The G.C.C. Countries and China’s Belt and Road Initiative (BRI): Curbing Their Enthusiasm?

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 ...
 

The Belt and Road Initiative (BRI) is the central pillar of China’s foreign policy under Xi Jinping, and will likely continue to shape China’s international relations in the coming decades. Chinese leaders emphasize that the BRI is focused on developing connectivity through inclusive cooperation, rather than a strategy that is directed against another state or group of states. Chinese Foreign Minister Wang Yi used a musical metaphor to emphasize the difference, saying, “the initiatives are not China’s solo, but a symphony performed by all relevant countries.”[1]

Despite China’s vision of a non-political initiative, certain BRI projects have potential strategic outcomes that can affect regional power dynamics. States that might otherwise be inclined to cooperate with China on the BRI could perceive elements of the initiative to run counter to their interests. The Gulf Cooperation Council (G.C.C.) states present such a case. They all have strong ties to China and have expressed support for the BRI.  At the same time, two major BRI projects, the China-Pakistan Economic Corridor (CPEC) and the China-Central-West Asia Economic Corridor (CCWAEC), have important strategic implications for the G.C.C. In considering the BRI, Gulf leaders have to balance their increasingly important relationship with China against the ways this initiative empowers rivals or threatens their relations with important external powers.

China-G.C.C. Interdependence and BRI Cooperation

China-G.C.C. states cooperation has grown significantly in recent years, and the structure of these bilateral relationships dovetails with China’s BRI cooperation priorities of policy coordination, facilities connectivity, financial integration, unimpeded trade, and people-to-people bonds.[2] This structure was in place long before the BRI was announced in 2013, and is consistent with China’s ‘economic diplomacy’ approach whereby China focuses on developing trade and economic ties with partner states while not focusing on political issues.[3]

This geo-economic approach with G.C.C. states has developed relations around the core of economic interdependence. Sino-G.C.C. trade has increased from just under $10 billion in 2000 to $114 billion in 2016.[4] Taken as a group, the G.C.C. ranks as China’s eighth largest source of imports and eighth largest export destination. Interestingly, of the seven higher ranking trade partners, all but Germany are Asia-Pacific states with long-established trade and historical ties to China. This reinforces a point made by Scobell and Nader in a recent survey: outside the Asia-Pacific, the Middle East is becoming China’s most important region.[5]

In terms of policy coordination, each of the G.C.C. states has announced ambitious development plans. Frequent high-level visits between Chinese and Gulf officials have presented opportunities to coordinate these plans with BRI projects, as illustrated with the case with two Saudi visits to China in the past year. During Crown Prince Mohamed bin Salman’s visit to Beijing in August 2016, he indicated that the BRI is “one of the main pillars of the Saudi Vision 2030 which would seek to make China among the Kingdom’s biggest economic partners.”[6] To this end, he traveled with a delegation including ministers of Commerce and Investment, Energy, Industry and Mineral Resources, Culture and Information, and Information Technology, who participated in a panel discussion titled, “Saudi Vision 2030 and the Belt and Road Initiative: Together for a Promising Future.”[7] During the visit, the two sides signed 15 MOUs for projects associated with the Vision 2030 plan to diversify the Saudi economy.[8] There followed in March 2017 a state visit by King Salman that culminated in the signing of $65 billion worth of deals. In addition, Chinese and Saudi companies signed 22 agreements concerning joint investment opportunities, many of which also focused on Vision 2030 projects.[9] Indeed, recent developments in China’s relations with all of the G.C.C. states have followed a similar pattern, whereby officials have used state visits or multilateral forums to express support for and highlight the complimentary nature of BRI and Gulf development plans. For example, Kuwaiti Ambassador to China, Sameeh Johar Hayat, stated that BRI cooperation with China helps Kuwait achieve its 2035 Vision for Development.[10]

This policy coordination has spillover effects that lead to cooperation on other BRI priorities, especially facilities connectivity. Infrastructure projects feature significantly in the G.C.C. development plans. China is the main foreign investor Oman’s Duqm Free Zone project, for example, with $3.16 billion currently invested and a projected total investment of $10.7 billion over the life of the project.[11] This would present Chinese enterprises with a base of operations on the Arabian Sea, linking them to markets in South Asia, East Africa, and the Arabian Peninsula.  

