Martin Jacques - When China Rules the World

Nearly two-thirds of the world’s proven oil reserves are concentrated in the Arabian Gulf, with Saudi Arabia controlling over a quarter, and Iraq and Kuwait sharing a little under a quarter. These three countries control about half of the world’s known oil reserves. Another potentially large producer in the region, Iran, accounts for a little under a tenth of world oil reserves. The Gulf States are responsible for nearly 40 per cent of world crude oil exports, with Saudi Arabia ’s share around 12 per cent and Iran ’s 7 per cent. China became a net importer of oil products in 1993 and of crude oil in 1996. [1095] [1095] Zha Daojiong, ‘ China ’s Energy Security and Its International Relations’, China and Eurasia Forum Quarterly , 3: 3 (November 2005), p. 40. It is estimated that by 202 °China will have to import in the range of 57–73 per cent of its oil requirements. [1096] [1096] Ibid., p. 42. China first became seriously concerned about its future oil supplies during the 1990s and as a result began to take steps to ensure their reliability. Until 2006 its biggest single supplier was Saudi Arabia, but Iran is also very important. It would therefore be natural for China to seek a much closer relationship with the Middle East. Unlike Africa, however, the region is regarded by the Americans as its sphere of influence. The US has become increasingly embroiled in the Middle East over the last thirty years, building extremely close relations with Israel and Saudi Arabia in particular, and becoming involved in two Gulf Wars with Iraq, the second largest oil producer, with the invasion in 2003 culminating in the country’s occupation. The Chinese, as a consequence, have trodden very warily in the region for fear of antagonizing the United States, whose relationship, ever since the reform period began, it has prioritized over all others. In contrast to Africa, which has clearly now assumed a central importance in its foreign policy, China regards the Middle East, as a result, as of only second-tier significance. [1097] [1097] John W. Garver, China and Iran: Ancient Partners in a Post-Imperial World (Seattle: University of Washington Press, 2006), p. 293. Over the last few years it has employed various strategies to try to secure its oil supplies from the region. It has sought to negotiate long-term energy supply arrangements, most notably a ‘strategic oil partnership’ with the Saudis in 1999; [1098] [1098] Hassan M. Fattah, ‘Avoiding Political Talk, Saudis and Chinese Build Trade’, New York Times , 23 April 2006. Chinese oil companies have tried to gain rights to invest and develop oilfields in the region; and, finally, China has encouraged companies in the Gulf to invest in Chinese refineries in order to try to promote closer links. [1099] [1099] Phar Kim Beng and Vic Y. W. Li, ‘ China ’s Energy Dependence on the Middle East: Boon or Bane for Asian Security?’, China and Eurasia Forum Quarterly , 3: 3 (November 2005), p. 24.

At the heart of China ’s strategy in the Middle East lies Iran, with which it has long enjoyed a close relationship. The two countries have much in common. They are both very old civilizations with rich histories of achievement and a strong sense of superiority towards other states in their respective regions. They have also both suffered at the hands of the West, which they deeply resent, believing they would prosper rather more in a world no longer dominated by it. Although interests rather than attitudes have primarily driven their relationship, there is a certain sense of affinity between the two countries. [1100] [1100] Garver, China and Iran , pp. 2-17. As an emergent global power, China naturally seeks friendly relations with more powerful states as this in turn is likely to enhance its own influence, [1101] [1101] Ibid., p. 28. and Iran very much falls into this category. China nevertheless has acted cautiously in its relationship with Iran, concerned to preserve its international reputation in the face of the militant Islamic ideology of the Iranian regime post-1979. The single most important constraining factor in China ’s stance towards Iran, however, has been the attitude of the United States. China has walked a skilful diplomatic tightrope, at times cooperating with Iran in ways contrary to US policy and at other times cooperating with the United States in ways contrary to Iranian policy. Until quite recently it managed to thwart American attempts to impose economic sanctions on Iran and it successfully resisted efforts to excommunicate Iran after it had been branded as a member of ‘an axis of evil’ by the Bush administration. [1102] [1102] Ibid., pp. 281, 283. China ’s economic relationship with Iran began to grow after the departure of the US and UK following the 1979 Revolution. The key to their blossoming partnership has been China ’s export of large quantities of high-tech capital goods, engineering services and arms to Iran in exchange for oil and raw materials, with trade between the two countries growing extremely rapidly during the 1990s. [1103] [1103] Ibid., pp. 237, 246. In 2003 two major Chinese motor vehicle manufacturers established production plants in Iran. China negotiated a major package of oil deals in 2004, as a result of which it became a major stakeholder and one of the largest foreign investors in the Iranian oil industry, in addition to Iran being one of its biggest suppliers of oil. [1104] [1104] Ibid., pp. 256, 265, 271, 275. And it signed a further major agreement in 2007 to develop part of the giant Yadavaran oilfield. [1105] [1105] ‘ Iran Signs $2bn Oil Deal with China ’, Financial Times , 9 December 2007.

The future of China ’s relationship with Iran is open-ended. China remains constrained by the need to maintain good relations with the United States, and nowhere are American sensitivities greater than in the Middle East. The US regards Iran as an alternative power broker in the region and a major potential threat to its interests — hence its long-running hostility towards Iran. In the long run, China would probably be content to see Iran playing a major, perhaps even dominant, role in the Gulf region, given that it will be a long time, if ever, before China itself could perform such a role; every global power needs allies and Iran is China ’s natural ally in the Middle East. As the international relations expert John Garver argues, a dominant China in East Asia combined with a dominant Iran in West Asia could ultimately become ‘a central element of a post-unipolar, China-centred Asia in the middle of the twenty-first century’. [1106] [1106] Garver, China and Iran , p. 295. Possibly China is thinking in these terms for a future multipolar system. [1107] [1107] Ibid., p. 295. Meanwhile, in order to keep its options open, China is likely to continue to help build up Iran while seeking not to antagonize the United States. The desire of the Obama administration to bring Iran in from the cold could make life easier for the Chinese on this score.

There are other possible long-term scenarios. China ’s highest priority is Taiwan, and the biggest obstacle in the way of reunification is American military support for the island. The most likely cause of military conflict between China and the US is Taiwan; and in the event of war, China would be extremely anxious about the security of its maritime oil supply routes, especially in the Malacca Strait and the South China Sea, which could easily be severed by the US ’s superior air and naval power. In such an eventuality, Iran could at some point offer the possibility of a land-based supply route from West to East Asia. But there is another possible future scenario, namely that China and the US could arrive at some kind of trade-off involving Taiwan and Iran in which the US agrees to stop sending weapons to Taiwan and China volunteers to do the same with Iran. In effect, China would agree to sacrifice Iran in return for Taiwan, its greater foreign policy priority. Such a deal would represent a tacit recognition that East Asia was China ’s sphere of influence and the Middle East, America ’s. [1108] [1108] Ibid., pp. 296-7.