China and the Arabian Gulf: Learning from a Lab Rat.
Remember the old chestnut: What’s the difference between a laboratory rat and a human being? The lab rat finally ceases scurrying through a maze when he realizes there is no cheese at the end. Human beings, on the other hand, never stop trying.
Confronted with the maze that is the Arabian Gulf, the Chinese are the lab rats. Take Iran, for starters.
Though careful not to directly challenge the Americans, China’s diplomats and businessmen have followed a sinuous route, publicly urging Iran to back away from plans to produce nuclear weapons, but refusing to support current American and European calls for tougher sanctions.
True to form, the Americans have been pushing trade sanctions in various degrees of severity ever since American diplomats were taken hostage in Tehran back in 1979.
The Chinese have long argued that stiffer sanctions won’t convince the Iranians to stop their nuclear program.
Those sanctions, however, have enabled the Chinese gain a remarkable foothold in Iran. So much so, that today 15% of China’s petroleum and gas imports come from Iran, which makes Iran more vital to China than Saudi Arabia is to the United States [the Saudis provide 11% of U.S. petroleum imports].
At one time or another, all the great powers have had their eyes on Iran’s energy reserves. But, because of the U.S. embargo, those riches had been largely untapped: Iran suffered from a woeful lack of modern technology, engineering expertise, and capital.
Unhindered by the embargo, Chinese companies, have offered Iran much of what it needs to develop--as well as sophisticated arms, anti ship-missiles and nuclear technology.
In return, of course the Chinese obtained access to Iran’s massive resources. In 2004, for instance, Iran signed a $100 billion dollar deal for a Chinese company to develop Yadavaran, Iran’s largest undeveloped field. That concession in exchange for China’s receiving 10 million tons of Iranian liquified natural gas annually for a period of 25 years.
That deal was followed by other huge gas and oil exploration contracts, as well as a plan to deliver Iranian oil from the Caspian Sea, through a pipeline from Kazakhstan to China.
In another convoluted agreement, a Chinese company bought the Iranian subsidiary of Sheer Energy in Calgary, Alberta, thus winding up with a 49 percent stake in another Iranian oil field.
Flourishing Chinese-Iranian trade is not restricted to the energy sector.
Chinese companies have won contracts to build everything from broadband fiber optics, to television sets and automobiles, not to mention a $680 million contract to expand the Tehran subway system.
And all the while, Washington has continued to view Iran as THE menace looming over the Gulf. Thus, the Americans made an ally of Saddam Hussein after he invaded Iran, and continued to back him despite his use of nerve gas and long range rockets against civilian targets.
Again, in 1991 when Iraq’s Shiites and Kurds rose against the Iraqi tyrant following the first Gulf War, the United States stood by as tens of thousands of Iraqis were slaughtered by Saddam—despite the fact that George W. Bush had himself called for the uprising. The reason for the betrayal: Washington was afraid that an Iraq governed by its Shiite majority would open the doors to an Iranian takeover of Iraq.
Fast forward twenty years. After having spent literally trillions of dollars to oust Saddam, U.S. troops are withdrawing from Iraq, leaving the shattered country governed by---a Shiite majority. Worse, many of those Shiites sympathetic to Iran and still deeply embittered by America’s betrayal in 1991.
But even as they withdraw from Iraq, America has been pouring hundreds of billions of dollars into Iraq’s neighbors to ensure a massive and enduring military presence in the Gulf. Their major purpose again, a bulwark against Iran.
In addition, Washington has reportedly been funding and training opposition groups in Iran to carry out activities that, were they directed against American targets, would certainly be labeled as “terrorist.”
That American military build-up in the Gulf has long provided Iran’s leaders with a rationale for developing nuclear weapons: not to incinerate Israel, but to defend Iran against an American/Israel attack. For years now, American officials have calmly and openly discussed such military action as an on-going and viable option.
What American officials don’t like to discuss is the fact—repeatedly cited by Iran’s leaders hard-line and moderate --that Israel, which clamors most shrilly about the Iranian nuclear threat, possesses an “illegal” nuclear arsenal that American has never been officially willing to deal with.
However, despite enduring U.S. hostility, the regime in Tehran is still very much in place, its nuclear weapons program still apparently active. And while revolts are still roiling much of the Arab world, the iron-fisted mullahs in Tehran have managed to squelch internal opposition. Indeed, there are those who argue that the embargo and constant threat of an American cum Israel military attack have in fact strengthened the hands of Tehran’s often feckless and feuding leadership.
And as all this has been going on, the Chinese have been prospering. Chinese/Iranian trade has mushroomed from $3.3 billion in 2001 to $30 billion in 2010, and is expected to hit $50 billion by 2015.
No wonder, then, that the Chinese are as solicitous of Tehran’s interests as the folks in Washington are of the Saudis.
Their interest is not just economic.
Like Russia, China views Iran as a quasi-ally in their effort to check American influence in the Middle East and Central Asia. One particularly ironic blow came in July 2005, when Iran (along with India and Pakistan) was granted observer status in the Shanghai Co-operation Organization, a regional-security arrangement—established to combat separatism, extremism and terrorism.
China’s activities in the Gulf, however, are not restricted to Iran. Just as American troops and bases have spread along the Gulf, so have China’s businessmen, eager to exploit the vital resources and trade routes that the U.S. military is thoughtfully protecting.
The surprising twist is that the oil resources and shipping routes of the Gulf are far more vital to China than to the United States. China gets 58% of its oil from the the region. And with China’s vertiginous needs, estimates are that by 2015, that dependence will soar to 70% .
