Beijing would find it hard to sustain its balancing act between Iran and Saudi Arabia.
China has managed a fine balancing act between Iran and Saudi Arabia by playing its cards well. Keeping a low political and military profile in the Middle East, China has taken advantage of its status as a wealthy newcomer to the region with huge economic potential, but no previous commitments to focus on trade, investment and energy, without taking positions that might entangle it in the escalating conflict between Tehran and Riyadh. Naturally the huge economic potential of relations with the rising Chinese superpower, coupled with the fear of lagging behind the other side in taking advantage of this potential has facilitated China. Just as important, Beijing has also skilfully played both sides’ geopolitical needs to find a great power partner in an unstable region, either to reduce reliance on an increasingly volatile US in the case of Riyadh, or to hedge against Washington in the case of Tehran. Recent events have amply demonstrated this balanced approach. In the last year, China has established an “all round strategic partnership” with both Riyadh and Tehran and has promised to massively expand economic interaction with both Middle East powers, pledging to increase bilateral trade to 600 billion dollars with Iran, and signing deals for 70 billion dollars with Saudi Arabia while offering to buy five per cent of Saudi Aramco’s shares.
However, it would be increasingly difficult for China to sustain its pragmatic and lucrative policy of engaging both Iran and Saudi Arabia without entanglement in their regional conflict. There are four reasons why the prospects of continuing this policy do not look good.
First, China’s grand Belt and Road Initiative (BRI), formerly the One Belt and One Road Initiative (OBOR), would increase substantially Beijing’s presence in the Middle East and, hence, would enmesh the Middle Kingdom into the perilous regional politics of the Saudi-Iran conflict. The BRI, a megaproject which aims to increase China’s access to the Persian Gulf’s energy resources and connect China’s economy with those of the Middle East, Central Asia and eventually Europe though massive infrastructure building, would be seriously affected by the instability generated by Riyadh and Tehran at hotspots such as Yemen, Iraq, Syria and Qatar. Such regional instability presents a formidable obstacle to the BRI’s strategic design, as it undermines connectivity, threatens infrastructure projects and makes an economic corridor through the volatile Middle East to the markets of developed Europe less viable. Beyond such grand strategic designs, the Saudi-Iran competition would complicate China’s BRI-focused policy toward third countries involved in the competition, such as Qatar, Iraq, Yemen and Lebanon, making it difficult for Beijing to engage with actors in these countries without taking sides. Just as important, as most of the Gulf and the Levant nations are divided between pro-Iranian and pro-Saudi camps which do not interact economically, it would be very difficult for China to integrate the two sides in a shared economic and infrastructure system. All this means that if China wants to push on with its critical BRI, it will have to involve itself in the messy geopolitics of the Saudi-Iranian competition to strike deals on specific BRI-related projects and prevent disruption to the BRI’s infrastructure and trade network through pressure, negotiation and mediation.
Second, the BRI would align China much more closely with Iran, a process already under way, with serious strategic implications for China. The reason for this is simple — Iran has much more to offer to China than Saudi Arabia. The Islamic Republic is a key component of BRI, as its geographic position gives China access on land from Central and South Asia to the Persian Gulf and the westernmost parts of Asia that border Europe. Iran, whose hostility to the US guarantees its reliability in Beijing’s eyes, also boasts a large population and a substantial market for Chinese products and investment. One of the world’s a leading energy producers in which Chinese energy companies enjoy a unique competitive advantage due to American sanctions, the Islamic republic also occupies a crucial place for the development of a trans-Eurasian gas infrastructure. In comparison, Saudi Arabia, a US ally with no comparable strategic location and much smaller population plays a lesser role in BRI and, although holding the status of China’s second largest oil supplier, has seen its importance to Beijing erode due to lower oil prices.
However, engaging Iran within the BRI framework would inevitably involve China deeper into the geopolitics of the Middle East. As China would invest massively in Iran, as part of BRI, it would inexorably come to depend on Teheran and would have to take Iran’s interests into account more seriously in its positions and policies in the region. China’s tilt toward the Islamic republic is likely to not only constrain Beijing but would also to affect its dealings with Saudi Arabia and the nations of the Saudi-dominated Gulf Cooperation Council and the US (see below). The Kingdom would feel threatened by the Sino-Iranian rapprochement as the latter would undermine Riyadh’s policy of isolating Tehran, embolden, and strengthen Shia power. Most likely, this would only serve to increase Riyadh’s mistrust of Beijing and push it further in Washington’s embrace, to China’s disadvantage. Naturally, China’s tilt toward Iran would also limit its ability to play the role of honest mediator between the two sides in order to manage regional tensions that can affect its interests.
