The Gulf is in a bit of a quandary, trying to figure out where the latest spat between China and Trump is leading to and at the same time trying to ensure that they do not have to choose sides as both China and the US remain important strategic partners, but for different reasons.
They have watched with some mounting alarm the fall out from the controversial call that was concluded between President-elect Donald Trump and Taiwan’s President Tsai Ing-wen, whereby, despite protestations, Beijing believes the call was arranged in advance and was a deliberate test of China’s patience.
However, made a point in noting that Trump has yet to assume office, and is “inexperienced” as a politician, President Xi Jinping instructed Foreign Minister Wang Yi to adopt solemn protests and a “mild” reaction – for now.
Going forward, Beijing will send a black and white message to the White House that there is no middle ground for the US in establishing a formal relationship with Taiwan, meaning any effort to establish formal relations with Taiwan would mean a cessation of relations with Beijing. The recent seizure of the underwater US surveillance drone is a direct message.
China Sea tensions between the US and China are still unresolved, and President Xi did not rule out the possibility the Trump Administration could challenge China’s “core interests,” especially in Taiwan and the South and East China Seas. Chinese officials warn that if the Trump Administration were to conduct high-level military exchanges with Taiwan beginning next year, Beijing will immediately suspend military exchanges with the US.
Over the next two months, Beijing will be on the look-out for two signs from the Trump Administration: The first is whether senior US officials meet with Tsai Ing-wen when she visits New York on her way to Nicaragua, Guatemala and El Salvador in mid-January. The second is whether the White House invites Taiwanese officials to Trump’s inaugural ceremony. If so, China has threatened it will seek to suspend diplomatic relations with the US.
Chinese sovereign entities took up a substantial amount of the recently concluded Saudi mega bond issue, especially in the medium and longer tenors, and have expressed their interest in the planned Aramco IPODr. Mohamed Ramady
And so, where does this leave the Gulf states, principally the largest GCC member, Saudi Arabia? They are all inextricably linked to the US in defense treaties and the US acts as a protector of mutual energy and economic interest against Iran’s interference. Trade relations are substantial with the US still ranking near the top in bilateral trade, with many US international companies, especially energy related, having a long association with the region.
The fact that ExxonMobil Chairman and CEO Rex Tillerson has been nominated as US Secretary of State offers some hope that strong energy relations will continue, at least in joint projects in the US, with its cheap gas feedstock for chemical manufacturing.
The large number of Gulf students studying on scholarships in the US will ensure that there is a preference for US products and technology transfer for years to come once these students come back and assume positions of responsibility.
The Chinese, however, have made major strides since establishing diplomatic relations with Saudi Arabia in 1990. It hasn’t gone unnoticed that the first overseas official visit that the late King Abdullah bin Abdulaziz made after becoming king was to China in 2006.
Since then several high level bilateral visits have taken place to cement this growing relationship, with Chinese President visiting the Kingdom, Egypt and Iran in January 2016, where he entered into many agreements to integrate the region, and Saudi Arabia especially, into a new “Silk Road” trade hub, something that appealed to Saudi Arabia as the current Saudi Vision 2030 aspires to have the Kingdom become a center for services and manufacturing.
The attendance of Deputy Crown Prince Mohammed bin Salman at the recent G20 Summit in Beijing meeting was also marked by several new bilateral agreements and initiatives in many sectors between the two countries.
It was noticeable that Chinese sovereign entities took up a substantial amount of the recently concluded Saudi mega bond issue, especially in the medium and longer tenors, and have expressed their interest in the planned Aramco IPO, as well as a possible listing in Hong Kong.
From almost negligible trade relations in 1990, China overtook the US as the Kingdom’s major trading partner by 2014, with imports of SR 87.1 billion compared with imports of SR 84.7 billion from the US, and Chinese imports growing to SR 92.3 billion in 2015 compared with SR 89 billion for the US.
In 2013, Chinese imports to Saudi Arabia totalled SR 78 billion while those from the US stood at SR 85 billion and bilateral Sino-Saudi trade stood at SR 262 billion in 2015. Energy exports to China and Asia have also increased with around 1,670 million barrels exported to that region from Saudi Arabia alone in 2015 compared with 434 million barrels’ oil exports to North America, with these volumes declining as the US ramped up its own shale oil production, and is now threatening energy independence from the Middle East following President-elect Trump’s election victory.
Chinese relations have not only been in commercial trade but also in the military sector and several GCC countries have purchased military equipment from China, either as part of their procurement diversification or as a signal to traditional suppliers, such as the USA, that alternative sources can be found.
When the US refused to sell Saudi Arabia long-range fuel tanks for Saudi F-15 fighters, Saudi Arabia arranged a deal with China in 1988, even before full diplomatic relations were established, to obtain nuclear-payload-capable CSS-2 intermediate-range ballistic missiles, but these purchases pale into insignificance compared with defence purchases from the US by Gulf countries and China has not, to date, any physical military presence in the region, unlike the US with bases and military facilities in Qatar, Kuwait and Bahrain.
For the Gulf, it is indeed a quandary – to continue depending on the US for a military alliances and support knowing that US global interests can change, while at the same time continue to build up an ever expanding economic and trade relations with China that can support the ambitious transformation programs that all GCC countries are embarking on? Can the Gulf ride two horses at the same time, whereby they look west but in essence go East?
Dr. Mohamed Ramady is an energy economist and geo-political expert on the GCC and former Professor at King Fahd University of Petroleum and Minerals, Dhahran, Saudi Arabia.