By comparison, the U.S. gets 18.2% from the Gulf. [In fact, America gets most of its petroleum from the Western Hemisphere. The countries of Africa even supply the U.S. with a greater percentage of its petroleum than does the Gulf.]
Another irony: while China has developed close ties with America’s prime enemy in the region, Iran, Beijing has been most successful in wooing Washington’s major Arab ally in the Gulf , the Saudis.
In the old days, Mao’s revolutionary China decried the Saudis and the feudal sheikdoms of the Gulf. But that’s then and now’s now. The Saudis currently provide China with 20% of its crude oil imports—and Saudi leaders have assured Beijing they will furnish all the crude China will need over the coming decades.
China has also offered to sell the Saudis intercontinental ballistic missiles. But in deference to Washington, the Saudis have so far turned down such proposals. Meanwhile, business is booming: China’s annual trade with Saudi Arabia totals $60 billion, the Saudis selling not just petroleum but chemicals for China’s surging manufacturing sector.
The Saudi’s new found alliance with China, also enable them to pay less heed to the annoying calls out of Washington for Riyadh to commit to democratic reforms—an issue that never bothers the Chinese.
Iraq:
You’d think that America’s huge sacrifice and treasure and blood in Iraq would have brought the U.S. some benefit--the inside track, for instance on the development of Iraq’s massive petroleum reserves. That’s what Dick Cheney and his friends were supposedly after. But in Iraq, as in Iran, the Chinese have been willing to take risks few American firms were willing or able to make.
As a result, China wound up as one of the largest oil beneficiaries of the Iraq War.
Indeed, the first major deal for oil exploration rights signed by the new Iraqi government with a foreign firm, was with a couple of Chinese companies: a 23 year agreement for $3 billion in 2008 to pump oil from the Al Adhab field. In 2009 PetroChina teamed up with Britain’s BP to win a 20 year contract to boost output from Iraq’s largest oil field, Rumaila—the only contract awarded in Iraq’s first post Saddam auction of oil licenses.
Earlier this year, Iraq President Maliki journeyed to China hoping to convince more Chinese companies to invest in Iraq, in everything from energy, oil, transport, housing, telecommunication and agriculture. He also welcomed Chinese military aid, though warned that if Iraq buys Chinese military weapons and equipment, China should also offer some support.
With China’s commercial successes in mind, it might be instructive to compare the size of China’s Embassy in Baghdad with the sprawling compound the U.S. constructed, the largest U.S. Embassy in the world, staffed by some 16,000 employees, protected in turn by an army of 5,000 “independent contractors”.
Beijing would probably favor a continued U.S. combat presence in Iraq. Many of the Chinese companies now operating in Iraq are afraid to expand further because of the on-going danger of terrorist attacks.
Not that the Chinese are uninterested in strategic facilities of their own.
China has contributed $200 million to construct a deep-sea port at Gwadar in the Baluchistan Province of Pakistan, at the Gulf of Oman—an important asset only 250 miles from the key Strait of Hormuz. So is the port of Salalah in Oman, where Chinese navy escort force now dock and resupply; not to mention the Chinese warships that have docked in Abu Dhabi.
But there’s no way the Chinese military presence will ever challenge the U.S. in the Gulf. Nor is there any evidence they want to. The hulking American bases have their own obvious downside. Remember, it was the huge inflow of American “infidel” troops into Saudi Arabia in 1990 following Saddam’s invasion of Kuwait, that provoked Osama Bin Laden’s outrage and provided him with thousands of similarly inflamed recruits.
Concern about continued opposition to U.S. troops in Saudi lay behind the decision to move the American centre of operations to nearby Qatar. As a result, since the drawdown in Iraq, the huge new air base of Al Udeid in Qatar has become a lynchpin for the U.S. buildup in the Gulf. But Qatar also boasts the third-largest reserves of gas in the world, and the Chinese are thus very present.
In May 2010, CNPC (the China National Petroleum Corporation) and Qatar Petroleum signed a 30-year deal for gas exploration and production in Qatar. That was just for starters. CNPC, Shell and Qatar have also put together a joint venture to build a 10 billion dollar petrochemical complex in Eastern China.
Nearby Abu Dhabi also has huge oil reserves, and in 2009 a Chinese firm for the first time won a service contract to supply oil rigs for onshore drilling. The deal came after a visit to China by Sheikh Mohammed bin Zayed, Crown Prince of Abu Dhabi. The goal: to foster strategic co-operation with Beijing. The Crown Prince was also Deputy Supreme Commander of the UAE Armed Forces.
Oil-rich Kuwait, of course, was the country that the U.S. went to war to “save” in 1991 after Saddam’s troops invaded. In 2009, a Chinese state-controlled oil company, Sinopec, won a $140m contract to supply drilling rigs to the Kuwait Oil Company after Kuwait said it would export 500,000 barrels per day of oil to China by 2015. Kuwait Oil and Sinopec have also agreed to build a $9 billion oil refinery in China.
It may have escaped the notice of American strategic planners, but trade between China and the Gulf is a two-way affair. In 2009, the same year that China became the largest importer of oil from the Gulf, it also passed the United as the largest single importer to the region we well. By 2020 annual trade between China and the Gulf will top $350 billion,
Remarkably, there are now more Middle Eastern visitors to Yiwu, a city in China that houses tens of thousands of retailers, than there are to the entire United States. Cross-border investment from the Middle East in Chinese financial institutions also represents a new mode of exchange.
And perhaps that’s how things will continue to go: a strange symbiosis: American arms and Chinese markets.
Or maybe not. As Jon B.Alterman at the Centre for Strategic and International Studies observes “there is something inherently unstable about a region that relies on the West for security and the East for prosperity.”
First Published in Truthdig.com