The G.C.C. and China’s One Belt, One Road: Risk or Opportunity?

This essay is part of the series “All About China”—a journey into the history and diverse culture of China through essays that shed light on the lasting imprint of China’s past encounters with the Islamic world as well as an exploration of the increasingly vibrant and complex dynamics of contemporary Sino-Middle Eastern relations. Read more ...

China’s One Belt, One Road (OBOR) initiative is both a reflection of China’s growing need for deeper engagement with the regions to its west and a grander vision for Chinese foreign policy. OBOR is an ambitious plan for integrating the provinces of China, especially underdeveloped ones in the west and south of the country, with Eurasia through intensified trade, telecommunication, and infrastructure. The plan faces immense challenges. Parts of Eurasia remain unstable, the region attracts major powers whose interests regularly diverge, and political challenges are rampant. Yet, the potential payoffs for both China and Eurasia if OBOR succeeds are substantial. In the Gulf region, OBOR’s impact is intended to maximize commerce among all actors, but its impact is likely to extend beyond economics.[1] OBOR does not provide an equal opportunity for all states, and, in the case of the Gulf, it is Iran that will likely benefit over all others. The states of the G.C.C. also factor in to Beijing’s plan, just not to the same degree―and that is the problem. This imbalance will have political ramifications for the Gulf, and as OBOR progresses, the G.C.C. will need to measure its potential economic gains against the political risks associated with China’s efforts. There is a way for the states of the G.C.C. to effectively address this developing regional environment, and that is to mirror China by engaging eastward. Using OBOR and existing comparative advantages will allow the states of the G.C.C. to balance Iran’s potential windfall. 

OBOR – What It Is and Is Not

OBOR actually provides two pathways for connecting China with Eurasia. The first, and the one garnering the most attention, is an overland route that begins in Central China, moves through Xinjiang and China’s west into Central Asia, across the Middle East, and terminates in Europe. The second is a maritime route that flows south through Southeast Asia, then west across the littoral states of South Asia, on past the Arabian Peninsula and East Africa, and finally concludes in the Mediterranean. The concept took form over the span of several years and has now become a cornerstone of President Xi’s foreign policy. OBOR is a strategy that includes the efforts of several ministries within the Chinese state and seeks to alter the future of much of continental Asia. It represents the most comprehensive vision for China’s engagement with the regions to its west since the founding of the People’s Republic. The plan progresses through a multitude of projects in stages, including roadways, bridges, telecommunication networking structures, pipelines, and so forth. OBOR emphasizes certain countries, namely Pakistan, Myanmar, Iran, and Kazakhstan, but includes virtually all of the countries that are considered part of China’s Eurasian west.[2]

OBOR also includes a heavy dose of Chinese soft power. Chinese investment, beyond serving the national interest, is a means by which to show the communities of Eurasia that China is an attractive partner. Beijing has sold OBOR as a means of mutual development, serving as a way to show that China is a different type of major power and to combat China's reputation as a mercantilist regime.[3] OBOR is conceived as a plan by which to increase economic fortunes, strengthen diplomatic ties, and bring societies closer by repurposing the legacy of the Silk Road. As it has been described among Chinese scholars, OBOR proposes a prosperous future for Eurasia, with China leading a community of equals.

Source: Middle East Institute, 2015

OBOR is not a strategic vision for Eurasia that features a military and security footprint, at least not as it is initially conceived. Increased Chinese investment to its west has led to the use of private security contractors to protect Chinese projects and has encouraged greater operations and visits to the region by the People’s Liberation Army Navy (PLAN), but China does not have the desire or capability in the near term to become a security provider in Eurasia.[4] China has avoided, by and large, becoming entangled in regional conflicts and, when engaging in a conflict environment, prefers to avoid taking sides in favor of facilitating some type of political dialogue between competing actors.[5] China’s increased orientation to its west may one day reach a level where security concerns become an essential factor motivating Chinese policy, but OBOR was not designed to include security operations, and China will do what it can to avoid such concerns becoming central. OBOR seeks to thread the needle of becoming more involved in regional affairs while remaining removed from regional disputes.

