BICOM

What happened: BICOM has published a new report that examining China’s expanding role in the Middle East.

• ‘UK-China relations and a changing Middle East’ argues that China’s increasing involvement in the Middle East could threaten vital UK interests in the region due to differences over Iran policy, Chinese arms exports and Chinese investment in key locations where UK forces are deployed.
• The report found that while China’s military deployments in the Middle East are small, its trade and economic leverage towers above the UK. This outsize influence could cause a clash with the UK on Iran as China continues to purchase Iranian oil and undercuts attempts to sanction Iran.
• China has also played an important role in Iran’s ballistic missile programme, viewed by the UK as a threat to regional security, particularly after cruise missile strikes on Saudi oil facilities in September. A further challenge is that Britain’s military installations in the region may in future depend on Chinese-financed ports and logistics centres. For example the UK’s forthcoming permanent naval and army desert training centre at Duqm, Oman is due to be built in an area where China is investing $10 billion in infrastructure.
• Yet the report also found that China and the UK have shared interests in the Middle East. These include stable energy prices and supplies as well as increased bilateral investment and trade – In 2017, Chinese trade in the Middle East was worth $219.79bn. This compares to $58.21bn for the UK, and $134.08bn for the US. In particular both countries have a shared interest in keeping the Strait of Hormuz open to international shipping.

Context: The Middle East is critically important for China’s domestic energy needs and its trade with the EU – 60% of China’s daily exports to Europe flow through the Suez Canal. All this comes in the context of long-standing British involvement in the region that is based on four areas of interest: trade; soft power and diplomacy; defence and security arrangements; and international development.

• BICOM CEO James Sorene said: “UK-China trade is booming and could increase after Brexit. But the Middle East is becoming a source of tension in bilateral relations. Both countries are signatories to the Iran nuclear deal but whilst the UK is seeking to constrain Iranian military activity in the region and limit its missile programme, China is one of Iran’s largest arms suppliers and Chinese expertise played a vital role developing Iran’s advanced missile programme. China is also a major purchaser of Iranian oil, in violation of US sanctions, providing a major boost to the Iranian economy. In the longer term, increasing Chinese infrastructure investments in ports and infrastructure could ultimately create problems for UK military bases across the Middle East.”

Key findings: The UK and China differ on reconstruction in Syria – the UK will not provide assistance without a political process underway, as outlined in UNSC Resolution 2254, but China is already laying the groundwork for Chinese investment and for Chinese companies to bid for reconstruction contracts.

• While both China and the UK support the JCPOA Iran nuclear deal, the UK is moving towards the US position and views Iran as a destabilising player in the region which should be confronted and constrained. China-Iran trade is worth $37bn, its third largest trade partner in the Middle East after Saudi Arabia and the UAE. US officials estimate that 50-70% of Iranian oil exports go to China.
• China is Iran’s largest arms supplier, and has been a key partner in Iran’s military modernisation and nuclear development, as well as supporting the development of Iranian ballistic and cruise missiles.
• China’s growth in arms sales presents a challenge for the UK’s arms industry particularly in the Gulf where the UK has placed a moratorium on arms sales to Saudi Arabia.

You can read the full report here.