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    China Business
     Sep 29, 2010
Page 1 of 2
China builds up role in Gulf
By Chris Zambelis

China's diplomatic, economic, and security interests in the Middle East continue to expand commensurate with its energy interests and growing international clout. With the country the world's second-largest consumer and the third-largest net importer of oil overall, Beijing's energy security rests on the steady flow of oil from the Middle East.

The multifaceted bilateral relationships that are being forged between China and the leading oil producers in the Middle East and, in particular, the Persian Gulf, such as Saudi Arabia - China's largest oil supplier - and Iran - China's third-largest supplier of oil - reflect Beijing's myriad stakes in the region. China today enjoys close ties with the individual member states that

 

comprise the Gulf Cooperation Council (GCC), namely Saudi Arabia, the United Arab Emirates (UAE), Kuwait, Bahrain, Oman and Qatar.

While China's bilateral relations with key players in the Middle East continue to receive ample coverage in Western analyses, its burgeoning engagement with multilateral bodies in the region such as the energy-rich GCC has lagged by comparison.

China's engagement with the GCC is, in essence, analogous to its dealings with multilateral bodies such as the European Union (EU), the Association of Southeast Asian Nations (ASEAN) and the African Union (AU). As GCC members increasingly pool their diplomatic and economic resources to maximize their influence in the region and beyond, the nature of China's relationship with the bloc warrants a closer look.

GCC China Business Forum
The first GCC China Business Forum (GCBF), which took place from March 23-24 in Manama, Bahrain, represents the efforts of GCC members to engage China as a unified bloc. The GCBF was the product of a joint effort by the Federation of GCC Chambers of Commerce and Industry, the China Council for the Promotion of International Trade, and the Bahrain Chamber of Commerce and Industry to strengthen the already robust economic bond between China and the GCC.

The event featured, among other things, presentations on economic trends and opportunities in China and the GCC as well as networking sessions meant to facilitate contacts between Chinese and GCC business leaders. The majority of China's oil imports from the Middle East originate in the GCC and Iran.

While oil wealth drives the economies of the GCC - member states boast 45% of the world's recoverable sources of crude oil - the bloc is also a major aluminum and phosphates producer. Some predict that the GCC will account for 18% of the world's output of aluminum by 2015. GCC members are collectively working to diversify their economies away from oil exports. Considering that the smelting process required to produce aluminum is oil intensive, the GCC is well-positioned to broaden its capacity to produce aluminum to meet rising demand in China and other parts of Asia. In addition, the GCC is also keen to expand its stake in another oil-intensive sector: the global plastics conversion market.

With an eye on tapping markets in China and elsewhere in Asia, the GCC is expected to account for up to 11% of the total plastics conversion market in the coming years, an increase from its current market share of 2%. China is the world's largest importer of converted plastics. The Aluminum Corporation of China Ltd (Chalco), a subsidiary of Aluminum Corporation of China (Chinalco), is also interested in developing an aluminum production plant in Saudi Arabia.

Bilateral trade between China and the GCC topped US$70 billion in 2008; according to some estimates, the Sino-GCC trade volume will reach between $350 billion and $500 billion by 2020.

In another first in Sino-GCC relations, both sides held their inaugural Strategic Dialogue gathering in Beijing on June 4 to discuss a range of topics. Co-chaired by Chinese Foreign Minister Yang Jiechi and Kuwaiti Deputy Prime Minister and Foreign Minister Sheikh Muhammed Sabah al-Salem al-Sabah [1], GCC secretary general Abdul Rahman al-Attiyah, and Minister of State for Foreign Affairs of the UAE Anwar Muhammed Qarqash, the ministerial-level meetings in Beijing showcased the growing significance of Sino-GCC ties.

Both sides used the occasion to highlight the rapid development of mutually beneficial economic, diplomatic and cultural relations between China and the GCC. The meeting also prompted a statement denouncing Israel's May 31 attack against the Gaza Freedom Flotilla and a call for the lifting of Israel's blockade against Gaza. A second ministerial-level Strategic Dialogue meeting is planned for 2011 in the UAE.

Bloc power and politics
The Cooperation Council for the Arab States of the Gulf (commonly referred to as the GCC) was established in 1981 amid the backdrop of the Iran-Iraq War and the Iranian Revolution of 1979 as a trade and security bloc to foster closer economic cooperation and political and security integration among its six constituent members. [2] The GCC has since evolved into an organization keen to maximize the respective influence of its individual members as a collective body on a range of issues.

GCC members share a great deal in common. The group is composed of monarchical Arab dynasties, each of which is ensconced in a strategic alliance with the United States. The United States, in essence, guarantees the sovereignty and security of individual GCC members. The network of US military bases and naval assets positioned in and around GCC member countries reflects the strategic importance of the Persian Gulf. Bahrain, for instance, is home to the US Navy's Fifth Fleet.

The regional headquarters of US Central Command (USCENTCOM) is in Qatar. Fixed US military installations and forward operating bases (FOBs) are also located in Kuwait, Oman and the UAE. While the United States has removed its troop presence from Saudi Arabia, close military and security cooperation between US and Saudi forces continues; Saudi Arabian military bases are also available to US forces in the event of a crisis.

Patrols by US Carrier Strike Groups are a fixture of the Gulf's waters. GCC countries also spend billions of dollars on purchases of advanced US weapons platforms and technology; the United States just concluded its largest arms deal ever: a $60 billion deal to supply advanced weapons platforms to Saudi Arabia.

Due to their role as logistical hubs for US forces, GCC countries have also proved indispensable to launching and sustaining the US-led wars in Iraq and Afghanistan. The GCC states, along with Israel, Egypt and Jordan, are also critical to US efforts to contain Iran and project US power in the greater Middle East.

In spite of China's growing interests in the Persian Gulf, the region remains firmly entrenched in the US security orbit. Even with the United States engaged in two wars in Iraq and Afghanistan, there are no indications that Beijing is willing to challenge Washington's position as the preeminent force in the region.

Oil and natural gas
The collective oil and natural gas wealth of individual members underlies the power and influence of the GCC and their importance to China, the United States and the global economy; four GCC members are part of the Organization of the Petroleum Exporting Countries (OPEC). [3]

In spite of their modest populations - the combined population of GCC member states is around 37 million - the group wields a tremendous amount of leverage internationally. GCC members with the exception of Bahrain [4] are among the world's leading energy producers. Saudi Arabia is the world's largest oil producer and home to approximately one-fifth of the world's proven oil reserves. Saudi Arabia is also a major source of natural gas. The UAE is the world's eighth-largest oil producer, and boasts the world's seventh-largest oil reserves and sixth-largest natural gas reserves. Kuwait is the world's ninth-largest oil producer and has the world's fifth-largest oil reserves. Qatar boasts the world's third-largest natural gas reserves and is the world's top exporter of liquefied natural gas (LNG). Qatar is also a major oil exporter and Oman is an important producer of oil and a potential exporter of LNG.

Continued 1 2  


The Iran chip in Sino-Saudi relations (May 18, '10)


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(24 hours to 11:59pm ET, Sep 27, 2010)

 
 



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