The nature of the relationship between the Kingdom of Saudi Arabia (KSA) and Iran has played a central role in shaping the foreign policies of other Muslim states. Both countries have been contesting for the sphere of influence from the Middle East to South Asia and from Central Asia to Far East Asia. The ideological rivalry between the two countries has its roots in the history of Islam. The sectarian infighting of Schism and Wahabism propelled both sides to vey for influence with their own brands of Islam since the 18th century. It was further precipitated by the debates of political Islam, where contesting discourses were created to directly win the hearts and minds of Muslim populations across the globe.
However, the current meltdown is not the byproduct of retrospection from both sides; rather, it is the undeniable realities of the international system that have compelled both sides to improve their relations. As both KSA and Iran have been fighting for the sphere of influence in the Muslim World, the United States and China are also on the path of spare of influence globally. The Middle East is one contesting ground. The agreement between KSA and Iran is one of the victories for the Chinese diplomatic effort to increase the sphere of influence in the Middle East. China hosted both sides in Beijing from 6 to 10 March 2023. The deal is of the dividends of great power politics. Instead of aligning with one warring side Chinese mode of diplomacy has outmaneuvered the US.
China will have a whopping 271 billion USD investment in the Middle East in 2022. On the other hand, the US has invested only 96 billion USD, that is only 1.5% of direct US investments abroad. In 2021, China imported 128 billion USD worth of crude oil from the countries along with the Arabian Gulf and Strait of Hormuz – three times more than the United States and European Union combined. In 2020, China and Iran signed an agreement that China would invest 400 billion USD in Iran over a period of 25 years. On the other hand, in 2022, KSA was the largest recipient of Chinese investment under BRI. In June 2023, China and Saudi Arabia announced $10 billion in investments in mining, technology, and renewables. China is also the largest oil importer of KSA. In 2020, China’s 15.9% of crude oil was imported from the Kingdom. Despite being sanctioned by the US, Iran also exported 17.8 million tonnes of crude oil to China.
There are some geo-political and demographical realities that have enabled the Chinese to break the deal. Middle East has been a priority region for the US in the last five decades. The petrodollar economy enabled the US to enjoy its hegemony in the region. In January 2023, the Saudi finance minister announced that “Saudi Arabia is open to discussions about trade in currencies other than the US dollar”. The world has also witnessed an accelerating trend of de-dollarization. In 2001, the US dollar had a 71% share in the global market, which has declined to 58% in 2022. More, the US dollar has lost its currency as an intermediary, where many countries have started preferring third-party currency as an alternative to the US dollar.
These small figures are self-evident of China’s widening space in the Middle East, where the US is the biggest loser. The US has enjoyed the role of great power in the Middle East for long. However, the infamous ‘flip-flop’ diplomacy in the region, its relations with Israel, and highly self-interested moves in abandoning Afghanistan disseminated a clear message to the Middle Eastern nation-states to revisit their relationship with US China’s growing presence precipitated the leadership in the region to show its back to the US and start afresh for greater regional cooperation. According to some estimates, China has 330 billion USD in investment in the Gulf Cooperation Countries only.
The Middle Eastern leadership has also praised China’s global clout. In December 2022, Saudi crown prince Muhammad Bin Salman welcomed Chinese President Xi Jinping with a lavish reception in the capital Riyadh. It created mega optics worldwide. During the same visit, the Chinese president attended the first China-Arab states summit with the attendance of 21 Arab League leaders. The summit was the precursor of the Riyadh Declaration. This is one unique example of South-South cooperation where China has aimed to rejuvenate the incident Silk Rout. One of the most important points of the keynote address of the Chinese president was that “China supports the development and progress of Arab countries suited to their national conditions and holding their future firmly in their own hands.
The Chinese mode of engagement suits the Arab monarchies more than the Western mode of engagement. Western powers have long engaged the region in a pursuit to proselytize liberal values and democratic norms that stand contrary to the Arab culture. On the other hand, China’s business model approaches do not intervene in the socio-political structures of other countries except economic interdependence. This interdependence, according to the Chinese president, is the hallmark of people-to-people contacts. According to 2020 official data from the Chinese Ministry of Education, there are 15000 Arab students in Chinese universities. On the other hand, according to the International Institute for Asian Studies, there are around 1 million Chinese living in the Middle East.
Middle Eastern states were overdependent on the US China has enabled them to rebalance their relationship vis-à-vis the US. Despite the fact that Chinese investments have shaped a “Pax Sanica” in the Middle East, the leadership in the region doesn’t see this in binary terms. The defense needs of the regional players still remain a reality, and the Gulf States will pressurize the US to provide more sophisticated defense technologies in a strategic bargain vis-à-vis China. The US still thinks that it has no match in the Middle East in terms of defense and security cooperation. Going by this realization, China has preferred not to hit the security interests of the US.
