The New Oil Supply Nexus: China and the Gulf Co-operation Council

China-GCC-trade

China’s influence in the Middle East has steadily grown over the last few decades as it sources increasing amounts of oil from the region and its companies and exports penetrate the region, bringing machinery, inexpensive consumer products as well as cheap finance and highly capable construction firms. Below I have provided a brief snapshot of Chinese relations with countries in the Gulf Cooperation Council, the association of conservative states centred on the Persian Gulf.

Saudi Arabia

The Kingdom of Saudi Arabia has quietly found a new economic partner in China. Beijing is now its major customer for crude and the US – Saudi relationship which is one of the central pillars of Middle Eastern politics is being undermined by China. The US remains militarily and diplomatically ahead of China, also Beijing does not (yet) want to take a leading role in Middle Eastern politics, but as its economic interests in the Kingdom and the Gulf region expand, China will become a more significant player in years to come. India has also become a major oil buyer and therefore Delhi views its relationship with Riyadh and the Gulf States with increasing importance.

Qatar

This tiny nation in the Persian Gulf has one of the largest gas reserves in the world, which has allowed it to carry out its ambitious foreign policy objectives. This became particularly apparent when it won the rights to the 2022 World Cup. Holding a global mega event will focus attention on the country as never before and could be unwelcome attention for the autocratic state. Qatar’s gas reserves have also given it the cash to allow it to support the ailing Egyptian government with a loan and it also supply weapons and funds the Syrian opposition forces. China has not intervened in the Middle East, but its intentions will be increasingly studied by the likes of Qatar as different forces and factions in the region will attempt to co-opt the Asian giant into backing their side.

Bahrain

Bahrain has expanded trade with China, exporting much needed oil, while China has seen Bahrain and ther region at large as a marketplace for its goods, thus Chinese manufacturers and retailers have flocked to the bazaars and trade fairs of the Middle East in recent years, selling everything from toys and clothes to fridges and freezers.

Kuwait

A young democracy in the region which is strongly aligned with the US, Kuwait and its oil wealth has allowed it to back the troubled Egyptian government and alongside other Gulf States the Syrian rebels. Kuwait is by virtue of its oil reserves is major exporter to both China and India, these rising powers are both major and fast growing energy users.

Oman

Oman and China have developed strong trade relations, reaching a value of over $ 6 billion in 2012, with Chinese demand making it the third biggest buyer of Omani oil. Sino-Omani trade is also likely to benefit from a proposed free trade zone between China and the Gulf Cooperation Council countries, which is likely to be sealed in 2014.

UAE

The UAE represents a major centre for Chinese trade and commerce for the rest of the region, trade has risen dramatically and represents over a third of the $100 billion trade between the GCC states and China, although much of this represents re-exports. The nation’s “hub status” has also led to it becoming home to many Chinese citizens and businesses with operations across the Middle East and Africa. The links between Beijing and this small but important Arab state will only grow in stature and importance as Chinese business and political interests expand throughout the region.



Categories: Silk Road

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