Mohammad Shakeel Ramay
Recent years have witnessed a marked change in the nature of commercial competition in the Middle Eastern (ME) region.
Conventional players such as USA and its major allies (UK, Germany, France, Netherlands) are facing immense pressure and new challenges as a result of China’s growing footprint in the Middle East.
A report by the BESA Center says that China’s trade with regional countries in 2018-19 was more than $294 billion.
The investment portfolio also observed a rapid increase to $93 billion during 2013-2019.
Besides China’s growing footprint in the Middle East, China also promised at China-Arab Forum in 2018 to invest $ 23 billion in the oil and gas sectors.
Major beneficiaries of the Chinese investment are Saudi Arabia, Iran and UAE, with promises of even more generous packages of investment in future.
As far Saudi Arabia, Beijing plans to invest almost $10 billion in the oil and minerals such as copper sectors.
Both countries also capitalized on the visit of the Crown Prince Muhammad Bin Salman to China, when they signed various economic deals and MoUs worth $28 billion in February 2019.
Now, China has finalized a comprehensive 25-year deal worth nearly $400 billion with Iran. This level of financial commitment by Beijing as part of its Belt and Road Initiative (BRI), particularly to the context of its growing geo-stratetic divergences with the US-led West, could in fact be a game changer for the region.
The major reason of the its enhanced cooperation with the Middle Eastern countries is China’s desire to work abroad through mutually beneficial economic ventures, and without interfering in other countries’ internal matters.
The COVID-19-induced impact is likely to open new avenues of cooperation between China and the Middle East because of the havoc that the pandemic has played with the economy across the globe.
The Middle East is no exception either, which according to international financial institutions will be severely hit, especially the oil exporting and tourism-based economies.
As the consumption of oil is declining due to lockdowns and the closure of industries, restrictions on mobility have also badly impacted tourism in most parts of the world.
IMF, for example, predicted in April 2020 that the cumulative losses of the ME & Northern Africa would be around $323 billion and the worst hit would be the oil exporting countries of the ME, primarily because of lower oil exports.
These scary projections will have implication not only for the people of the ME countries but also for many others across the world.
In these circumstances ME would be looking for avenues to support its economy and China has the capacity to provide the requisite finances and technology.
The early signs of enhanced economic cooperation between the ME countries and China are already quite visible as
China has emerged as one of the biggest and reliable markets for oil exports for the Middle Eastern countries during the COVID-19.
Bloomberg has reported that Saudi Arabia, which is the biggest source of oil supplies to China, has exported almost a third of its oil to China in May 2020.
Iraq,too, exported almost 50 percent of its oil to China.
Cumulatively, Saudi Arabia, Kuwait and UAE exported the biggest quantity in their history to China in April 2020. It is expected that these exports will increase in future.
The major contributing factors for this increased oil exports from the ME to China is the low demand in USA and major Western countries due to COVID-19 as well as the emergence of USA as a new exporter of oil.
Moreover, CPEC route would also serve as a big conduit for the Middle Eastern oil exports to China’s growing footprint in the Middle East.
CPEC offers the shortest route and hence will help reduce the transportation costs, which will enhance competitiveness of ME oil. It will also help China import oil at affordable prices through a reliable supply route unlike the strait of Malacca.
These facts, deduced from a study to assess the potential benefits of CPEC route to China, underline that CPEC route will reduce travel time by 20 days for Oman, 21 days for KSA and 24 days for Kuwait from China and it would save $1857 per shipment container for Oman, $1457 for KSA, and $1457 for Kuwait.
These are substantial savings both in terms of traveling time and money.
Pakistan will also earn good amount in transit fees and related services.
Thus, CPEC route presents a win-win situation for trade between China and the Middle East.
Apart from route, CPEC also presents good opportunities to enhance a trilateral cooperation among China, Middle East and Pakistan. For example, ME countries can also establish oil refineries in Pakistan to provide refined oil and other oil products to China and Pakistan.
Pakistan and Saudi Arabia are already in the process of finalizing a deal for establishing a refinery at Gwadar. China will also be part of this initiative.
Agriculture is another area, which can act as good area of cooperation and will be a win-win scenario for all. As, we know that Pakistan has huge productive lands and human resources but lacks technology and financial resources. There represent some of the main hurdles in the way of full exploitation of this potential.
China has technology and the scientific knowledge is looking for markets to import food from. Middle East is deficient in food production and looks for sustainable and reliable sources of Halal food. The strengths and weaknesses of these three stakeholders make it a perfect case of cooperation.
Special Economic Zones (SEZs) under CPEC also present opportunities for collaboration among these three players.
Hence, it is suggested that China, Pakistan and Middle East should look for ways to enhance cooperation through CPEC. The starting point can be the establishment of a China-Pakistan-Middle East Forum.
