China, Global Energy, and the Middle East Author(s): Steve A.

Yetiv and Chunlong Lu Reviewed work(s): Source: Middle East Journal, Vol. 61, No. 2 (Spring, 2007), pp. 199-218 Published by: Middle East Institute Stable URL: http://www.jstor.org/stable/4330385 . Accessed: 11/06/2012 03:14
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and China,GlobalEnergy, the MiddleEast

Steve A. Yetiv and ChunlongLu
China has significantly enhanced its position and interest in the Persian Gulf region over the past 25 years, making it an important newcomer in regional dynamics. Evidence clearly shows that it has expanded, in some cases dramatically, its diplomatic contacts, economic ties, and arns sales to regional states. This represents a novel development which is likely to accelerate in thefuture as China's dependence on Persian Gulf oil grows. China's rising position in the region has put Beijing and Washingtonat odds and could generate serious friction points in thefuture. Policy recommendationsare sketched to avoid such an outcome.

recenttimes, Chinahas become increasinglydependenton Middle Easternoil. for Chinahas no near-term substitute MiddleEastern given thatits own oil fields oil, are almostfully exploited.In fact, its oil importsare expectedto grow fourfoldfrom 2003 to 2030 with PersianGulf oil accounting muchof thatincrease.'Energysefor curityhas becomevital to Chinaandcentralin its foreignpolicy.Indeed,China's10th Five YearPlan (2001-2005) refersexplicitlyand for the firsttime publiclyto energy and security,which is definedas guaranteeing securingoil suppliesfrom abroadas essentialto China'scontinuedeconomicgrowthand modernization.2 one Chinese As energyofficialputit, we "needto findoil fast."3 From 1405 to 1433, China's fleet made seven epic voyages, includingtrips the throughout IndianOcean and PersianGulf, but shortlyafterthe last voyage, the forbadeoverseastraveland ship emperor, partlyin responseto isolationistpressures, building,puttingin motioneffects thatwouldleave the fleet nearlyextinctwithin 100 that It years.4 wouldnotbe untilthe mid-to late 19th century Chinawoulddevelopsome interestin the PersianGulf region.And, even then,its interestsandinvolvement were to for quitelimitedcompared thatof the greatpowers,caughtin theirrivalry strategic colonialplunder. and position,territorial aggrandization, outright While two worldwars China'srelativeisolationcontinuedinto the 20th century.

In

Steve A. Yetiv is a Professor of Political Science at Old Dominion University, and author of Crude Awaken-

ForeignPolicy: U.S. ForeignPolicy (Cornell,2004); Explaining ings: Global Oil SecurityandAmerican The United & Decision-Making the PersianGulf Crisis (JohnsHopkins,2004); andNo GrandStrategy:
States and the Persian Gulf (forthcoming, Johns Hopkins, 2008). Chunlong Lu is a Ph.D. candidate in International Studies at Old Dominion University, and author of several articles on China in majorjournals. 1. See International Energy Outlook 2006 (US Department of Energy, June 2006), p. 25. 2. See Minxuan Cui, ed., "Zhongguo nengyuan shiwu guihua jianjie" ["Brief Introduction of China Energy Tenth Five-Year Plan"], in Zhongguo nengyuanfazhan baogao 2006 [The Energy Deveopment Report of China 2006], (Beijing: Shehui kexue wenxian chubanshe, 2006). For a good summary of China's views on energy security, also see Erica S. Downs, "The Chinese Energy Security Debate," The China Quarterly, Vol. 177 (March 2004), pp. 21-41. 3. "China Drills Where Others Dare Not Seek Oil," Bloomberg News, International Herald Tribune, October 2, 2006.

