China has few leverage in Middle East

Atlantic Council carries an extensive article about tensions in the Middle East, roles of Tehran and its proxies, Caliber.Az reprints the article.

In case it wasn’t already clear, the challenges of working with Iran became apparent again in Beijing. Tensions in the Middle East have been steadily escalating, and Tehran and its proxies are at the center of much of it. After a year of headlines about China’s growing clout in the Middle East, recent events have provided a useful reality check; despite China’s interests in the region being threatened, Beijing has apparently been able to exert little influence over Iran.

China has long tried to maintain a tricky balancing act in the Middle East, working with every country while trying to avoid alienating any of them. This friend-to-all logic makes sense for an extra-regional actor without aspirations of playing a significant political or security role. It allowed Beijing to build up its regional interests, enhance its economic presence, offer mediation that few took seriously, and release five-point plans that few read. The expectation has long been that China’s considerable interests in the region would result in a larger political role, and Chinese leaders have been saying as much for at least a decade. 

In a 2014 interview with Al Jazeera, Foreign Minister Wang Yi was grilled about the perception of China as an economics-only actor. He acknowledged “a need for China to build up its capabilities for sustained expansion of such cooperation,” noting that China would “play a role in the political field as well.” He added that “China’s political role in the Middle East will only be enhanced, not diminished.”  However, in the following years, there was little movement to indicate that China was willing to be more than an economic actor in the region.

After President Xi Jinping’s state visit to Riyadh in December 2022, this perception of a modestly influential China began to change. Throughout the first half of 2023, it looked like Beijing was ready to start spending the political capital it had long been saving up; Iranian President Ebrahimi Raisi visited China in February 2023, and Palestinian President Mahmoud Abbas did the same in June 2023. 

After the Abbas visit, Israeli Prime Minister Benjamin Netanyahu announced that he had been invited to visit China in October 2023. Ultimately, he didn’t go because of the Hamas attack on Israel, but for a time, China appeared willing to wade into the murky waters of the Israeli-Palestinian conflict. Additionally, BRICS and the Shanghai Cooperation Organization (SCO) expanded to include members from the Middle East. Most notably, in March 2023, the surprising announcement in Beijing came that Saudi Arabia and Iran were normalizing diplomatic relations. (It has been well-documented that the Omanis and Iraqis did the heavy lifting on that agreement, but China gladly put its great power stamp on the deal.)

Taken together, the popular narrative was that China had emerged as a major power in the Middle East, and one of the issues on which this was expected to pay dividends was in its relationship with Iran. The two announced a comprehensive strategic partnership during President Xi’s visit to Tehran in 2016, although it took five years to bring it to fruition. During that visit, Beijing and Tehran announced—far too optimistically, as it would turn out—that they would increase trade to $600 billion by 2026. Last year, according to the International Monetary Fund’s Direction of Trade Statistics dataset, the volume of trade reached $12.5 billion. Still, China is consistently Iran’s largest trade partner and has provided the Islamic Republic international legitimacy with Raisi’s state visit and full membership in BRICS and the SCO.  Many hoped this would result in Chinese leverage in Tehran that could be used to temper the aggressive behavior affecting China’s regional interests. The limits of that logic have been demonstrated over the past few weeks.

One issue is related to the SCO, which Columbia University’s Alexander Cooley described as “China’s attempt to establish, from scratch, a new organization that is neither controlled by nor beholden to Western interests and inputs.” Founded in 2000, it is a security-focused international organization, with the Regional Anti-Terrorist Structure (RATS) being one of only two permanent bodies (the other being its secretariat). While not a fully-fledged security community, member states are expected to come to a consensus on SCO matters, and the non-use of force among member states is a typical baseline expectation for these organizations. This is one reason why the dual memberships of India and Pakistan in 2017 raised eyebrows. Did SCO leaders China and Russia really believe they could manage such a tense relationship? As it turned out, China and India proved to be the more combustible ones, with hostilities in Doklam, Bhutan in 2017 and the Line of Actual Control in 2020.

On January 16, however, the newest full member of the SCO—Iran—strained the organization’s harmony and credibility when it launched missiles into Pakistan’s Balochistan province. Pakistan, in turn, launched counter-strikes into Iran. Tehran said that its target was Jaish al-Adl, a Sunni separatist group that killed eleven Iranian police officers in a December attack; Pakistan said its strike targeted separatist groups—the Baloch Liberation Front and the Baloch Liberation Army—that they suspect are hiding in Iran. Both strikes resulted in the death of children.

