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Gulf looking to China

Tonhis mood The Arabian peninsula was on edge. After a sudden spike, oil prices slipped amid a recession in the rich world. A brewing conflict in the Persian Gulf has Saudi Arabia worried about attacks on its oil fields and rushing to procure ballistic missiles to deter its rivals. Rejected by the United States, a young and powerful Saudi prince turned to China, which signed a secret deal to give the kingdom the weapons it wanted.

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If the story evokes a sense of déjà vu, then of course it should. It happened 40 years ago and led to the establishment of Sino-Saudi relations in 1990. Much of that echoes today, as Xi arrives in Saudi Arabia on Dec. 7, his second visit to the kingdom.

Of course, not all things are created equal. Compared to the 1980s, Saudi Arabia and its Gulf neighbors now have strong business ties with China. still, plus ça change: The Saudis continue to view China as a foil to the United States, which has become, in their eyes, a particularly unreliable partner over the past decade.

The challenge for the Gulf states is how to balance these two perceptions of China. The first one is becoming more and more attractive. China is a large export market and a major source of investment in the Gulf region. Second, China is less visible as a strategic hedge against a volatile US: China is not an easy substitute. Moreover, in attempting to leverage one power against another, Gulf leaders could hasten America’s abandonment of them, which is what they fear.

Starting with the economic relationship between the Gulf region and China, this relationship is developing. Energy is still at the core. Last year, 51 percent of China’s oil imports came from Arab countries, four-fifths of which came from the six monarchies of the Gulf Cooperation Council (Gulf Cooperation Council). In November, state-owned energy giant Sinopec signed a 27-year deal to buy liquefied natural gas from Qatar, the longest-ever gas deal.

Since 2005, China has signed $223 billion worth of large investment deals and construction contracts with Arab countries, according to the American Enterprise Institute, a Washington think tank.Of this total, 52% have been with Gulf Cooperation Council Countries (Algeria, Egypt and Iraq make up most of the rest). The pace of these deals picked up in the late 2010s (see chart). Although it has since slowed due to the pandemic and a slump in Chinese investment globally, China still sees hope in the Gulf region. In the first half of 2022, Saudi Arabia received $5.5 billion in investments and contracts through China’s Belt and Road Initiative, more than any other country.

Most of the investment is still concentrated in energy. The trade involves oil, too: almost all of China’s imports from the region are petrochemicals and other commodities. The Gulf states are keen to shift their economies away from oil and see China as a key partner in the effort. Last year it poured money into hotels in Oman and car manufacturing in Saudi Arabia. However, such projects remain outliers; non-oil investment remains subdued.

None of this would cause much anxiety in the United States. Worrying for those in Washington is the Gulf’s increasingly close relationship with China in strategic areas: telecommunications, security and, increasingly, defense. Gulf Cooperation Council Members are loyal customers of U.S.-sanctioned telecommunications giant Huawei and are happy to do business with companies like SenseTime, an artificial intelligence company blacklisted by the U.S. for spying on Uighurs in Xinjiang. In September, a company owned by Saudi Arabia’s sovereign wealth fund announced a $207 million joint venture with SenseTime to build a artificial intelligence A laboratory in the kingdom.

China also sells armed drones to US United Arab Emirates, among other things, have used them on the battlefield in the region. In March, a Saudi company signed an agreement with a Chinese state-owned defense giant to manufacture drones in the kingdom. U.S. spies say China is also helping Saudi Arabia build ballistic missiles.

Last month, at the Manama Dialogue, an annual security conference in Bahrain, U.S. officials sounded the alarm. The president’s Middle East adviser, Brett McGurk, said greater cooperation with China in the region would put a “ceiling” in relations with the US. Another official acknowledged tensions between the two countries, especially over Iran.

Xi Jinping received an even warmer reception than Joe Biden, who visited Saudi Arabia in July, his first as president, feeling desperate: oil prices were high, elections were looming, and he needed help. The Saudis sent him home empty-handed. After more than a year of cynicism from his people, they were in no mood for generosity.

Mr. Xi, by contrast, is likely to go home with a bevy of big investment deals and other announcements. He was due to meet Saudi leaders, including Crown Prince and de facto ruler Mohammed bin Salman, on Dec. 8. Next on his agenda is a summit with Gulf leaders and further meetings with people from around the Arab world. Saudis joked about the prospect of a taciturn Xi taking part in a traditional sword dance.

Saudi officials insist that none of this is a snub for the United States: China is an important country, they say, and the kingdom treats it as such. Still, the Biden team has had a tricky relationship with Saudi Arabia and sees China as its main competitor. In stark contrast to Biden’s nonchalance, Xi’s friendly reception would not be very popular in Washington.

Privately, Gulf officials say they are annoyed by a U.S. whose policies appear to be inconsistent. Three successive presidents have spoken of reducing the U.S. role in the Middle East, but they don’t want other powers to gain much leverage while they’re gone. This frustration in the Bay Area is understandable.

But so is America.this Gulf Cooperation Council Complaining that the US is not doing enough to protect it from Iran, the Gulf Arab country’s main rival, with which China signed a 25-year “strategic partnership” last year. Xi Jinping is one of the few leaders with real leverage over Iran. Much of the oil exported from Iranian ports defies U.S. sanctions and ends up in refineries in China. However, he is reluctant to use it to put pressure on the Iranian government.

Buoyed by rising oil prices and economic growth, Gulf rulers feel confident: They think now is their moment to step out of America’s shadow. Mr Biden will have to accept a greater role for China in the region. But both sides should realize that now, as in the 1980s, China cannot fully replace the US in the Gulf.

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