For his first overseas tour of 2016, Chinese President Xi Jinping visited 3 key nations in the Middle East: Saudi Arabia, Egypt, and Iran. This was his first visit to the Middle East as Chinese President, and this visit signaled China’s increased interest in the region, especially in view of the rising prominence of the Middle East as a key regional partner of China’s “Belt and Road” global development initiative. In addition, President Xi’s Middle Eastern visit manifested what he described last year as a “new type” of international relations, which is based on win-win practical cooperation rather than the zero-sum calculations of American-style diplomacy.1 Columbia University Professor Hamid Dabashi highlights the difference:
“As the thing that calls itself ‘the West’ tries to conquer the world politically to rule it economically, the Chinese are doing exactly the opposite: Mapping the world in economic detail from which may emerge a bona fide political order.”2
Indeed, in his address to the Arab League in Cairo, President Xi recommended that the Middle Eastern nations pursue development and dialogue to resolve their regional problems. In particular, consensus-building through dialogue and a long-term program of social and economic development will offer the Middle East an independent path to peace and prosperity beyond the geostrategic games of the Western powers. China has hence encouraged the Israelis and the Palestinians, as well as the key participants in the Syrian civil war, to pursue settlements of their conflicts through peaceful dialogue.3
At the Arab League, President Xi also announced China’s offer of 280 million RMB in humanitarian aid for the Palestinians, Syrians, Yemenis, and other groups in need of such aid. In addition, President Xi announced substantial financing packages for economic projects, including 20 billion USD in joint investment funds and 35 billion USD in commercial and concessional loan programs. President Xi also invited the Arab nations to participate in the infrastructure megaprojects under China’s “Belt and Road” global development framework, which will allow them to accelerate their economic development though the modernization of their infrastructure as well as the upgrading of their industrial production capacity. To further accelerate the region’s economic growth through human resource development, President Xi announced that the Chinese government will offer 10,000 scholarships and 10,000 training opportunities to the students and workers of the Middle East.4
“Belt and Road”
President Xi’s tour saw China deepen its cooperation with Saudi Arabia, Egypt, and Iran under the “Belt and Road” development framework with the signing of 52 agreements in a range of sectors including infrastructure construction and energy. China’s bilateral relationships with Saudi Arabia and Iran were upgraded to comprehensive strategic partnerships, while China and Egypt agreed to deepen their bilateral cooperation under their existing comprehensive strategic partnership. In the multilateral arena, China and the Gulf Cooperation Council (GCC) agreed to work towards completing a comprehensive free trade deal this year.5
President Xi and Saudi King Salman bin Abdulaziz Al Saud agreed that their countries should cooperate under the “Belt and Road” development framework, especially in key sectors like energy. Saudi Arabia is currently China’s largest supplier of oil, and during President Xi’s visit the Saudi and Chinese major oil firms Saudi Aramco and Sinopec signed a strategic cooperation agreement worth almost 1.5 billion USD. President Xi also attended the launch of the Yasref oil refinery, a joint venture between Saudi Aramco and Sinopec worth almost 10 billion USD.