China’s resistance to becoming a security provider for Eurasia is consistent with its traditional stance of non-intervention, but also reflects its continuing fixation on internal security and the Asia-Pacific. China sees itself and acts overwhelmingly as an East Asian nation that is on the ascendance. All of China’s major foreign policy challenges are found in the Asia-Pacific, whether it is the instability found on the Korean peninsula, the South China Sea, or the direction of the U.S.-China relationship. OBOR is designed to avoid the problems to China’s east by partnering with willing regimes in Eurasia. Its intent is to acquire economic benefits that can help underdeveloped parts of the Chinese homeland, while obtaining resources that are critical to the national interest. As China’s recently published Arab Policy Paper states,

Joint efforts will be made by China and Arab countries to promote the “Belt and Road” initiative under the principle of wide consultation, joint contribution and shared benefit. China and Arab countries will adopt the “1+2+3” cooperation pattern to upgrade pragmatic cooperation by taking energy cooperation as the core infrastructure construction and trade and investment facilitation as the two wings, and high and new technologies in the fields of nuclear energy, space satellite and new energy as the three breakthroughs.[6]

In short, OBOR is framed as a diplomatic and economic win-win.

The G.C.C. States’ Challenge

Given that OBOR is focused on enhancing relations with states that have a generally positive image of China and accessing strategic resources for China’s national interests, the member states of the G.C.C. are logical foci for China’s efforts. Yet, the strategy does not formally look to the Arabian Peninsula. The reason for this is that China’s relations with G.C.C. member states are primarily transactional in nature.[7] Chinese-Saudi Arabian ties have deepened dramatically since 2001, fueled in part by increased petroleum sales and several substantial joint ventures in the energy and manufacturing sectors.[8] In much of the G.C.C., trade with China has expanded rapidly along the same lines as in Saudi Arabia, making China the G.C.C.’s largest trading partner.[9] Beijing’s relations with Abu Dhabi have progressed even further in the economic arena. Today, the United Arab Emirates and China are focused less on fossil fuel deals and manufactured imports and more on high-tech joint ventures in the arenas of construction and renewable energy.[10] In total, ties have flourished in the energy, manufacturing, construction, and financial sectors. 

For all the success that the G.C.C. states enjoy in their relations with China, the relationships are still focused almost solely on economic projects.[11] The strategic dimensions associated with China’s westward push do not factor into most of the thinking in the Arabian Peninsula and warrant no strategic element at this time. OBOR’s overall function is to connect China to Europe through Eurasia, and the states of the G.C.C., save Oman, do not lie at natural waystations along either the overland or maritime paths. China has effectively established a reputation throughout the Gulf as a reliable economic partner, but any desire for a more overt political connection between these states has yet to emerge. Chinese companies may be a common partner, but a comprehensive relationship is not present.

Thus, China remains somewhat of a mystery for the governments within the G.C.C. Beijing’s approach is one of being a friend to all and an opponent to none, but friendship with Beijing does not equate to adopting the views of regional partners during times of instability and conflict. Beijing projects neutrality in its engagement with the Middle East, but its principal objective is the achievement of its national interests. China wants a seat at the table when major issues are discussed, and increasingly it has shown itself willing to take unpopular stances.[12] As an example, Beijing has consistently expressed regret regarding the duration and the intensity of the Syrian civil war, but it remains supportive of the Assad regime continuing its rule. China’s leadership claims that its support for Assad’s government is not an affirmation of the Syrian regime’s methods or objectives. China argues it has no choice but to back Assad because there simply is no other actor that could possibly achieve some semblance of stability.[13] This perplexes the Arab states of the Middle East, particularly the G.C.C., for obvious reasons. China’s support of Assad, no matter how qualified, goes against the prevailing opinion of the majority of regional states and can be perceived as support for one of Assad’s major benefactors, Iran. For much of the Arab world, Iran is a major threat to both Syria and the larger region. If China is a friend, then why show support for the actions of an adversary? 