While Sino-G.C.C. relations fit within the

The Arabian Peninsula in the BRI

While Sino-G.C.C. relations fit within the structure of BRI cooperation, there is not yet a formal economic corridor on the Arabian Peninsula. These corridors are the architecture of the BRI, and represent China’s vision of how states and regions can participate in the initiative. Of the currently proposed six corridors, none formally includes G.C.C. states.[12] Even so, the absence of a formal corridor does not preclude G.C.C. participation; as one Chinese diplomat based in the Gulf recently stated, “any type of bilateral cooperation can be considered part of the Belt and Road.”[13]

Of the five existing economic corridors, two feature the Persian Gulf as an endpoint: the CCWAEC, which connects China to Iran, and the CPEC, which ends in Gwadar Port, formerly an Omani territory, situated just over 600 nautical kilometers from the Hormuz Strait. Both of these corridors present strategic considerations and challenges for the G.C.C., and emphasize the point that, while Chinese leaders insist that the BRI is an economic initiative, it creates political and security concerns for the states in regions through which it passes.

The case of the CCWAEC presents obvious concerns for the G.C.C. This corridor runs from western China, through Tajikistan, Uzbekistan, Kyrgyzstan, and Turkmenistan, with one endpoint in Turkey and the other in Iran. The latter, considered a key actor within this corridor, can provide China with access to an important Persian Gulf transport and logistics hub, as well as to Iranian energy exports.[14] Given the tense state of relations between the G.C.C. and Iran, any such initiative is likely to be perceived by those on the Arabian side of the Gulf as problematic.[15] Deeper ties between China and Turkey is also a concern for some G.C.C. states; Saudi Arabia and the U.A.E. in particular have had strained relations with Turkey, made more difficult given Turkey’s support for Qatar in its diplomatic standoff with Saudi, the U.A.E., Egypt and Bahrain. The CCWAEC becomes all the more problematic for G.C.C. states as both Iran and Turkey are considered future Shanghai Cooperation Organization members, which would presumably intensify their relations with China and present opportunities for cooperation in security affairs as well as the economic integration inherent in the BRI.[16] This corridor of the BRI is counter to Saudi and Emirati interests. Given the latter two countries’ dominance within the G.C.C., it is likely that none of the other members would participate in CCWAEC initiatives. 

CPEC, on the other hand, would seem to present an obvious opportunity for enhanced G.C.C. BRI participation. It has been described as “the flagship project” of the BRI, and “essentially the only fully-developed section of the entire scheme.”[17] CPEC has been the recipient of $46 billion in Chinese loans, announced in a set of 51 Memorandums of Understanding signed when President Xi visited Islamabad in April 2015.[18] Chinese cooperation with Pakistan follows what China refers to as a 1+4 model, where 1 represents the CPEC initiative and 4 represents each of the pillars that support it: Gwadar port, energy, infrastructure, and industrial collaboration.[19] Taken together, these four components of CPEC present an opportunity for Pakistan to address serious energy and development shortcomings. China’s insistence on infrastructure development would create functioning connectivity that spans the length of Pakistan, from its norther region of Gilgit-Baltistan bordering China’s Xinjiang province, to its Arabian Sea port in Gwadar.

Given Gwadar’s proximity to the Persian Gulf, this is a major component of CPEC. The Chinese Overseas Port Holding Company signed a 40-year operational control lease of Gwadar in 2013, and Chinese firms developing the port and its corresponding infrastructure.  In 2013, Pakistan leased 923 hectares to China to develop a Gwadar special economic zone (SEZ). This port would offer a substantial reduction in time and distance in shipping Gulf oil to China (i.e., cutting the distance from Dubai’s Jebel Ali to Xinjiang from approximately 15,000 km to roughly 2,500 km.)[20] G.C.C.-China energy trade is crucial to both sides, with approximately 52 percent of China’s imported oil coming from the Gulf and 33 percent of that from the G.C.C.[21] Gwadar port and the pipelines connecting it to China should therefore make it an important factor in Sino-G.C.C. trade.

