China’s growing economic influence in the Gulf states threatens the West’s foothold in the region | Daily News Byte

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At the end of November, British Prime Minister Rishi Sunak announced that the “golden era” between Great Britain and China was over. However, China may not have been too upset by the news and was busy making influential friends elsewhere.

In early December, Chinese President Xi Jinping met with the Gulf Cooperation Council – a group made up of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates – to discuss trade and investment. Also on the agenda were talks about establishing closer political ties and a deeper security relationship.

This summit in Saudi Arabia was the latest step in what our research shows is an increasingly close relationship between China and the Gulf states. Economic ties have been growing steadily for several decades (largely at the expense of trade with the US and the European Union) and are specially adapted to their needs.

Simply put, China needs oil, while the Gulf needs to import manufactured goods, including household items, textiles, electrical products and automobiles.

China’s remarkable growth in recent decades has been particularly significant for the oil-rich Gulf economies. Between 1980 and 2019, their exports to China grew at an annual rate of 17.1%. In 2021, 40% of China’s crude oil imports came from the Gulf – more than any other country or regional group, with 17% from Saudi Arabia alone.

And oil will likely continue to flow in China’s direction. In 2009, China was predicted to need 14 million barrels of oil per day by 2025. In fact, China reached that figure in 2019 and is expected to need at least 17 million barrels per day by 2040. At the same time, the U.S. has become net oil exporter in 2019 and thus achieved a long-standing foreign policy goal: to overcome their dependence on West Asian fossil fuels.

China has benefited from increasing demand for its manufactured goods, with exports to the Gulf growing at an annual rate of 11.7% over the past decade. It overtook the USA in 2008 and then the European Union in 2020 to become the most important source of imports in the Gulf.

These are good customers for China. Gulf economies are expected to grow by around 5.9% in 2022 (compared to a meager 2.5% projected growth in the US and the European Union) and offer attractive opportunities for China’s export-oriented economy. It is likely that speeding up a free trade agreement was high on the summit agenda in early December.

Strong ties

The Gulf’s increased reliance on trade with China has been accompanied by a lessening of its appetite to follow the political and cultural lead of the West.

As a group, it has supported Western military action in Iraq, for example, and the broader fight against Islamic State. But recently the Gulf has notably refused to support the West in condemning Russia’s invasion of Ukraine. It also threatened Netflix with legal action for “promoting homosexuality”, while Qatar actively banned rainbow flags supporting sexual diversity at the men’s World Cup.

So Xi’s visit to Saudi Arabia was well-timed to illustrate the strengthening of this important partnership. And to the extent that anything can be predicted, deepening trade relations between the Gulf and China seem likely. On the political front, however, the development of events is more difficult to predict.

China is seeking to protect its interests in West Asia in light of the Belt and Road Initiative, its ambitious transcontinental infrastructure and investment project.

But how far could the Gulf states be willing to sacrifice their long-standing security pacts with Western powers (created after World War II) to seek new ones with the likes of Beijing? Currently, America has military bases (or stations) in all six Gulf countries, but it is well documented that the Gulf Cooperation Council is looking for ways to diversify its over-reliance on the US as the primary guarantor of security (a sentiment within the bloc that was emphasized while Obama was president, less with Trump, but again on the rise with Biden).

In the coming period, the Gulf Cooperation Council will have to decide which socio-economic path to follow in the post-oil era where economies based on artificial intelligence will set the pace. In choosing strategic linkages beyond trade alone, Gulf states must ask themselves whether the creativity and innovative potential of their populations will be best served by allegiance to governments that are authoritarian or accountable.

Emilie Rutledge is a lecturer in economics at the Open University.

This article first appeared on The Conversation.

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