China explains its approach to the Middle East by emphasizing its historical support for state sovereignty and its commitment to non-intervention in foreign countries. Yet, the truth is that China has and will continue to ignore the ideals of its foreign policy if doing so will further the country’s national interests. In short, China’s policy towards the Middle East is not consistent, just like that of every other major non-regional power that has a footprint in the region. China wants to achieve its objectives with the minimal amount of blowback, but if an action is necessary, then it will incur the costs of said action. Within the context of the Gulf, China does fear that closer ties with any particular Gulf state will place it amidst one of the region’s most intense rivalries―that of the G.C.C. versus Iran (or more specifically, that of Saudi Arabia vs. Iran).[14] A key component of China’s national interest—its energy security—is tied to supplies in the Gulf, and becoming entangled in the animosity between Iran and the Arab Gulf states would make China’s objective more complicated and expensive.[15] So why come into proximity with this regional competition by backing Assad? Put directly, China knows its position will cause some strain in its regional ties, but it will not break those ties. Assad, for the time being, is best for China’s interests, and China will back him so long as it is favorable to do so. If the regional chessboard changes, though, then China’s orientation towards the region will likewise shift.

OBOR, oddly enough, complicates the chessboard for China in the Middle East. The maritime route, by and large, bypasses the region, but the overland route requires that attention be paid to Iran. Iran bridges Central Asia and the Middle East, is the location of ample, untapped natural resource wealth, and is governed by a regime that has long-standing relations with Beijing.[16] Therefore, the strategic plan behind OBOR creates conditions facilitating a closer relationship between Beijing and Tehran, especially with the P5+1 Talks concluded and international sanctions targeting Iran loosened. Closer ties between China and Iran would certainly reverberate throughout the Gulf. China wants to be a prominent player in what could be an economic boom following the signing of the nuclear agreement. Beijing seeks to leverage its long-standing relations with Tehran, including its history of arms sales, in order to acquire better access to Iranian markets.[17] Iran is China's priority in the Gulf. Yet, given the recent uptick in tensions between the members states of the G.C.C. and Iran, deepening ties between Beijing and Tehran would further complicate any claim of neutrality.

Beijing has consistently characterized its relations with Iran as only economic.[18] Statements by the Ministry of Foreign Affairs have revealed no position regarding Iran’s security footing within the region, nor Iran’s role in regional conflicts.[19] Xi Jinping’s much discussed visit to the Middle East in January 2016 was firmly fixated on diplomatic ties and economic relations, and he made sure to visit both Tehran and Riyadh.[20] Does Beijing’s orientation towards Tehran poison its relations with the G.C.C.? No, it does not. Yet, China’s interests in Iran could further strengthen the Iranian regime, and this possibility is what concerns the states of the Arabian Peninsula.

Options for the G.C.C.

Iran’s geostrategic location and the possible economic windfall are too favorable for China to pass up. Yet, the states of the G.C.C. find themselves in a more favorable footing than is first apparent. OBOR, even if it does not overtly favor the G.C.C., does not fundamentally alter the relationship between China and each state of the G.C.C., nor does it in any way limit how the states of the G.C.C. can offset Iranian gains. 

The G.C.C. states must recognize that Iran’s fortunes are set to improve, partially as a result of the Joint Comprehensive Plan of Action (J.C.P.O.A.) regarding the Iranian nuclear program and partially due to its stronger foothold throughout the Levant. The nuclear agreement allows Iran a mechanism for rejoining the community of nations, and that process will bring economic benefits that, in turn, enhance the reach of the Iranian state. China is no different than a host of other countries seeking to gain a footing in the newly viable Iranian market, but China has also shown no interest in backing the political machinations of the Iranian regime.[21]

The G.C.C. needs Chinese consumer demand, China needs the G.C.C.’s natural resources and markets, and Beijing’s OBOR strategy will almost certainly help Iran. What options exist for the states of the G.C.C. to address this turn of events? So long as the Xi administration remains committed to OBOR, there is little chance for the G.C.C. member states to persuade China to abandon its plans for Iran. The best option for G.C.C. member states is to use OBOR to their advantage and offset gains made by Iran. Beijing’s plans for Eurasia are economic and diplomatic in nature. There are no plans for a security presence in this part of the world, nor has China shown any indication that it seeks to become a political leader for Eurasian states. Even if Beijing had such aspirations, they would be difficult to achieve. Russia remains a major actor throughout Eurasia, and, even amidst a warming of relations between Moscow and Beijing, it is unlikely that Beijing could reshape the political map of continental Asia unopposed.[22] The United States retains a major presence in both the Gulf and Central Asia and would move to impede any effort by another state to upset its position. Beijing’s goal is to stimulate the region’s economies and contribute to its overall stability for the sake of increased strength at home.