Investment opportunities are another reason CPEC participation could be beneficial for G.C.C. states. CPEC is expected to draw significant flows of foreign direct investment (FDI) into Pakistan, with one estimate projecting as much as $150 billion.[22] All G.C.C. states feature as sources of FDI into Pakistan, with the U.A.E. playing a leading role; Emirati investments in Pakistan is estimated at $20 billion in sectors such as telecommunications, finance, real estate, and energy.  CPEC would provide further investment opportunities in mining, infrastructure construction, information technology, and software.[23]  In short, CPEC participation presents an opportunity for the G.C.C., as well as a chance to increase its strategic relationship with China. 

G.C.C. States’ Strategic Considerations

Despite the potential opportunities for the G.C.C. states to collaborate in CPEC, there is an important strategic consideration. India has been the most vocal international voice against the BRI in general, and CPEC in particular, based on domestic and international political concerns. That CPEC runs through the disputed territory of Gilgit-Baltistan is the most significant domestic concern for India, with Prime Minister Narendra Modi stating that the BRI undermines India’s sovereignty.[24] Central among its international concerns is that China has courted BRI participation from Nepal, Bangladesh, Myanmar, and Sri Lanka, as well as Pakistan; in New Delhi, this looks like Chinese power projection in a region that India has long seen as its sphere of influence. In response, India signed a defense and logistical agreement with the USA, a move that India’s former Junior Minister for Defense Pallam Raju states had long been resisted, “because we didn’t want to give the perception that we are ganging up with the Americans against somebody else, in particular China.”[25] While Beijing insists the BRI is not strategic in nature, it is inspiring strategic responses.

For leaders of the G.C.C. countries, this adds a level of complication to CPEC. Cooperation with China and Pakistan is in their interests, but not at the expense of their relationships with India. The Indian diaspora is a crucial segment of the G.C.C.’s labor force; with over eight million non-resident Indians (NRIs) living and working in G.C.C. states, this represents 72 percent of the NRIs worldwide.[26] The Qatari NRI population actually outnumbers that of Qatari citizens, and in the U.A.E., NRIs nearly double the native Emirati population.[27] Trade between India and the G.C.C. was over $76 billion in 2016, compared with $11.5 billion in G.C.C.-Pakistani trade. India-G.C.C. is bound to increase, as India has become the world’s third-largest consumer of energy in the world, and could account for as much as 25 percent of projected rise in global energy use between 2015 and 2040.[28] Looking at the import and export data for individual G.C.C. states with both India and Pakistan, the balance is even more striking: India ranks within the top seven sources of exports for every G.C.C. state and a top ten source of imports. Pakistan, meanwhile, is as low as the 38^th export destination and 50^th source of imports.[29] Economically, the G.C.C. states have to be aware of the consequences of pursuing closer ties with a state with a GDP of $283 billion while alienating another with a GDP of $2.2 trillion, both of whom are important partners with long historical ties to the Gulf.[30]

This is not to say that the G.C.C. is uninterested in CPEC. Oman’s Minister Responsible for Foreign Affairs, Yusef bin Alawi bin Abdulla, recently visited Islamabad and indicated that Oman would be interested in investing in Gwadar’s SEZ.[31] Saudi Ambassador to Pakistan Nawaf Ahmad Al-Maliki has also recently expressed general Saudi interest in CPEC, although without any specific commitments.[32] However, G.C.C. enthusiasm has tempered. When asked if he anticipated greater G.C.C. participation in CPEC, a Pakistani diplomat in the region replied, “It depends on our neighbors to the south.”[33]

Conclusion

The case of the G.C.C. is useful in understanding why some states may be hesitant to pursue greater cooperation with China in the BRI, even when it appears to be in their interests to do so. Sino-G.C.C. relations are dense, multifaceted, and mutually beneficial. If a dedicated G.C.C. economic corridor were to be developed, there would be tremendous potential for cooperation. However, existing corridors in the Gulf region bump against G.C.C. interests, and create potential to exacerbate political tensions, either between the G.C.C. states and their Middle East rivals, or between important non-regional actors in Pakistan and India. 