4. See Louise Levathes, WhenChina Ruled the Seas: The TreasureFleet of the Dragon Throne,
1405-1433 (New York: Simon & Schuster, 1994).
MIDDLEEAST JOURNAL* VOLUME61, NO. 2, SPRING2007

200 * MIDDLE EASTJOURNAL drew European states into the Middle East and the Cold Warmade the region more important the UnitedStates,Chinaremained to largelyuninvolved. 1941, China's By leadersdidbeginto realizethatcontrolof theregionby hostilepowerscouldprovevery but withsurvival nation-building.6 dangerous,5 theywerepreoccupied and WhileChina in did seek to generateanti-colonial sentiment the regionin the 1950s and 1960s and to check Moscow in the 1970s, it was not untilthe late 1970s and 1980s thatBeijing, in conjunction with its broader politicalopeningto the world,started becomemore to seriouslyinvolvedin the MiddleEastandthe PersianGulf in particular. Chinahas enhancedits positionand interestin the PersianGulf region significantlyoverthe past25 years.In orderto ensureadequate energyto sustainits growing and population economy,Beijing has successfullyestablishedand in some cases dramaticallyexpandeddiplomatic,economic,and securityties acrossthe region,which it lackedin 1980. Thesechanges,whenconsideredin toto andacrossa broadrangeof an time, represent important changein the international relationsof the PersianGulf, andthey arepregnant with implications the futureof the region,for globalenergy for relations. security,and for Sino-American Indeed,China'srising profilealreadyhas to contributed tensionsin Sino-American relations. Thesetensionshavebeentempered in some measureby global-levelinterdependence betweenthe two countries, they but may well heightenin the future.Policy recommendations offeredin the conclusion are of this articleto help avoidsuchan outcome.

AREASOF CHINESE INVOLVEMENT

CHINA's LACK OF MILITARY PRESENCE

Unlike the United States,and to some extentBritain,France,and even Russia, Chinahas no historyof militarybasingor access agreements, muchless usingmilitary forcesfor politicalor strategic in advantage or nearthe region.It has no prepositioning sites in the area,minimalif any access to regionalfacilities,and lacks the navaland airprojection to in capabilities influencedevelopments the region.Perhaps a hedge, as Chinahas been constructing navalbase and portin Gwadar, a not Pakistan, far from the mouthof the Straitof Hormuz,which will allow it to monitormaritimetraffic, of engage in surveillance US and othernavalactivityin the PersianGulf and Indian Ocean,andbenefitfroma transit terminal crudeoil imports for fromIranandAfricato China'sXinjiangregion.Beijing also has continued debatehow to secureoil lanes, to but Chinais decadesaway from havingthe military,logistical, and communications technologyto cover the 7,000 miles of sea lanes that lie between Shanghaiand the Straitof Hormuz.7 Some Chinesethinkers have arguedthatBeijing'saim of ensuring secureoil supplylanes can be achievedmoreeasily andeconomicallyby "freeriding" on American rather thanby Chinaattempting secureoil itself, butothers protection to
5. Yitzhak Shichor, The Middle East in China's Foreign Policy, 1949-1977 (Cambridge:Cambridge University Press, 1979), chp. 1. 6. For a good history on China's regionalapproach,see Lillian CraigHarris,China Considersthe Middle East (London:I.B. Tauris,1993). 7. JohnCalabrese,"Dragonby the Tail:China'sEnergyQuandary," MiddleEast InstitutePerspective (March23, 2004), http://www.mideasti.org/articles/docl79.html.

ANDTHEMIDDLE GLOBAL CHINA, ENERGY, EAST* 201 are not comfortable with this approach.8 the foreseeablefuture,ChinacannotesFor cape relianceon theAmerican securityblanketin the PersianGulf. China'slack of militarycapabilityin the PersianGulf regionhas forcedit to resort almostexclusivelyto othertools of statecraft protectand advanceits interests. to In particular, discussedbelow, it has focused on developingdiplomaticcontacts, as tradeandforeigndirectinvestment, armssales,while also usingits influencein the and UnitedNationsandin termsof its relations with FranceandRussia.
DIPLOMATIC INTERACTION

