The Impact of the Coronavirus Pandemic on China’s Belt and Road Initiative in the Middle East

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 coronavirus has hit the Middle East at a time when the region is already burdened with multiple problems, including a series of long-running conflicts, sectarian tension, economic crises, and widespread political unrest. On March 11, the World Health Organization (WHO) declared novel coronavirus (冠状病毒) — now officially designated as “COVID-19” — to be a pandemic.[1] This disease outbreak has since become a major international health crisis. As of April 25, 210 countries and territories have 2,890,892 confirmed cases of the Coronavirus and a death toll of 201,501.[2] However, the actual figures may be far higher due to under-reporting.[3]

The Middle East is rapidly becoming the world’s second-largest hotspot for the novel coronavirus outbreak after China. While many Middle Eastern countries may be unprepared to handle the disease, its spread among the millions of people affected by wars and refugee crises in Iraq, Syria, Yemen, and elsewhere would be catastrophic.[4]

The vast majority of countries in the region have closed schools and universities, suspended football matches, canceled major cultural events, and banned all commercial flights until further notice. Some have prohibited their citizens traveling to certain destinations. Meanwhile, bars and cafes are shuttered. So, too, are places of religious worship, such as Al-Aqsa Mosque in Jerusalem, the Church of the Nativity in Bethlehem, and the Shiite Muslim shrine in Karbala, Iraq. There is fear that the COVID-19 has infiltrated a main pilgrimage route in the Middle East, which could lead the deadly pathogen to high-risk populations, including those that have been displaced due to conflict or other reasons.[5]

Nevertheless, the ability to contain the virus depends on the strength of the public health systems of the Middle East countries. According to the World Health Organization (WHO), most Middle East states ranks relatively high among the world’s 191 health systems, with a few exceptions, such as Syria, ranked 108th, and Yemen, ranked 120th. However, the exponential spread of the virus could stress test the national health systems in both energy-rich countries that have invested in state-of-the-art medical facilities as well as war-ravaged nations like Syria and Yemen where hospitals have been prime targets of devastating airstrikes.[6]

The coronavirus continues to spread across the Middle East, with official figures indicating over 262,861 cases of infection, and nearly 9,224 reported deaths.[7] However, many experts believe these figures vastly underestimate the extent of the virus’s spread. The United Arab Emirates (UAE) was the first Middle East country to report a coronavirus-positive case, but the most significant number of infections and fatalities are in Iran, followed by Turkey and Israel.[8]

As of April 26, 2020, Turkey has the seventh-highest and Iran the eighth-highest number of reported coronavirus cases in the world. As the figure at right indicates, those two countries also have the highest and second-highest number, respectively, in the MENA region. There is concern that the number of infections across Iran is much higher than reported; and that the virus could be spread throughout the region by Shi’ite pilgrims traveling to or from the country.[9]

Middle Eastern countries that have extensive economic ties with China, especially those that have joined the Belt and Road Initiative (BRI), are likely to be impacted. What remains to be seen, is the degree to which BRI itself is affected, and how Middle Eastern countries that have a strong interest in this initiative’s success will respond. 

Although it is too soon to say precisely how the coronavirus will change the broad contours of Chinese foreign policy in the Middle East, it has already highlighted some of the frailties of the BRI. Most BRI infrastructure contracts in the Middle East are given to Chinese companies,[10] most projects rely overwhelmingly on Chinese labor and supplies,[11] and BRI projects depend on the availability of massive amounts of cheap credit from Chinese banks.[12] In becoming the epicenter of a global public health crisis with far-reaching economic consequences, Beijing has also revealed the inherent vulnerabilities of the BRI.
 

China’s most significant twenty-first-century diplomatic and economic activity in the Middle East is the launching of the Silk Road initiative. Over the past seven years, according to the China Global Investment Tracker, Beijing has invested an estimated $93.3 billion across the Middle East, mainly in the energy ($52.8 billion) real estate ($18.4 billion), transport ($18.6 billion), and utilities ($5.9 billion) sectors.[13] That number is expected to grow exponentially over the next decade as the Silk Road strategy enters its next phase. The Middle East also accounts for more than 40% of China’s oil imports and is a key supplier of the country’s liquefied natural gas. This energy relationship is set to continue since the Middle Eastern exporters look to East Asia in general and China in particular as a reliable long-term energy export market. The International Energy Agency (IEA) expects Beijing to double its oil imports from the region by 2035.[14]  