Third, the US is likely to massively complicate China’s fine balancing act between Iran and Saudi Arabia. Washington is not only a staunch Saudi ally and a foe of Iran’s theocratic regime but is also highly concerned by its weakened position in the Middle East and the steep rise of Tehran’s power in the region. Given this background, the US is likely to perceive China’s deepening engagement with Tehran as a major challenge to its sanctions on Iran and a factor enabling the Islamic republic to feel more secure and, consequently, pursue a more expansionist policy in the region. This is particularly true if the US-Iran relations continue to deteriorate, as it increasingly looks likely, and the Trump administration scraps the US-Iran nuclear deal. The fledgling military cooperation between Iran and China, which might also feature defense sales, is likely to make things worse. As a result, Iran would likely reemerge as an important issue in US-China relations, constraining Beijing’s freedom of action in the region and further increasing the strategic mistrust between the two global powers. The US is likely to pressure China hard on its Iran policy ,as indicated by the sanctions Washington recently imposed on Chinese individuals and companies for breaking Iran sanctions and the prosecution of Chinese telecom giant ZTE on similar charges. Against this backdrop, Washington is likely to put pressure on Riyadh and its other regional allies to limit their engagement with China, creating obstacles to BRI’s development and to China-Saudi relations. More generally, tensions between the US and Iran would increase the polarisation of the Middle East, making China’s position of keeping economic and political issues apart more difficult. Finally, China’s growing role in the Gulf might open a strategic vulnerability which Washington can exploit as a source of leverage and pressure against China, much in the same way as China has used Iran to gain leverage over the US and divert its attention from more important issues.
Finally, China’s balancing act in the Middle East would be increasingly challenged by the recent sharp escalation of the Saudi-Iran regional conflict. While some of this escalation can be attributed to Saudi Crown Prince Mohammad bin Salman’s risk-taking foreign policy, much has been the result of Iran’s consolidation of its regional position and its successes in Iraq and Syria which, coupled with the US-Iran nuclear deal, have raised Saudi fears of Iranian regional dominance. This escalation inherently threatens China’s economic agenda in the Middle East and complicates its efforts to engage both the Islamic republic and the Kingdom. Moreover, the sharp escalation of Saudi-Iranian competition is likely to boost further Islamist radicalisation in the region to China’s disadvantage. Such radicalisation and the terrorism it produces might spill into Pakistan, a key Chinese ally whose territory Iran claims is used by Saudi-backed terrorists against the Islamic republic, and even into Beijing’s restive Xinjiang province. In addition, the spiraling Saudi-Iranian competition is also pushing up energy prices and affecting China’s growth which has largely benefited from low oil prices in recent years, although to a lesser extent than often believed. Much more important, on the longer run the insecurity bred by the Saudi-Iranian competition and the geopolitical instability in the region would lead Riyadh and Tehran to seek a strategic, even military relationship with Beijing. This would present China with a dilemma, as both accepting and refuting overtures for such relationships would pose serious problems, either of entanglement or of straining relations with key partners.
In short, China’s balancing act between Iran and Saudi Arabia would be much more difficult to sustain in the future. This situation would likely slow down BRI’s progress, create tensions with the US and face Beijing with difficult choices about how to navigate the Saudi-Iran competition. Of course, this does not mean that China would be forced to take sides in the Riyadh-Tehran conflict. Through skilfull diplomacy Beijing might exploit to its advantage the two sides’ rivalry to engage the emerging Chinese superpower without entangling commitments. However, it would be a tough act to pull. Even success would come at a high cost, as Beijing would have to regularly offer sweeteners to each side to keep its policy of equidistance, address the inevitable mistrust bred by its policy and engage into crisis management during the inevitable spasms of China-harming instability which the competition would generate. Like other great powers before it China would soon start finding how difficult the shifting sands of the Middle East are to navigate.
For India, Beijing’s complex dance with Tehran and Riyadh offers some benefits but also a warning. The BRI’s difficulties in the Middle East would benefit Delhi, which increasingly sees the initiative as a project built to encircle India and establish Chinese dominance throughout much of Eurasia and the India Ocean Region. China’s policies in the Middle East would also, likely, push Iran and Saudi Arabia to seek closer ties with India to hedge against China strategically and even economically. Naturally, Delhi can also exploit Beijing’s problems with Riyadh, Tehran and even Washington, in its Middle East policy, to make strategic gains. China’s likely tilt toward Iran might also complicate its relations with Saudi-sympathetic and solidly Sunni Pakistan, to India’s benefit. However, China’s tough balancing act with Iran and Saudi Arabia also stands as a warning to India. As India’s profile grows in the Middle East, it might encounter many of the same problems that Beijing faces. The shifting sands of the Middle East geostrategic landscape are a difficult trap for any external power to avoid.
Ivan Lidarev is a doctoral candidate at King’s College London who served as Visiting Fellow at Observer Research Foundation in the autumn of 2017.
The views expressed above belong to the author(s). ORF research and analyses now available on Telegram! Click here to access our curated content — blogs, longforms and interviews.