Yasref is Sinopec’s first overseas oil refinery and China’s largest investment in the kingdom. President Xi’s visit also saw the signing of an agreement for China Nuclear Engineering Group Corporation (CNEC) to conduct research on high-temperature gas-cooled (HTGR) nuclear reactor technology with the Saudi government, which has plans to construct 16 nuclear power plants by 2032. This R&D agreement is expected to lead to CNEC’s export of HTGR nuclear technology to the kingdom. This would not be the first instance of the export of Chinese technology to Saudi Arabia. The Mecca light rail, which allows Muslim pilgrims easy access to the holy sites within the city, is a good example of a major Chinese infrastructural project in the kingdom. Having completed this rail project in time for the Hajj of 2010 after a construction period of just 16 months, China Railway Construction Corporation (CRCC) has since operated the line for the past 5 years without incident.6
President Xi’s visit to Egypt coincided with the 60th anniversary of the establishment of Sino-Egyptian diplomatic relations. China and Egypt had upgraded their bilateral relations to a comprehensive strategic partnership in 2014. That same year, Sino-Egyptian bilateral trade reached 11.62 billion USD. During his visit, President Xi suggested to his Egyptian counterpart Abdel-Fattah al-Sisi that their countries work towards transforming Egypt into a “pivot” of the “Belt and Road” by focusing on the development of infrastructure as well as industrial capacity. President Xi also offered his government’s support for Egyptian megaprojects like the Suez Canal Corridor and the proposed new capital, and confirmed that his government also encourages the Chinese business community to invest in major Egyptian projects. An example of such Chinese involvement in a megaproject in Egypt is China Electric Power Equipment and Technology Corporation’s participation in the construction of a 1,210 km electrical transmission line in the Nile Delta, the largest such project in Egypt. Egyptian President al-Sisi confirmed that Egypt would be interested in connecting its development projects with the “Belt and Road,” and that it would also be interested in exploring financing opportunities from China’s new Asian Infrastructure Investment Bank (AIIB). President Xi’s visit saw China and Egypt sign 21 agreements for projects worth a combined value of 15 billion USD. Sino-Egyptian practical cooperation can also be seen in the China-Egypt Suez Economic and Trade Cooperation Zone, whose success has prompted a 230 million USD expansion into a 6 square km area focused on export-oriented manufacturing and logistics.7
President Xi was the first foreign leader to visit Iran after the recent lifting of international sanctions, a fact which was highlighted by Iranian President Hassan Rouhani. Indeed, China helped mediate the 2015 nuclear deal that allowed these sanctions to be lifted. Some observers interpret President Xi’s visit as an effort to maintain China’s pre-eminent position in the post-sanctions Iranian market, a position that China achieved through the much-needed economic cooperation it offered Iran during its years of international isolation. China has been Iran’s largest trading partner over the past 6 years, with their bilateral trade exceeding 50 billion USD in 2014. Both governments plan to increase Sino-Iranian bilateral trade to 600 billion USD over the next decade. President Rouhani agreed that his government would work towards greater cooperation with China under the “Belt and Road” development framework, especially in key sectors like energy and infrastructure, and Supreme Leader Ayatollah Ali Khamenei, describing Iran as a key nation along the “Belt and Road,” confirmed that the Iranian government would be willing to cooperate with China on the “Belt and Road” megaprojects. Indeed, President Xi’s visit saw China and Iran sign 17 agreements. In the area of infrastructure development, President Xi announced that China will help Iran finance and construct a 900 km high-speed rail line between Tehran and Mashhad. This infrastructure project, which comes under the “Belt and Road” framework, may eventually become part of the proposed transcontinental Silk Road high-speed railway between Tehran and the Chinese city of Urumqi. In the security arena, China agreed to support Iran’s application to raise its status from observer to full member of the Shanghai Cooperation Organization (SCO). The strengthening of the SCO with the increased participation of regional powers like Iran will be important for the long-term preservation of security for China and its “Belt and Road” partners against regional threats like the Islamic State.8
In the energy sector, this “new era” of Sino-Iranian practical cooperation includes a 10 billion USD deal for Chinese participation in the construction of two 1 GW nuclear power plants near the Iranian port city of Chabahar; the construction of several 100 MW power plants; the modernization of the Arak heavy water reactor; as well as nuclear energy research. Also in the energy sector, a separate project that will come under the “Belt and Road” framework is the long-delayed Iran-Pakistan gas pipeline which will connect with the Pakistani port of Gwadar, the Arabian Sea hub of the China-Pakistan Economic Corridor (CPEC). When complete, the Iran-Pakistan gas pipeline will offer an important route for oil and gas to be transported from Iran to China through the CPEC pipelines, thereby avoiding the increasingly risky Straits of Malacca and South China Sea. However, while the construction of the Iranian section of the pipeline is almost complete, Pakistan, under pressure from the US, has delayed constructing its section of the pipeline, prompting the Iranian government to threaten legal action for the breach of contract. The timely resolution of this dispute and the completion of the pipeline could offer significant economic benefits to both Iran and Pakistan.
BY ALVIN CHENG-HIN LIM JANUARY 30, 2016