To the Kingdom Come – Seeking Energy, Security, and Balance in the Middle East
By Jason Fisher
September 18, 2011
From this year forward, longtime U.S. ally Saudi Arabia will supply more oil to China than the U.S. In 2010, the Middle East and Saudi Arabia accounted for 18 percent and 12 percent of U.S. crude oil imports, respectively. That same year, 46 percent of China’s crude oil imports originated in the Middle East and 19 percent came from the Kingdom of Saudi Arabia. While U.S. demand for oil has plateaued, China’s demand is expected to increase rapidly for at least the next two decades.
China’s demand for energy has exploded in recent years and, as a result, it has increased its activities in the Middle East. To date, China’s involvement in the region has been relatively uncomplicated, focusing almost exclusively on securing oil deals and building economic ties. By comparison, the U.S. has been engaged in addressing a host of complex issues in the area for some time, including the Israeli-Palestinian conflict, Iraqi development, and the containment of Iran. Perhaps it is the differences in the scope and degree of the two countries’ associations with the region that explain the Middle Eastern public’s contrasting views of them. In any case, China has of late fared much better than the U.S. in area public opinion polls.
At the same time regional perceptions of the U.S. are diminishing and global competition for energy resources is increasing, China’s engagement with and push for influence in the Middle East, and especially Saudi Arabia, is intensifying. That is contributing to a growing view among Western interests that China’s activities are threatening the international order. Such an understanding is too simplistic.
China’s need for energy makes its expansion in the Middle East, and Saudi Arabia, inevitable. And, Chinese, U.S., and Saudi goals in the region, while interrelated, are not mutually exclusive: China seeks a consistent energy supply to power its continued economic growth; the U.S. seeks to secure the homeland and the liberal international economic system; and Saudi Arabia seeks a counterweight to balance U.S. power. There will be competition but space also exists for substantial Sino-U.S. cooperation.
In 1993, China became a net importer of oil; in 2003, it overtook Japan to become the planet’s second largest consumer of oil; by 2025, it is expected to replace the U.S. as the world’s largest oil importer; and, by 2030, it is projected to import 75 percent of its energy. Since the mid-1990s, China has encouraged its national oil companies (NOCs) to diversify suppliers and acquire assets abroad, and has moved to build closer diplomatic and economic relations with oil exporting countries.
China and Saudi Arabia are forming an increasingly broad relationship along those lines. Discussing expanding Sino-Saudi ties, Prince Walid bin Talal, the billionaire Saudi investor, told The New York Times, “Saudi Arabia needs to open new channels beyond the West. It’s clear Saudi Arabia is going where its interests are, and China is going where its interests are.” To that end, the two countries have been holding regular high-level meetings together. Tellingly, King Abdullah’s first trip outside of the Middle East after becoming king was to China, where he concluded an agreement with President Hu Jintao concerning energy cooperation and joint investment.
China and Saudi Arabia have made several substantial energy-related deals but they have also grown their overall trade and investment with one another. On the energy side, Chinese and Saudi companies have undertaken the building of a refinery in Quanzhou, gas exploration in Saudi Arabia, and the creation of an oil storage facility on Hainan Island. In other sectors, Chinese companies are building digital networks and cement plants in Saudi Arabia, and Chinese and Saudi entities are combining to create an ethylene derivative facility in Tianjin and an aluminum smelter in Saudi Arabia.
In many ways, China is a more attractive business partner for Saudi Arabia than the United States. Unlike the U.S., China does not attempt to link energy and economic agreements with what the Saudis view as their internal affairs – i.e., political reforms and human rights – and Sino-Saudi commercial contacts have not suffered from the sort of backlash U.S.-Saudi business relations did after 9/11. Also, Chinese NOCs operate without regard for the Foreign Corrupt Practices Act and Organization for Economic Co-operation and Development guidelines, combine with other state-owned enterprises to offer attractive package deals, and participate in investments that may offer little in terms of economic return but are politically profitable.
While China and Saudi Arabia forge closer relations with each other, and the U.S. may no longer be the unrivaled economic force in the region, the world continues to depend on the U.S. to secure the vitally important energy resources originating in the Middle East. It is estimated that the U.S. spends over $35 billion per year defending Middle Eastern oil supplies. The U.S. has bases in every Gulf Cooperation Council country except Saudi Arabia. And, the U.S. is the biggest supplier of conventional weapons to the Middle East, providing an additional means with which to promote security. In 2010, the U.S. entered into a $60 billion arms deal with Saudi Arabia, agreeing to deliver, among other things, 154 fighter jets, 190 helicopters, and a store of bunker-busting bombs.
China’s expanding involvement in the Middle East, and with Saudi Arabia in particular, should not be ignored but it also should not be feared. China has shown little interest in supplanting the U.S. in the region; it has avoided challenging U.S. military predominance and major U.S. policy initiatives in the area. If anything, Saudi Arabia and other Middle Eastern countries appear more interested in China displacing the U.S. than China does. It makes sense that China would support the status quo in the region: any increase in oil prices caused by instability in the area would disproportionately harm China.
China and the U.S. will not always agree on Middle Eastern policy, especially on matters that can be interpreted as involving issues of state sovereignty. Ultimately, however, the two countries’ interests on most significant regional issues – secure energy flows, terrorism, piracy, the proliferation of weapons of mass destruction, and internal political stability – align. And, that provides a basis for cooperation.
The U.S. and Chinese navies could certainly cooperate more closely. China benefits greatly from the security the U.S. provides in the Persian Gulf and along the trade routes that take oil to China from the Middle East, but it does not assist much, even though 85 percent of the oil it imports pass through strategic shipping lanes. Other potential areas of cooperation between the U.S. and China include reducing the need for Middle Eastern oil generally – perhaps by encouraging their companies to develop alternative energy sources or explore for oil elsewhere jointly – and developing the economies of those countries in the region where rebellions recently occurred.
The U.S. and China will be active in the Middle East, and in Saudi Arabia, for the foreseeable future. How their mutual engagement in the region and their bilateral relations with states there evolve will have profound foreign policy implications both for them and the Middle East writ large.
Jason Fisher is an attorney living in the San Francisco Bay Area. He holds graduate and law degrees from the University of California, Berkeley, and his professional interests include foreign affairs, national security, and international law.
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