The economic stability of G.C.C. member states is what provides their opportunity. Most of the states within the G.C.C. possess substantial wealth and have invested considerably in expanding their diplomatic reach. The G.C.C.’s influence has largely been used to affect Middle Eastern affairs and to interact with the world’s major powers: the United States, China, Russia, and the states of the European Union. The G.C.C.’s footprint in South Asia, Central Asia, and Southeast Asia is shallow, despite a large diaspora from these regions living throughout the G.C.C. member states. Why not invest greater national resources into deepening ties with continental Asia? OBOR is not a comprehensive solution for overcoming underdevelopment in Asia. There will remain ample opportunity to further assist the economies of Central, South, and Southeast Asia beyond what China plans. Diplomatic ties can move into the territory of greater cooperation, joint enterprise, and political dialogue. In short, the states of the G.C.C. have a chance to become more powerful actors in the regions to their east.

The biggest threat OBOR creates for the G.C.C. has little to do with China’s actual plan. The threat comes from Iran, which will use greater material wealth to develop greater political influence outside its borders. Iran would pursue such a strategy even without OBOR. While OBOR brings with it risks for Beijing, the strategy’s greatest strength is that it spreads Chinese influence throughout Asia without having to exert much political manipulation. Beijing’s reputation, at least right now, remains relatively untarnished while it engages in projects that are helpful for the nation’s growth. The G.C.C. can take a page out of the Chinese playbook by projecting power east. Member states could deepen preexisting relations and develop new ties. China has helped by facilitating a path by which the states of the G.C.C. could look eastward.

For example, the Asian Infrastructure Investment Bank (A.I.I.B.), which every state in the G.C.C., save Bahrain, has joined, is an institution intended to fund infrastructural development throughout Asia.[23] The bank facilitates projects, with the burden shared among contributing member states. Due to the G.C.C.’s disproportionate economic influence, the A.I.I.B. is a potential platform for assisting less developed states in the region without the risk associated with direct financing. Much of Eurasia looks favorably upon the G.C.C. and, in some cases, actively seeks to replicate the success of G.C.C. states like the United Arab Emirates. This good reputation throughout Eurasia has not been leveraged by any state in the G.C.C. to any substantial degree. Certainly, G.C.C. member states cannot develop projects on the same scale and scope as those by China, but they do have the expertise and financing to coordinate on planned projects or to independently finance smaller-scale programs that provide real economic benefits for recipient states. Engaging in development opportunities would not only enhance G.C.C. relations with China, but, while Iran focuses primarily on its internal modernization, the member states of the G.C.C. would be projecting power outwards.

Such an effort would require changes to the foreign policies of G.C.C. member states. Some member states would have a more difficult task than others, but, in several cases, adapting OBOR to the national interests of the G.C.C. states would merely require developing already initiated programs. For the U.A.E., outreach to Asia is an already established objective of the Ministry of Foreign Affairs. The states of East Asia are its principal focus, but improving ties with Southeast Asia, South Asia, and Central Asia are also a part of this new diplomatic agenda. The leadership of the U.A.E. would need to intensify the speed by which it is developing this focus, through the training of its diplomatic corps, improved research efforts toward Asia, and selective high-level visits by prominent government officials. In December of 2015, the U.A.E. announced the U.A.E.-China Joint Investment Cooperation Fund, a joint fund with firms in China that is focused on development projects in Eurasia.[24] This type of project is exactly the type of enterprise that the states of the G.C.C. should invest time in developing. For the U.A.E., it is a strong start, but progress in Asian outreach can, and should, be pursued independently of China or any other major Asian country. 

Saudi Arabia, for its part, has for decades deployed soft power through cultural and religious exchanges with the Muslim-majority states of Asia. Such ties provide a useful platform for the Saudi royal family and the Ministry of Foreign Affairs from which to launch greater economic programs in these states. The most logical starting point is Pakistan, where China plans one of its largest OBOR projects and where Saudi Arabia has long enjoyed a positive relationship.[25] The conflict in Yemen has created a small cleavage between Saudi Arabia and Pakistan, but supporting economic programs in conjunction with China’s efforts or independently would help repair whatever tension has emerged.[26]