Since the late 1970s, when Deng Xiaopinglaunchedthe FourModernizations, the People'sRepublicof China(PRC)has mademajorstridesin establishing nurand in the region. Before 1978, China'sdiplomaticrelations turingdiplomaticrelations with the MiddleEasthadbecomeparalyzed its rigidideologicalstand(revolutionby Since 1978,Chineseleadershaveimplemented "Open aryandanti-imperialist). an and Reform" its the policy to modernize economy,andgradually downgraded importance of traditional Marxistideology. They have tried to make China'sexternalrelations servethe national and goal of economicmodernization politicalstability.This internal of dynamicpavedthe roadfor the normalization the relationsbetweenChinaand all Middle Easterncountries.A set of substantive tangibleinterestsgraduallyhave and dominated China'sMiddleEast policy since 1980s:Among these interests,the quest for oil is the most important economicrelationswith one, followedby strengthening the MiddleEastandarmssales. In the 1990s,Beijingsuccessfullymaintained good relationswith all MiddleEastcountries, rangingfromAmerica'sclose allies (e.g., Israel andSaudiArabia)to intenselyanti-American states(e.g., IranandIraq). Eventhough China'sdiplomacyin the MiddleEastis largelylimitedto economicaffairsand arms sales, Chinahas soughtto gain a footholdon the politicalmapof this regionin recent years. In The evolutionof China'sdiplomacy manifestin particular is bilateral relations. whichhadbeen brokenoff in 1949 officialrelations, 1970, ChinaandIranestablished of followingthe establishment the PRC.But it was not untilthe early 1980sthatthese focused on generrelationsimprovedsignificantly. High-leveldiplomaticinteraction on War atingcooperation issues includingthe Iran-Iraq (1980-1988),armssales, and balancingglobal hegemonywhereIranand Chinasaw each otheras useful partners.9 ties Chinasucceededin the challengingtaskof enhancing with BaghConcomitantly, in untilmid-1975. relationswere established 1958, butremained dad. Sino-Iraqi poor aboutSoviet designsin the region,andthat Chinabecamemoreconcerned Thereafter, War to madeIraqmoreimportant China,while the Iran-Iraq would makeChinamore These complementary interestsdrovethe two to important Iraqas an armssupplier. statescloser. In additionto Iranand Iraq,Chinaestablishedrelationswith otherGulf states it as the UnitedArabEmirates such (1984) andBahrain (1989). However, still needed

8. Downs, "TheChinese Energy SecurityDebate,"p. 32. Purposes, Patterns,and Prospectsin the New World 9. See R. Bates Gill, ChineseArmsTransfers: Order(Westport,CT: Praeger,1992), pp. 96-99.