While China insists that the BRI is not a strategy aimed at projecting political power, states and regions along the Belt and Road will perceive it strategically.  In her recent study on the BRI, Rolland states “Roads and railroads crisscrossing Eurasia are not just meant to facilitate cargo transportation; they have a strong political component.”[34] CPEC and CCWAEC offer important illustrations of how these political components can be perceived by other states, creating a more challenging geopolitical environment.  

[1] “China’s Belt and Road Initiatives Not Solo, but Symphony: FM,” Xinhua, March 8, 2015. 

[2] “Vision and Actions on Jointly Building Silk Road Economic Belt and 21^st-Century Maritime Silk Road,” National Development and Reform Commission, Ministry of Foreign Affairs, and Ministry of Commerce of the People’s Republic of China, March 28, 2015, accessed September 15, 2017, http://en.ndrc.gov.cn/newsrelease/201503/t20150330_669367.html

[3] Degang Sun and Yahia H. Zoubir, “China’s Economic Diplomacy Towards the Arab Countries: Challenges Ahead?” Journal of Contemporary China, 24, no. 5 (2015): 907-908.

[4] International Monetary Fund, “Direction of Trade by Partners.”

[5] Andrew Scobell and Alireza Nader, China in the Middle East: The Wary Dragon (Santa Monica: RAND, 2016): 73.

[6] “Fusing Vision 2030 with Belt Road Initiative,” Arab News, September 3, 2016, accessed September 15, 2017, http://www.arabnews.com/node/979346/saudi-arabia.

[7] “Fusing Vision 2030,” Arab News.

[8] “Saudi Arabia Signs Initial Deals with China on Prince’s Visit,” Reuters, August 30, 2016, http://www.reuters.com/article/us-saudi-china-agreements/saudi-arabia-signs-initial-deals-with-china-on-princes-visit-idUSKCN1151HT.

[9] “Saudis Study $65 Billion in China Investments during King’s Trip,” Bloomberg, March 16, 2017, accessed September 15, 2017, https://www.bloomberg.com/news/articles/2017-03-16/saudis-study-65-billion-in-china-investments-during-king-s-trip.

[10] “Kuwait, China Share Enthusiasm on ‘Belt and Road’ Economic Initiative,” Kuwait Times, May 13, 2017, accessed September 15, 2017, http://news.kuwaittimes.net/website/kuwait-china-share-enthusiasm-belt-road-economic-initiative/.

[11] Nawied Jabarkhyl, “Oman Counts on Chinese Billions to Build Desert Boomtown,” Reuters, September 5, 2017, accessed September 15, 2017, https://www.reuters.com/article/us-oman-china-investment/oman-counts-on-chinese-billions-to-build-desert-boomtown-idUSKCN1BG1WJ.

[12] They are the New Eurasian Land Bridge, the China-Pakistan Economic Corridor, the China-Central West Asia Economic Corridor, China-Mongolia-Russia Economic Corridor, China-Indochina Peninsula Economic Corridor, and China-Myanmar-Bangladesh-India Economic Corridor.

[13] Author interview, Spring 2017.

[14] Tristan Kenderdine, “China Eyes Iran as Important Belt and Road Hub,” Eurasianet.org, September 7, 2017, accessed September 15, 2017, http://www.eurasianet.org/node/85026.

[15] Giorgio Cafiero and Daniel Wagner, “What the Gulf States Think of ‘One Belt, One Road,” The Diplomat, May 24 2017, accessed September 15, 2017, http://thediplomat.com/2017/05/what-the-gulf-states-think-of-one-belt-one-road/.

[16] Jonathan Fulton, “China is Trying to Pull Middle East Countries into its Version of NATO,” Washington Post Monkey Cage Blog, June 21, 2017, accessed September 15, 2017, https://www.washingtonpost.com/news/monkey-cage/wp/2017/06/21/how-china-is-shifting-toward-the-middle-east/?utm_term=.240e99621a6c.