Each G.C.C. member state should leverage whatever advantages it possesses to deepen ties with Asia. Timelines and the intensity of this effort would vary from state to state, and G.C.C. member states would not engage with Asia at the expense of their relations throughout the Middle East or with the West. Every success in Asia would spread the influence of the respective G.C.C. member state and would offset gains made by Iran. Even if greater outreach throughout Asia does not follow, the G.C.C. will be better positioned, regardless of Iran’s success. If the G.C.C. can successfully foster greater engagement throughout Asia, then it can contribute to stability amidst one of the world’s most unstable regions. For years, the member states of the G.C.C. have sought to position themselves as states that exert outsized influence. The G.C.C. has been successful within the context of the Middle East and North Africa (MENA) but not to any great degree beyond that. G.C.C. member states have been searching for a way to counter Iran’s growing influence, and OBOR is an opportunity to do just that.

Conclusion

It is becoming increasingly clear that China is actively seeking to impact the future of Eurasia. OBOR is simultaneously a development regime for a conflict-ridden and underdeveloped part of the world and an ambitious plan to secure key components of China’s national interests. China’s plans for Eurasia will have a direct impact on the G.C.C., as OBOR will inevitably focus on and assist Iran. G.C.C. member states, however, can mimic OBOR and offset Iranian gains by strategically investing diplomatic and economic resources throughout Asia. Such actions will not complicate relations with China and will bring the member states of the G.C.C. closer to all of Asia. Looking east could prove to be a win-win for all parties involved.

[1] “Arab Policy Paper,” Xinhua, January 13, 2016, accessed July 25, 2016, http://news.xinhuanet.com/english/china/2016-01/13/c_135006619.html.

[2] Chen Aizhu and Bozorgmehr Sharafedin, “China Firms Push for Multi-billion Dollar Iran Rail and Ship Deals,” Reuters, March 10, 2016, accessed July 25, 2016, http://www.reuters.com/article/us-iran-china-transportation-idUSKCN0WC1…; David Brewster, “China’s Rocky Silk Road,” East Asia Forum, December 9, 2015, accessed July 25, 2016, http://www.eastasiaforum.org/2015/12/09/chinas-rocky-silk-road/; Tim Craig and Simon Denyer, “From the Mountains to the Sea: A Chinese Vision, a Pakistani Corridor,” Washington Post, October 23, 2015, accessed July 25, 2016, https://www.washingtonpost.com/world/asia_pacific/from-the-mountains-to… Runde, “Kazakhstan: The Buckle in One Belt, One Road,” Forbes, June 29, 2015, accessed July 25, 2016, http://www.forbes.com/sites/danielrunde/2015/06/29/kazakhstan-buckle-on….

[3] Ariella Viehe, Aarthi Gunasekaran, and Hanna Downing, “Understanding China’s Belt and Road Initiative: Opportunities and Risks,” Center for American Progress, September 22, 2015, accessed July 25, 2016, https://www.americanprogress.org/issues/security/report/2015/09/22/1216….

[4] Ankit Panda, “China and Iran's Historic Naval Exercise,” The Diplomat, September 23, 2014, accessed July 25, 2016, http://thediplomat.com/2014/09/china-and-irans-historic-naval-exercise/; “China's Private Security Companies Go Overseas,” Financial Times World, November 28, 2013, accessed July 25, 2016, https://www.youtube.com/watch?v=IhuOKiVADXA.

[5] Edward Wong, “China Urging Afghanistan to Restart Peace Talks With Taliban,” New York Times, January 27, 2016, accessed July 25, 2016, http://www.nytimes.com/2016/01/28/world/asia/china-afghanistan-taliban-….

[6] “Arab Policy Paper.”

[7] “China, Saudi Arabia Agree to Set Up High-level Committee to Steer Cooperation,” Xinhua, January 20, 2016, accessed July 25, 2016, http://news.xinhuanet.com/english/2016-01/20/c_135028789.htm.

[8] Deema Almashabi, “Saudi Arabia’s Sabic Plans More Than Three Ventures in China,” Bloomberg News, October 18, 2015, accessed July 25, 2016, http://www.bloomberg.com/news/articles/2015-10-18/saudi-arabia-s-sabic-….

[9] Tim Niblock, “Situating the GCC in China's Transforming Roles in Asia,” MEI Middle East-Asia Project (MAP), February 16, 2016, accessed July 25, 2016, http://www.mei.edu/content/map/gcc-and-china%E2%80%99s-transformative-r….