China’s foreign ministry called for calm and offered to “play a constructive role in cooling down the situation,” but it is not clear what that meant in real terms. It does underscore the SCO’s institutional weakness; if the member states were worried about terrorist groups operating in each other’s territory, they could share intelligence through RATS and coordinate a response. That Pakistan and Iran instead chose to launch airstrikes into their partner’s sovereign territory is not a rousing endorsement of the utility of China’s flagship international organization. 

The second issue is more troubling for Beijing: Yemen’s Houthi rebel attacks on Red Sea shipping. This began last October 2023 and escalated in January, with attacks on at least thirty vessels. Navigation between the chokepoints of the Bab el-Mandeb Strait and the Suez Canal is crucial for maritime commerce, an issue that affects all countries economically, including China. The European Union is one of China’s largest export markets. China has substantial investments in Egyptian Red Sea ports, a military facility in Djibouti, and the China Industrial Park, a China-Saudi joint investment in Jizan on Saudi Arabia’s Red Sea coast. Re-routing around the Cape of Good Hope is costly in time and money, adding between eight to ten extra days in shipping from Shanghai to Rotterdam.

The bigger impact is on global inflation and regional economic pressures across the Middle East, including in two of China’s comprehensive strategic partners: Egypt and Saudi Arabia. Egypt is already facing a deeply troubled economy and relies upon Suez revenue. Saudi Arabia has focused on building a stable and sustainable economy through its Saudi Vision 2030. More than anything, the Vision requires a stable region if it is going to attract foreign direct investment and global talent, and the Houthi attacks seriously undermine that. 

China’s response has been modest. Predictably, it did not join Operation Prosperity Guardian, the multinational coalition meant to ensure safe transit through the Red Sea. This was rewarded when the Houthis announced they would offer Chinese and Russian ships safe passage as long as they did not have links to Israel. China’s COSCO, with the industry’s fourth largest shipping fleet, has re-routed to avoid the security risk, despite the Houthi’s assurances. Others have not. 

The Financial Times reported on January 25 that smaller Chinese shipping companies—Transfar Shipping, Sea Legend, and Fujian Huahui Shipping—have taken advantage of this immunity to redeploy to the Red Sea. One can imagine that Beijing’s partners in Riyadh, Cairo, and elsewhere would have found this combination of a political non-response and commercial opportunism incredibly disappointing after all the pronouncements of a greater present last year. 

The US has repeatedly and publicly asked for Chinese support, which has not been forthcoming. On the face of it, this looks like a lack of US influence; China is confident enough to ignore the global superpower. Look more closely, however, and this seems to be a deft bit of positioning by Washington. China’s inaction exposes the self-interested and transactional nature of its position in the Middle East. Regional actors need international leadership in the Red Sea, and China has not offered it.  

On January 26, Reuters reported that Beijing had been working behind the scenes. It reached out to Iran—the Houthi’s sponsor and closest partner—asking them to rein in the group or risk Tehran’s economic relations with China. It is often assumed that the Houthis are an Iranian proxy, but it is more of a partnership than a patron-client relationship. A Houthi spokesman said there had been no message from Iran concerning China. Whether or not this is true—there is no reason for them to acknowledge such discussions publicly—it seems that the leadership in Tehran is far more focused on regional priorities right now.

At the same time, the partnership with China has not delivered in economic terms to the degree the Iranians expected. Since finalizing the comprehensive strategic partnership deal in 2021, Iran has been the recipient of a flimsy $185 million in Chinese investment, which pales in comparison to the excess of $5 billion Saudi Arabia has provided over the same period. Iran’s deputy economy minister Ali Fekri complained last year that he “is not happy with the volume of Chinese investment in Iran, as they have much greater capacity.” This frustration seems to have boiled over in January, when Iran decided that the days of cheap oil for China were done; Iran began withholding crude shipments to Beijing and demanded higher prices after long offering significantly discounted crude. The perception of Chinese leverage in Tehran—much like the perception of Chinese power and influence in the Middle East and North Africa—took a hit.

It is important to emphasize that these dynamics are all very fluid. Seeing its status and interests in the Middle East threatened, Beijing may yet step up and play a role commensurate with its economic footprint. However, it is more likely to continue to be the regional actor it has been over the past decade—one that comes to the Middle East to trade and build, not lead.