EASTJOURNAL 202 * MIDDLE to develop influencewith SaudiArabia,the leaderof the Gulf Cooperation Council The officialmeetingtook place in Omanin November1985, (GCC).10 firstSino-Saudi following severalyears of heightenedcontactbetween the two countries.By 1990, ties whichenhanced diplomatic were established, Beijing'sinfluencewith all statesof the the GCC.Relationsexpandedthroughout 1990s,"I afterthe two and,in particular, in oil statessigneda strategic partnership 1999. Beyondbilateral diplomacy, Beijingalso has madeeffortsto cooperatewith the GCC itself. On May 27, 1981, just two days afterthe GCC was formed,Chinaestablisheddiplomaticties with it. By 1996, the GCC and Chinaestablisheda regular mechanism supported that consultative increased economicandtradecooperation, with consultations be held eachyearrotating to betweenBeijingandRiyadh.China'sdiplomaticrelationswith the GCChavebeen catapulted the backof expanding on trade.By TradeConference established, 1992, the GCC-China was and,as we shalldiscusslater in this article,the PRC formallybeganto establishthe types of institutional contacts thatwouldexpandinto the 21stcentury. Since the UnitedStatesinvaded Iraqin 2003, Riyadhhasbeenconcerned the that liberation Iraq'sShi'a from SaddamHusayn'sauthoritarian mightignite antiof rule or for withinthe Kingdom, regimesentiment pressures democracy includingamongits in Shi'a population concentrated its majoroil producing areas.As repressive societies, Chinaand SaudiArabiahave been wary of outsideintervention pressures,and in or this respect,have had a commonset of interests.12 Riyadhhas tendedto believe that China'spragmatic foreignpolicy will not aim to changeits politicalsystem and way of life, in contrast American to foreignpolicy which sometimesaims in thatdirection, even if indirectly. Thus,it has hadaddedreasonsto look eastto Chinabothfor markets andpoliticalallies. Furthermore, Beijing andRiyadhhavebelievedthattheirpolitical cooperation might help them check America'sregionalinfluence,even as they both seek to cooperate withWashington economicandstrategic for reasons. In line withits securityandenergygoals, Chinaalso has soughtto improve poits sitionin the broader MiddleEast as well, beyondjust the Gulf region.On January 30, 2004, ChinaandArabcountries up a China-Arab set Cooperation Forum.Since then,it hasheldtwo ministerial meetings.In the secondministerial meetingin Beijingin 2006, China'sStateCouncilor, TangJiaxuan, asserted "China Arabcountriesshould that and becomepartners commondevelopment in through deepeningeconomiccooperation,"
and "... should become partners in safeguarding world peace, security and stability

our in throughstrengthening coordination a wide spectrum international of affairs."'3 While the arenasof the PersianGulf andthe broader Arabworldaredistinctin many
10. The six memberstates of the Gulf CooperationCouncil are:the United ArabEmirates,Oman, Bahrain,Qatar,Kuwait,and Saudi Arabia. 11. See text of the communiquebetween China and SaudiArabia,Beijing Xinhua Domestic Service in Foreign BroadcastInformationService (FBIS): CHI, November 20, 1999. Also, see Dru C. Gladney,"Sino-MiddleEasternPerspectivesand Relations since the Gulf War:Views from Below," InternationalJournal of Middle East Studies,Vol. 26, No. 4 (November 1994). 12. See WeihuaAn, "Zhongguo-zhongdong youhao hezuo guanxi wendingfazhan" ["StableDevelopmentof the Sino-MiddleEast FriendshipandCo-operation"], Xiyafeizhou [WestAsia&Africa], No. 6 (1998), pp. 54-60. 13. "DeepeningFriendshipand Strengthening Cooperationto Build a New-type China-ArabPartnership,"Ministryof ForeignAffairs of the People's Republic of China, May 31, 2006, http://www. fmprc.gov.cn/eng/zxxx/t256775.htm.

EAST* 203 ANDTHEMIDDLE ENERGY, GLOBAL CHINA, ways, leveragewith Arab countriesoutside the PersianGulf can enhanceBeijing's positionin the Gulf.
TIES IN THEREGION CHINA'S ECONOMIC

