China's changing oil strategy in the Middle East

China's changing oil strategy in the Middle East
Chinese oil purchases offered Beijing a sphere of influence in the Middle East, but Covid-19 has upended this once-promising strategy.
5 min read
20 August, 2020
China is the world's largest importer of crude oil. [Getty]
Whereas the United States established its sphere of influence in the Middle East through diplomatic partnerships and military alliances, China underwrote a different approach through its impressive financial resources.  

The East Asian power, the world's largest importer of crude oil, bought petroleum from Arab states large and small. This relationship allowed China to forge economic ties to countries in a strategic region without having to entangle itself in their internal affairs.

The spread of Covid-19, however, has upended China's once-promising strategy. As tourism has plummeted in the pandemic's wake, China's need for fossil fuels has decreased.

For much of the spring, Chinese authorities blocked a range of international flights to keep the coronavirus from seeping through the East Asian country's borders, and travel to and from China remains well below pre-pandemic levels. 

The short-term slowdown to China's economy, a result of the country's lockdowns, has also lessened the need for petroleum from abroad. 

While Chinese businesses have continued to import large amounts of petroleum from Saudi Arabia and other energy superpowers to jumpstart China's economic recovery, the tumble in the price of oil after a dip in demand has left the Middle East's exporters struggling to make ends meet.

Given the Chinese military's minimal presence in the Middle East, purchasing oil offered Beijing a more logical path for pursuing a sphere of influence in the region

In April, the cost of oil in the United States fell below zero dollars, meaning that sellers of petroleum had to pay their customers to buy oil. In July, the International Monetary Fund predicted that the energy industry in the Middle East would lose $270 billion in revenue.

China may be saving money on fossil fuels in the short term, but the East Asian power's ties to a number of Arab energy superpowers may suffer in the long term. In 2018, China imported more petroleum from Kuwait, Oman, and Saudi Arabia than did any other country, and Chinese buyers have also done significant business with Qatar and the United Arab Emirates. These countries benefited from a reliable customer while China got a foothold in the Persian Gulf. 

Read more: Covid-19 diplomacy: Mapping China's Health
Silk Road in the Middle East

Today, even the wealthiest Arab countries are feeling the effects of the decline in Chinese purchases. Oman, a monarchy that once used proceeds from the energy industry to finance a sprawling welfare state, may now have to seek a bailout from its neighbors because of the coronavirus' economic consequences.

Joint projects that China employed to expand its sphere of influence in the Middle East, such as a Chinese-funded industrial park in the Omani town of Duqm, may wither amid the wider decline in China's economic partnerships across the region. 

The impact of a drop in demand from China will reverberate beyond the Gulf. In 2018, China distinguished itself as the largest buyer of petroleum from Yemen and second-biggest importer of oil from Iraq and Libya.

Though Saudi Arabia, the UAE, and other energy superpowers have relied on their exports to build a financial cushion that will help them weather the pandemic, recurring cycles of political violence have kept Iraq, Libya, and Yemen from doing the same.

As a consumer of fossil fuels, China has little obvious need for Iraq, Libya, and Yemen: the world's second-largest economy can always look for petroleum elsewhere. As a great power, however, China looked to international trade as a way to represent its interests in geopolitical theaters that Iran, Russia, the United States, and the well-resourced countries of the Gulf have long dominated.

China has premised its foreign policy on non-interventionism, with few Arab countries opposing its economic outreach

Given the Chinese military's minimal presence in the Middle East, purchasing oil offered China a more logical path for pursuing a sphere of influence in the region.

Even the appearance of a Chinese economic withdrawal from the Arab world could present an opportunity for other Asian countries interested in developing their presence in the Middle East.

India has already been making such a push. Indian officials have been focusing on the UAE, which does $60 billion in trade with India a year. Japan and South Korea, Chinese rivals and major importers of petroleum from the Middle East, may also press their advantage there.

Read more: China in the Middle East: Tourism and soft power

China still enjoys a major advantage over its Asian and Western competitors. Chinese officials have premised their foreign policy on non-interventionism: they refrain from criticizing the actions of other countries as long as those states extend the same courtesy to China. Chinese engagement with Saudi Arabia provides the most notorious example.

Unlike the United States, China has avoided condemning the bloody Saudi campaign in Yemen. Saudi Arabia, in turn, showed its appreciation by praising China's internment of a million Uighur Muslims.

Russia and the United States' diplomatic and military interventions in the Middle East have enabled both countries to amass influence in the region, but these adventures have also earned American and Russian officials plenty of enemies. China, on the other hand, has found that few Arab countries oppose its economic outreach.

This innocuous approach to foreign policy may allow China to withstand the effect of the coronavirus on its partnerships in the Arab world.

Austin Bodetti studies the intersection of Islam, culture, and politics in Africa and Asia. He has conducted fieldwork in Bosnia, Indonesia, Iraq, Myanmar, Nicaragua, Oman, South Sudan, Thailand, and Uganda. His research has appeared in The Daily Beast, USA Today, Vox, and Wired