China's giant leap towards the GCC

China's giant leap towards the GCC
Comment: Beijing is known for its long-term pragmatism, and is investing massively in the infrastructure needed to develop oil and gas imports, writes Naveed Ahmad.
6 min read
07 Jan, 2016
The GCC nations are looking for investment opportunities in China [AFP]

Since 2014, China has been the single largest foreign business stakeholder in the Gulf Cooperation Council - and the dependence only set to grow.

Known for its pragmatism and long-term vision, Beijing is investing big-time, to sustain and secure vital business relationship with the Gulf nations. However, China's future-planning investment is not exclusive to Arab nations.

At the cost of $46 billion, China is securing multiple pathways to the world's largest deep sea port, Gwadar. Located on the mouth of Strait of Hormuz, the ancient Pakistani coastal city will house virtually any facility burgeoning trade may require.

The most significant among the China-Pakistan Economic Corridor (CPEC) projects are crude oil storage facilities, a refinery and international airport.

China's one-belt-one-road initiative

In 2013, Beijing proposed to Pakistan the idea of an economic corridor linking Gwadar with Kashgar, located in the historic but under-developed Xinjiang.

A mammoth project of rail links, motorways, special economic zones, dry ports and other infrastructure projects across Pakistan, the passageway would bring China closer to the GCC by more than 10,000 kilometres.

The cargo to and from the Gulf would reach its destination in ten days instead of 45 days. Besides saving time and logistical cost, the new route comes with fewer risks.

China will manage to avoid potentially contested channels near Taiwan, Vietnam, the Philippines, Indonesia and India. With 70 percent of China's trade and energy imports passing through the conflict and pirate-vulnerable Strait of Malacca, the urgency is unprecedented.

Read more: Building the Southern Silk Road, by Vijay Prashad

For now, China has chosen some mega projects to lay the basic infrastructure to connect western China to the mouth of the Arabian Sea.

The Bank of China, the Export-Import Bank of China and the proposed Asian Infrastructure Development Bank have earmarked billions of dollars for a Karachi-Lahore-Peshawar railway line, four coal-fired power stations, developing the world's sixth-largest coal mining blocks at Thar, building a natural gas pipeline between Gwadar and Nawabshah, and upgrading the Karakoram highway to Islamabad and Havelien - to name but a few.

The list is set to swell further on the basis of need and impact over the next 15 years.

Due to the negligence of Islamabad, a few large Baloch tribes have taken up arms against Pakistan's security forces. But over the past two years, Pakistan has improved the security situation in Balochistan considerably, while pushing for political engagement with the enraged tribes and engaging diplomatic channels against their alleged Indian funding through consulates in Afghanistan.

Long before the 'one-belt, one-road' initiative, China won Pakistan's confidence as an all-weather friend

The military operation in Pakistani tribal areas - including Waziristan - has stemmed terrorist activities for the most part. The Chinese investment revitalises Pakistan's urge to capitalise on its geostrategic location vis-à-vis India, Iran and Western powers. 

Long before the "one-belt, one-road" initiative, China won Pakistan's confidence as an all-weather friend.

As much as Pakistan is vital to China's quest for global economic and military might, Saudi Arabia carries equal weight.

Riyadh serves as Beijing's single largest oil-trading partner, supplying more than 15 percent of the country's total annual imports, followed by Russia at 13 percent.

Amid heightened tensions with Iran, Saudi Arabia - along with other GCC nations - is very much likely to be looking towards long-term agreements with China.

Due to Iran's defence pact with India and its lease of Chabahar port, China is increasingly more inclined to focus on the Arab Gulf suppliers of energy than lobby Tehran.

Prospects for the GCC economies

To augment the already soaring business relationship with China, the GCC nations are already looking for investment opportunities out east. And Pakistan's role as an energy bridge between China and the GCC brings the country back to the Middle East.

Qatar has now built its first terminal in China's eastern coastal province of Jiangsu, after the signing of a 25-year supply contract for gas. Already looking to diversify their economies, the GCC nations should invest in building and expanding oil pipelines, refineries and rail infrastructure in Pakistan as well as China.

Read more: Will China join Russia's military intervention in Syria? 

Building on the CPEC, Saudi Arabia, Qatar and other oil-exporting Gulf nations may look to link their energy ports with Gwadar - especially since China is now Dubai's biggest non-oil trade partner.

With much of UAE's $50 billion trade likely taking place via Gwadar, it is in the Gulf's interest to invest in trade infrastructure with a longer-term business vision.

In sync with their foreign policy needs, Gulf countries have an inherent interest in diversifying their future investments from Europe and North America to Pakistan, China and Turkey.

Taking a clue from China's policy of developing strategic ports across Asia, Saudi Arabia and the UAE may also ponder the development of strategic relationships based on economic concern, and with military undertones.

For example, there is high likelihood that Pakistan will provide the Chinese with a strategic naval base in the Arabian Sea should the need arise. The US and India have been wary of China's expanding military might, meanwhile, with a second aircraft carrier on the Beijing production line.

Pakistan as strategic linchpin 

Though China would not like to be part of power struggles between the GCC and Russia, or between Arab nations and Iran, nor would it like to treat the GCC nations as a bloc, its far-sighted investment in Pakistan can easily be capitalised on to benefit the Gulf.

Investing in Pakistan's untapped mineral resources in Balochistan and elsewhere would not only help diversify Saudi and other Arab investments, but also provide jobs and multi-dimensional stability in the country.

Such large-scale investments may bolster a positive image of countries such as Saudi Arabia, which more often make headlines for the fatwas of hardline clerics, or the gruesome images of death sentences being executed. 

At large, the Gulf nations lack focus on public diplomacy and people-to-people contact.

To make the Chinese corridor to the Gulf a success, Pakistan has an assortment of challenges to tackle

Iran clearly sees CPEC as an opportunity worth exploiting to bolster gas supplies to China, by linking the Nawabshah pipeline with its gas fields.

Such a plan will increase interdependence on Iran, which Pakistan has always avoided for the sake of its Arab friends in the Gulf. With Pakistan's inclusion in the Saudi-led "anti-terror" coalition, the gulf between Pakistan and Iran has started to widen even further.

To make the Chinese corridor to the Gulf a success, Pakistan has an assortment of challenges to tackle on its own.

The first is to establish the political stability of the democratic process. Contrary to its potential, Pakistan remains marred with basic problems largely due to corrupt and vengeful political leaders, and a praetorian military hungry for executive authority.

The second of Islamabad's challenges will be to establish a political settlement with the enraged tribes in Balochistan, as well as guaranteeing security of pipelines, highways and railroads. The ongoing Zarb-e-Azb operation has only eliminated safe havens of extremists.

The real peace stems from political inclusion and economic development of isolated regions, such as tribal areas along the Afghan border, or Balochsitan - where Gwadar port kisses the ocean.

The final major challenge for Pakistan is to keep its nuclear deterrence and delivery systems effective enough that India does not engage into an all-out conflict - limited or extended - or a proxy war.

Simultaneously, Islamabad faces economic and security challenges from Iran, aligned with India on one hand in long-term defence and trade pacts, and with sympathies in Afghanistan on the other.

Naveed Ahmad is a Doha-based investigative journalist and academic with special focus on diplomacy, security and energy issues. Follow him on Twitter:

Opinions expressed in this article remain those of the author and do not necessarily represent those of The New Arab, its editorial board or staff.