[10] LeAnne Graves, “Chinese Investment to Spur Middle East Renewable Energy Ambitions,” The National, December 6, 2015, accessed July 25, 2016, http://www.thenational.ae/business/energy/chinese-investment-to-spur-mi….

[11] Theodore Karasik, “The GCC's New Affair with China,” Middle East Institute Policy Focus, February 2016, accessed July 25, 2016, http://www.mei.edu/sites/default/files/publications/Karasik_GCCChina_PF….

[12] “Wang Yi Attends Middle East Peace Initiative Ministerial Conference,” Ministry of Foreign Affairs of the People's Republic of China, June 3, 2016, accessed July 25, 2016, http://www.fmprc.gov.cn/mfa_eng/wjb_663304/zzjg_663340/xybfs_663590/xwl….

[13] Jeffrey Payne, “Is There Wisdom in China’s Approach to Syria?” The Diplomat, February 15, 2016, accessed July 25, 2016, http://thediplomat.com/2016/02/is-there-wisdom-in-chinas-approach-to-sy….

[14] Kristine Kwok, “Is Xi Jinping the Man to Defuse Tensions in the Middle East?” South China Morning Post, January 15, 2016, accessed July 25, 2016, http://www.scmp.com/news/china/diplomacy-defence/article/1901092/xi-jin….

[15] Emma Scott, “Defying Expectations: China’s Iran Trade and Investments,” MEI Middle East-Asia Project (MAP), April 6, 2016, accessed July 25, 2016, http://www.mei.edu/content/map/defying-expectations-china%E2%80%99s-ira….

[16] Saeed Kamali Dehghan, “China’s Silk Road Revival Steams Ahead as Cargo Train Arrives in Iran,” The Guardian, February 15, 2016, accessed July 25, 2016, http://www.theguardian.com/business/2016/feb/15/chinas-silk-road-reviva….

[17] Jane Perlez, “President Xi Jinping of China Is All Business in Middle East Visit,” New York Times, January 31, 2016, accessed July 2016, http://www.nytimes.com/2016/01/31/world/asia/xi-jinping-visits-saudi-ir….

[18] “Vice Foreign Minister Zhang Ming Visits Iran,” Ministry of Foreign Affairs of the People’s Republic of China, January 10, 2016, accessed July 25, 2016, http://www.fmprc.gov.cn/mfa_eng/wjbxw/t1331222.shtml.

[19] “Joint Statement between China and Iran on the Comprehensive Strategic Partnership (Full Text),” China Daily, January 23, 2016, accessed July 25, 2016, http://www.chinadaily.com.cn/world/2016xivisitmiddleeast/2016-01/23/con….

[20] “Xi Jinping’s Tour of the Middle East Shows China’s Growing Stake There,” The Economist, January 23, 2016, accessed July 25, 2016, http://www.economist.com/news/21688786-chinese-president-makes-his-firs….

[21] “Iranian President Does Big Business in Europe,” CNN Money, January 26, 2016, accessed July 25, 2016, http://money.cnn.com/2016/01/26/news/companies/iran-europe-deals-italy-….

[22] Rafaello Pantucci, “China and Russia’s Soft Competition in Central Asia,” Current History (October 2015): 272-277, accessed July 25, 2016, https://raffaellopantucci.files.wordpress.com/2015/10/pantucci-current-….

[23] "Introduction: What is the AIIB?" Asian Infrastructure Investment Bank (AIIB), accessed August 1, 2016, http://euweb.aiib.org/html/aboutus/introduction/aiib/?show=0AIIB.

[24] Adam Bouyamoum, “UAE, China to Set Up $10bn Joint Strategic Investment Fund,” The National, December 15, 2015, accessed July 2016, http://www.thenational.ae/business/economy/uae-china-to-set-up-10bn-joi….

[25] Daniel Markey and James West, “Behind China’s Gambit in Pakistan,” Council on Foreign Relations (CFR) Brief, May 12, 2016, accessed July 25, 2016, http://www.cfr.org/pakistan/behind-chinas-gambit-pakistan/p37855.

[26] Bruce Reidel, “Why Pakistan Said No to King Salman,” Al Monitor, April 13, 2015, accessed July 25, 2016, http://www.al-monitor.com/pulse/originals/2015/04/yemen-conflict-parlia….