the war-torn nations of Iraq, Syria, Libya, Yemen, and Sudan, which have reconstruction needs in excess of one trillion dollars.

A Middle East reconstruction and development plan embodied in an "Arab Bank for Reconstruction and Development" that is closely integrated with the private sector would be a growth lifting initiative. It would facilitate the transfer of knowledge and technology. It would be a major source of job creation to fight Arab youth unemployment, alienation, and extremism. And it would help to alleviate poverty and start addressing the overarching political-social and economic issue of the more than 15 million refugees and forcibly displaced people in our region.

(Dr. Mohammed Issam Laaroussi is a scholar based in United Arab Emirates)