China's push in MENA is a tumour which is growing into cancer for India

A lot has been said and a lot needs to be said, but one thing is sure: China and India are the biggest competitors in the world. The global stage has transformed into a battleground for a cat-and-mouse game between these two nations. For China, the goal is expansion, while for India, it is the diversification of footprints so that it can explore the possibilities in the external markets without subjugating the countries.

India’s stance is unique in itself because for the first time in 75 years, New Delhi has profoundly reached out to the world and intensified cooperation. Among all the regions of the world, the Middle East and North Africa (MENA) is one of the most contested sites for both competing nations. And the recent developments are raising concerns for India.

Saudi-Iran deal brokered by China

A six-year-old dispute between Iran and Saudi Arabia was successfully brokered by China on Friday, when an agreement regarding it was signed between both parties in Beijing. A trilateral statement was released by all the parties, which included Iran’s Supreme National Security Council Secretary Ali Shamkhani, Saudi National Security Advisor Musaad bin Mohammed al-Aiban, and top Chinese diplomat Wang Yi.

Separate statements were issued by Iran and Saudi Arabia regarding the agreement, with the latter also expressing gratitude to Iraq and Oman for hosting “rounds of dialogue” between the two sides throughout 2021-2022.

But why is this happening? Let’s take a brief summary of the story first. Back in 2016, Saudi authorities executed 47 dissidents, including a leading Shia cleric. This led to unrest in Shia-dominated Iran. As a result, protests against Saudi Arabia started in Tehran. The protest became violent, and some of the protestors stormed the Saudi embassy. In response, Saudi Arabia cut diplomatic ties with Iran.

Now both countries have agreed to normalize relations with the reopening of embassies within a period not exceeding two months. Although it is good news for both countries as well as for the MENA region, the Chinese mediation is something that cannot be considered a normal move. China has a vested interest in the region regarding its BRI policy.

BRI and MENA

China’s Belt and Road Initiative (BRI) is considered the country’s most ambitious project of the century. Inspired by the ancient Silk Route of trade with China, BRI has already led to the signing of 202 agreements with 138 nations and 31 international organizations as of the end of 2020, according to a CMS report. However, the Middle East and North Africa (MENA) region is particularly crucial for the success of China’s BRI. To that extent, China announced an approach for the region in 2018 that was called “industrial park-port interconnection, two-wheel and two-wing approach.”

The ‘interconnection’ part of the concept involves integrating the construction and operation of China’s major industrial parks in Egypt, Oman, Saudi Arabia, and the UAE with the development of neighboring ports and long-term plans for regional transportation networks, including railways. The two ‘wheels’ are traditional energy (i.e., oil and gas) and low-carbon energy. The two ‘wings’ are science and technology (including AI, 5G, and space technology) and finance (including the mobilization of funds from various sources for BRI projects).

To sum it up in a simple way, the concept is geared to mesh with both China’s need for hydrocarbons and its aim to grow export markets, as well as the desire of many MENA nations to industrialize and diversify their economies. The basis of this approach lies in the fact that the Middle East is China’s biggest supplier of oil and gas. In the first 11 months of 2022, China imported 18.1 percent of its crude oil from Saudi Arabia. The oil imports from Kuwait, Iraq, and the UAE also soared.

On the other hand, the MENA region wants technological and infrastructural developments, which require funds and investment. According to the World Bank, the region needs to spend 8.2% of its GDP to meet its infrastructure goals by 2030.

Chinese aggressive investment

With the understanding that both countries have their respective interests that could bring them closer together, the question arises as to why the region was initially hesitant to embrace China’s Belt and Road Initiative (BRI). That’s because China’s debt-trap policy is a reality, and the investments made under the BRI were primarily driven by geopolitical considerations. Predatory lending practices were an integral part of China’s approach towards the BRI, which likely contributed to the region’s initial reluctance.

Despite being included in the preferential list for China’s Belt and Road Initiative (BRI), Middle Eastern countries were not the primary focus initially, largely because Gulf countries did not require cheap loans from China. However, the situation in the region is gradually changing. Currently, the BRI serves as a critical link for Gulf countries to connect with nations like Pakistan and Egypt. China has played a pivotal role in projects such as the Gwadar port and pipeline project in Pakistan, as well as Egypt’s Suez Canal Area Development Project, through its involvement in the BRI.

In the past few years, China has aggressively increased its investment in the Middle East, especially Saudi Arabia. Reports suggest that Saudi Arabia was the single largest recipient of Chinese investment under the BRI until mid-2022, which amounted to $5.5 billion.

The Middle East has emerged as a significant recipient of BRI investments, accounting for approximately 57 percent of total investments made by China. Furthermore, the region’s share of overall BRI engagement has increased from 8 percent in first half of 2020 to 32 percent in first half of 2022. Interestingly, China has reduced its BRI spending on Russia while increasing investment in the Middle East, highlighting the BRI’s ability to be flexible in investment mobilization in response to geopolitical needs.

Rising from the ashes of the US

The investment in the Middle East is more crucial as, against the backdrop of the US Army’s withdrawal from Afghanistan, the US has somewhat started to decouple from the Middle East too. Now, the US has shifted its focus towards the Indo-Pacific and Pacific regions. This can be witnessed by Saudi Arabia’s growing engagement with China and Russia.

However, China’s investment in the Middle East is not solely aimed at filling the vacuum left by the US. In fact, Chinese investment is more oriented to counter India’s growing influence in the region. I mean, when the US is shifting its major interest, China could have capitalized only on MENA’s needs by imposing unilateral terms and conditions like its other investments in Africa and Latin America.

China fears India because of BRI disadvantages

India is continuously bolstering its ties with the countries of the MENA region. By and large, it has remained successful in balancing the geopolitical factors in the region. Undoubtedly, India is behind China when we talk about engagement. But one thing that gives an advantage to India is the growing distrust for BRI in the MENA region.

Compared to 24 percent negative sentiment of participants for BRI in 2021, 2022 saw an upsurge to 63 percent. Additionally, 64 percent of the participants believe that political issues are the biggest hurdles to BRI. If we talk specifically about distrust, only 42 percent of the participants in the MENA region aim to maintain or increase their involvement in the projects, which was earlier 90 percent.

BRI 2.0 is more oriented towards green projects that major countries aspire to under today’s circumstances. Along with that, for BRI to be successful, it does not only need to invest but also form a chain of connecting countries to make the project more interconnected, which eventually will justify the name of the project, i.e., “belt” and “road.” In that context, Saudi Arabia’s relations with Iran needed to be normalized.

Indian policy needs a closer view towards China

Iran, which recently announced the discovery of the world’s second-largest lithium source, has given China another reason to dig deep into the possibilities. This must not be neglected. It becomes more important as India too has discovered this, which will reduce its dependency on China. And that India has good relations with Iran, giving the nation easy access to Iranian lithium.

But things are not that simple for India. It is a well-established fact that New Delhi is practicing the best foreign diplomacy in recent times, but the challenges are not less. So, the peacemaker needs to keep a closer eye on the unfolding trends in the Middle East.