In reaction to the coronavirus outbreak, the Chinese government turned to a series of severe measures to control the virus’ spread. It halted international travel, quarantined cities, and imposed lockdowns across the country. The implications of these measures could lead to a slowdown in the Chinese economy. According to some forecasts predicting that even with aggressive stimulus measures, China may not be able to attain 3% growth this year. The Chinese slowdown could have an impact on the country’s ambitious Silk Road strategy.[15] Although Chinese Foreign Minister Wang Yi has said the virus would not have “any negative impact” on BRI projects, Chinese authorities are no doubt aware that the COVID-19 outbreak is causing difficulties for overseas projects. The China Development Bank recently announced that it would provide low-cost loans to affected BRI related companies, though presumably these will go mainly or exclusively to Chinese firms.[16]

The coronavirus outbreak has also hampered Beijing's manufacturing supply chains, and BRI projects are predominantly reliant on Chinese, rather than local, materials, and supplies.[17] The COVID-19 pandemic has compromised the global supply chains that keep BRI projects moving forward, limiting the goods flowing out of China to the point that Beijing ran a trade deficit during the first two months of the year.[18] China’s shuttered factories not only need workers to be released from quarantines to resume normal output, but also need restored supplies of raw materials, adequate stores of protective gear for workers, and active truckers and shipping ports to deliver their goods abroad.[19] The coronavirus also disrupted the global shipping industry, which slowed to the point that more tonnage of container ships was idled around the world in February than during the worst points of the 2008 financial crisis.[20]

The spread of coronavirus has a direct impact on Beijing’s BRI projects in the Middle East. In the aftermath of the virus, the fact that Chinese workers cannot travel and the fact that China is not likely to send workers for BRI projects, countries in the region will themselves not be in a position to focus on BRI-related projects at least for some time. For example, Beijing has repatriated citizens working in Iran, due to the spread of COVID-19 there — a measure it could apply to any BRI host country severely afflicted with the spread of the coronavirus, and one that could grind other BRI projects to a halt.[21] More than 130 countries around the world have placed entry restrictions on Chinese citizens of individuals traveling from China. The longer that Chinese workers are unable to return to BRI projects overseas, the longer the projects will languish incomplete, and some may be abandoned altogether.[22]

Some of the BRI projects in the Middle East had begun to slow down even before the virus outbreak spread globally. Before the outbreak, there were issues due to the terms and conditions of the project, and several projects had to be renegotiated due to pressure from local populations. In Kuwait, for instance, there is some skepticism about the implementation of the Silk City and the Five Islands development projects. This is not unexpected, given the uncertainty surrounding the Persian Gulf where ambitious leaders’ mega-project proposals can come unstuck due to financial or political hurdles.[23]

The spread of coronavirus to two important BRI “nodal points” — Iran and the Levant — has further clouded the prospects for project implementation. As previously mentioned, Iran has become the regional epicenter of the coronavirus pandemic. The spread of the virus has reached to the top of Iran's leadership, with at least 23 members of Parliament (10% of Iran’s lawmakers) infected.[24] Meanwhile, in the Levant, millions of people inhabiting overcrowded and unsanitary refugee camps there are soon likely to face a brutal confrontation with the virus, as none of the governments in the Levant are well-equipped to handle health crises or epidemic outbreaks.[25]

Neither is the short-term outlook for progress in the execution of BRI projects within the Gulf Cooperation Countries (GCC) bright. Although the Gulf States have begun applying stringent measures to contain the spread of the virus, the contagion risk is highest in communities of foreign laborers, many of whom lack access to healthcare and live in conditions in which social distancing is not an option. Compounding the uncertainty regarding the Gulf States’ ability to contain the spread of the virus within their large migrant workforces is how they will manage the fiscal strain of the collapse of the oil market.

Conclusion

The restrictive travel bans, port closures, canceled flights, and blocked roads have prevented Chinese workers from returning to BRI worksites in the Middle East, while the shutdown of Chinese factories that supply machinery and raw materials for BRI projects has hindered projects from moving forward. These and other disruptions are causing delays, missed deadlines, and increased costs of the infrastructure construction damages that local economies will find it difficult to absorb. Although it is unlikely that COVID-19 will be fatal to the implementation of BRI projects, but the disease's fast and lethal spread will cause Middle East governments to rethink the risks attached to ever more integration and economic dependence on China’s infrastructure-based development strategy.