The GCC’s View of “One Belt, One Road”

by Giorgio Cafiero and Daniel Wagner *Giorgio Cafiero is the Founder and CEO of Gulf State Analytics (@GulfStateAnalyt) and an Adjunct Fellow at the American Security Project.

Daniel Wagner, in the picture,  is Managing Director of Risk Cooperative (@RiskCoop) and co-author of the book “Global Risk Agility and Decision Making”.
26.05.2017
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The “One Belt, One Road” (OBOR) initiative is China’s ambitious vision for restructuring the global economy on Beijing’s terms. As the world’s largest planned economic corridor, OBOR encompasses 60countries and links China to the Europe through ports, highways, bridges, tunnels, communications grids, and rail links along two pathways that traverse several regions. The “One Belt” (the “Silk Road Economic Belt”) stretches from Western China to Europe via Central Asia. The “One Road” (the “21st century Maritime Silk Road”) links China to Europe via the South China Sea, Indian Ocean, and Red Sea. 

Earlier this month, President Xi Jinping addressed the Silk Road Summit for International Cooperation in Beijing in pursuit of additional international support for OBOR. Xi pledged an additional $124 billion in Chinese funding for OBOR, which will include assistance, grants, and loans to countries within the initiative. According to Chinese state-media, OBOR has already received $1 trillion in investment and several more trillion will come in the coming ten years.

OBOR has received mixed reviews globally. If successful, the initiative will enhance China’s trade or economic and political influence in dozens of countries. Some of China’s geopolitical adversaries such as the US, Japan, and India are concerned about such strategic implications and, in India’s case, sovereignty issues. Many countries naturally see OBOR as Beijing’s attempt to spread Chinese geopolitical influence, trade, and investment, rather than a purely benign embrace of free trade, as China’s leadership maintains.

This month at this summit in Beijing, Xi’s message was anti-protectionist and illustrative of China’s efforts to sell itself as the world’s driver of free trade while hosting the summit at a time when US President Donald Trump’s administration has embraced protectionism, underscored by Washington’s scrapping of the Trans-Pacific Partnership in January and the president’s threats, issued as recently as last month, to scrap Nafta.

Indisputably, OBOR has become a pillar of Chinese foreign policy since its launch in 2014. Beijing envisions the trade corridor transforming global trade while placing China at its epicenter. OBOR is key to China’s strategy of safeguarding its interests in the regions that OBOR passes through, giving these countries higher stakes in maintaining positive bilateral relations with Beijing.

 

The GCC’s Interests

Although not directly along OBOR’s trade routes, the six Gulf Cooperation Council (GCC) states have high economic and geopolitical stakes in China’s planned economic corridor. China’s pursuit of regional oil and gas reserves from as many diverse sources as possible has brought Beijing close to the Arabian Peninsula’s sheikdoms, which are China’s top oil and gas suppliers. In turn, the Arab Gulf countries have strongly embraced and benefitted well from Chinese trade and investment in the 21st century. Therefore, the GCC has much to gain from OBOR as the initiative aims to enhance Beijing’s diplomatic and economic relations with countries that maintain a positive view of China’s global economic and political ascendancy, and can provide China (the world’s top oil importer) with the energy resources it needs to fuel its economy.

Saudi Arabia, China’s top trade partner in the Middle East, has welcomed Beijing’s “assiduous effort” to achieve OBOR’s potential. The Kingdom’s Energy Minister stated that Beijing’s efforts to revive such ancient trade routes compliment Saudi Arabia’s ambitious Vision 2030 based on both agendas’ “common features and notions”. Situated at a strategic juncture point of OBOR’s two trade routes, Saudi Arabia has an important role to play in OBOR as a key driver of regional development. The Saudis and Chinese have partnered on the construction of OBOR and the Industrial and Commercial Bank of China’s opening of a branch in Riyadh in 2015 (making it China’s first bank with a retail presence in the Kingdom) underscores how China’s initiative will help the Saudis lure foreign investment -- a requirement for Vision 2030’s success.

The UAE has high potential to become a linchpin of OBOR in the Middle East. Having formed relations in 1984, Abu Dhabi and Beijing have cemented deep relations over the years, with China currently ranking as Dubai’s number one trade partner and the UAE’s second-largest. Chinese investment in the Emirates is roughly $2.3 billion. Infrastructure such as the Jebal Ali port offers the Chinese special opportunities to access a key hub of international trade between several continents. Approximately 60 percent of China-UAE trade is re-exported to Africa or Europe, which will support OBOR’s purpose while making the country -- and particularly Dubai -- an important component of China’s trade strategy in the Middle East and beyond. Dubai and the UAE’s other six emirates are known for their stability, which the Chinese must rely on for OBOR to prove successful.