[17] Faseeh Mangi, “China’s New Silk Road Hinges on a Small Pakistan Port,” Bloomberg, September 30, 2016, accessed September 15, 2017, https://www.bloomberg.com/news/articles/2016-09-29/china-s-new-silk-road-hinges-on-a-small-pakistan-port.

[18] Mateen Haider, “Economic Corridor in Focus as Pakistan, China Sign 51 MoUs,” Dawn, April 20, 2015, accessed September 15, 2017, https://www.dawn.com/news/1177109.

[19] Chen Yingqun, “Rebuilt Port Heralds Success,” The Telegraph, May 5, 2017, accessed September 15, 2017, http://www.telegraph.co.uk/news/world/china-watch/business/china-rebuilds-port-in-pakistan/.

[20] Sajjad Ashraf, “Gwadar Will be the Economic Funnel for the Region,” Gulf News, May 24, 2017, accessed September 15, 2017,  http://gulfnews.com/opinion/thinkers/gwadar-will-be-the-economic-funnel-for-the-region-1.2032494.

[21] “China Country Report,” U.S. Energy Information Agency, May 14, 2015, accessed September 15, 2017, https://www.eia.gov/beta/international/analysis.cfm?iso=CHN.

[22] M. Aftab, “CPEC Set to Attract $150b Investment in Pakistan,” Khaleej Times, September 12, 2016, https://www.khaleejtimes.com/business/economy/cpec-set-to-attract-150b-investment-in-pakistan

[23] “China-Pakistan Economic Corridor,” Al Bawaba, March 29, 2015, accessed September 15, 2017, https://www.albawaba.com/business/china-pakistan-economic-corridor-game….

[24] Devirupa Mitra, “Modi Criticizes China’s One Belt One Road Plan, Says Connectivity Can’t Undermine Sovereignty,” The Wire, January 17, 2017, accessed September 15, 2017,  https://thewire.in/100803/modi-criticises-chinas-one-belt-one-road-plan-says-connectivity-corridors-cant-undermine-sovereignty/.

[25] Rama Lakshmi, “India and U.S. Deepen Defense Ties with Landmark Agreement,” Washington Post, August 30, 2016, accessed September 15, 2017,  https://www.washingtonpost.com/world/india-and-us-deepen-defense-ties-with-landmark-agreement/2016/08/30/2e7e045b-e3c3-49ff-9b2c-08efaa27b82b_story.html?utm_term=.348493f5322e.

[26] R.A.K Singh, “G.C.C. Countries Home to 72% of Indian Diaspora,” Oman Observer, August 22, 2016, accessed September 15, 2017, http://2016.omanobserver.om/G.C.C.-countries-home-72-indian-diaspora/.

[27] “2.8 Million Workers and $13 Billion: The story of Indian Migrants to the UAE,” The Hindu, March 29, 2016, accessed September 15, 2017, http://www.thehindu.com/data/28-million-workers-and-13-billion-the-story-of-indian-migrants-to-the-uae/article7550756.ece.

[28] Kadira Pethiyagoda, India-G.C.C. Relations: Delhi’s Strategic Opportunity, The Brookings Institution, 2017, accessed September 15, 2017, https://www.brookings.edu/wp-content/uploads/2017/02/india_G.C.C._relations.pdf.

[29] International Monetary Fund, “Direction of Trade by Partner,” 2016.

[30] World Bank, 2016.

[31] “Pakistan, Oman Discuss Opportunities Offered by CPEC, Gwadar Port,” Times of Islamabad, May 8, 2017, accessed September 15, 2017, https://timesofislamabad.com/pakistan-oman-discuss-opportunities-offered-cpec-gwadar-port/2017/05/08/.

[32] “Saudi Arabia to Cooperate with Pakistan on CPEC: Envoy,” The News International, September 11, 2017, accessed September 15, 2017, https://www.thenews.com.pk/print/229107-Saudi-Arabia-to-cooperate-with-Pakistan-on-CPEC-envoy.

[33] Author interview, June 2017. 

[34] Nadège Rolland, China’s Eurasian Century? Political and Strategic Implications of the Belt and Road Initiative (Seattle: The National Bureau of Asian Research, 2017) 41.