Qatar is also in a position to benefit substantially from OBOR. Last year, Chinese Foreign Minister Wang Yi attended the China-Arab States Cooperation Forum’s seven ministerial meeting in Doha. Wang’s discussion focused on Sino-Arab strategic ties and transregional issues of common interest, and China’s advancement of OBOR with cooperation from Arab states. The Chinese Foreign Minister stated that Beijing sees the Arab Gulf emirate as a key partner in OBOR, and that deeper Sino-Qatari cooperation can brighten the prospects for Qatar’s National Vision 2030.

Oman, situated closer to East Africa, India, Iran, Pakistan, Yemen, and the greater Indian Ocean region than other GCC states, will be of immense strategic value to Beijing’s OBOR plans. The Sultanate is positioned to play a significant role in China’s efforts to revive ancient maritime trade routes in lands which Oman once ruled as the center of an Indian Ocean empire encompassing countries linked to China via OBOR. Within this context, Muscat has fully embraced OBOR. Moreover, as a stable country, Oman’s cohesion and security can only raise Beijing’s interest in the Sultanate.

China understands that among the host of challenges associated with OBOR’s prospects the issue of security is key. In the Middle Eastern legs of the two trade routes there are numerous hotspots which threaten the free flow of trade. Xi made it clear that China is committed to working with all countries involved with the initiative to address both the symptoms and causes of extremism and terrorism, including poverty. In the counter-terrorism sphere, Beijing will rely on its partnerships with the GCC to enhance security along OBOR’s routes.

Despite the Arab Gulf states’ potential to cash in on OBOR, there are concerns in the Council about the initiative’s geopolitical implications because Iran will likely achieve major gains from it. Iran plays a key role in OBOR as an integral country in China’s Eurasian west. Given Iran’s geographical role linking Central Asia and the Middle East (and by extension Europe), and the fact that Tehran and Beijing maintain positive bilateral relations, it is difficult to imagine Sino-Iranian relations not improving in the future. OBOR will certainly serve to accelerate the growth of bilateral ties as accessing Iran’s gas, petroleum, and minerals and utilizing the country as a platform for China’s overall economic diplomacy in the Middle East are important goals of Beijing’s foreign policy in the region. Also, China’s determination to counteract the US’ pursuit of its geo-economic interests in the Gulf will increase Iran’s value to Beijing, particularly if tensions heat up in Washington-Tehran relations with the Donald Trump administration embracing an increasingly anti-Iranian foreign policy.

Thus, the GCC’s concern about OBOR is that the initiative, if successful, could weaken Saudi Arabia’s role in the Middle East’s geopolitical order by advancing Iran’s strategic interests and deepening its trade links with the rest of the world. From the vantage point of officials in Riyadh and other GCC capitals, a more prosperous Iran threatens its neighbors in the Arab world, therefore the lifting of sanctions on Iran and the country’s reintegration into the global economy following the Iranian Nuclear Deal’s passage in 2015 has posed a threat to regional security.

Ultimately, the GCC states recognize that China and Iran place a tremendous amount of value on their bilateral economic relationship. Yet Arab Gulf officials also realize that Beijing sees its ties with Iran as being primarily economic and that the Chinese are interested in maintaining neutrality between Riyadh and Tehran’s escalating tension. The question is whether China will be able to avoid falling into the traps of picking sides in Middle Eastern conflicts with ethnic/sectarian undertones while maintaining its overall excellent relations with all major oil/gas producers in the region. As Beijing becomes increasingly invested in successful counter-terrorism campaigns in hotspots along the OBOR routes, China will deepen its defense cooperation with countries such as Pakistan. In doing so, Beijing will be required to maintain delicate balances knowing full well how it cannot please all actors in the polarized Middle East. A case in point is China’s support for the regime in Damascus following the Syrian crisis’ eruption in 2011, which has fueled some friction in Beijing-Riyadh relations.

Despite the complications of capitalizing on all that the Gulf region has to offer OBOR while staying mostly neutral in regional conflicts, business and energy requirements will naturally bring both the GCC and Iran closer to China in the years ahead. All the in oil-rich Gulf have come to rely on China as a trade partner and the Chinese economy has become extremely linked to the six GCC members plus Iran. These factors will not change drastically in the foreseeable future. The GCC states are focused on ways to maximize the benefits they reap from this ambitious initiative that seeks to restructure the global economy on China’s terms despite concerns about OBOR enhancing Iran’s position in the tumultuous Middle East’s unstable geopolitical order.


*Giorgio Cafiero is the Founder and CEO of Gulf State Analytics (@GulfStateAnalyt) and an Adjunct Fellow at the American Security Project.

Daniel Wagner is Managing Director of Risk Cooperative (@RiskCoop) and co-author of the book “Global Risk Agility and Decision Making”.He can be reached at: or 1-203-570-1005.

This article originally appeared in The Diplomat.



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