The PRC's diplomaticgains have facilitatedsignificanteconomicties with the First, China'senergyinterests. Gulfstates,mostof whichhaverevolvedaround Persian of becamean importer crudeoil for the firsttime in 1993. China'soil imports China to fromthe PersianGulfhaverisenquicklysince the 1990s,compared thoseof Europe becameChina'stopcrudeoil exportandAmerica(See Table1). In 2002, SaudiArabia And ing country.'4 by 2005, SaudiArabiaprovidedChinawith 17.5%of its imported Chinawith 11.2%of its oil, whilein 1994it only provided1.2%.In 2005, Iranprovided in the firstthreemonths 0.6%.Moreover, oil, imported while in 1994 it only provided and of 2006, oil importsfrom Iranto Chinaincreased25%,1' SaudiArabiaprovided that oil, 20%of China'simported a percentage is expectedto rise to 70%in the next few years.'6 uponPerOn the otherhand,AmericaandEuropehave becomeless dependent in general, sian Gulf oil since the 1990s.Americanoil importsfromthe PersianGulf have been decreasing.For example,in 2005, Saudi and Saudi Arabiain particular, oil, Americawith 11.2%of its imported while in 1994it provided only provided Arabia oil, Europewith7.1%of its imported And in 2005, SaudiArabiaonly provided 15.6%. while in 1994 it provided12.6%. numerous foreignoil companies,includingthose from the United Furthermore, and States and China,seek to exploit billions of dollarsin potentialoil exploration in tradeandinvestment the China'soil-related in contracts IraqandKuwait. production it to and Gulf stateshas risensignificantly Beijingis committed increasing even more. (CNPC)beganto move into the Corporation In 1983, the ChinaNationalPetroleum to with limitedcontracts providelaborand otherservices. Kuwaitiand Iraqimarkets and exportsto the Middle From 1992 to 1997 alone, China'soil material equipment of East grew 710 times,'7partlyas a resultof the maturing China'sbusinessfirmsas actors.The CNPCis one of severalforeignfirmswhichmay well attempt international in if stability thenext potential, Iraqcanachieverequisite to exploitIraq'spost-Saddam to its decade.Especiallysince 2000, Chinahasbeenpressuring oil companies intensify in to and mergers acquisitions the oil industry help ensureChina'senergysecurity.'8
14. Lei Wu, "Zhongguoshiyou anquanmianlinde tiaozhanyu duice" ["China'sOil Safety: Challenges and CounterMeasures"],Xiyafeizhou [WestAsia & Africa], No. 4 (2003), pp. 17-21. zhongguocong yilangjinkou shiyou zeng 25%, rihanjinkouruijian"["TheOil Imports 15. "Yijidu from Iranto China Increased25 Percentduringthe First Quarterof this Year,while the Oil Imports Dongfang zaobao [OrientalMorning from Iranto Japanand South KoreaDecreasedDramatically"], Post], June 6, 2006. 16. "SaudiAramcoto Supply Sinopec with Im b/d by 2010," OPEC Bulletin,Vol. 37 (May/June 2006), p. 60. in 17. See Xiaojie Xu, "Chinaand the Middle East:Cross-Investment the Energy Sector,"Middle East Policy, Vol. 7, No. 3 (June2000), esp. pp. 125-27. Also, see "OPECon Top,"Middle East Economic Digest (MEED),Vol. 44, July 21, 2000. 18. PaulaDittrick,"NationalOil CompaniesInvestbeyond Borders,"Oil & Gas Journal,July 17, 2006, pp. 18-24.

Table 1: Percentage of Petroleum (Oil) Imports from Saudi Arabia, Iran, and t
Petroleum (Oil) Imports, 1994-2005
1994 Saudi Arabia China Iran PersianGulf Saudi Arabia
United
_

1995 2.0% 5.4% 45.4% 15.2% 0.0% 17.8% 22.3% 6.9% 68.4% 11.9% 7.1% 20.9%

1996 1.0% 10.2% 52.9% 14.4% 0.0% 16.9% 22.3% 7.7% 68.5% 10.9% 6.3% 18.9%

1997 1.4% 7.8% 47.3% 13.9% 0.0% 17.3% 24.3% 7.8% 72.7% 11.2% 5.5% 20.2%

1998 6.6% 13.2% 61.0% 13.9% 0.0% 19.9% 23.0% 8.6% 75.5% 10.7% 5.7% 22.2%

1999 6.8% 10.8% 46.2% 13.6% 0.0% 22.7% 21.7% 8.9% 72.9% 7.7%
_

2000 8.2% 10.0% 53.6% 13.7% 0.0% 21.7% 22.5% 8.9% 74.1% 7.9% 4.4% 18.1%

200

1.2% 0.6% 39.7% 15.6% 0.0% 19.2% 22.3% 7.9% 67.6% 12.6% 6.6% 21.4%

14.6

18.0

56.2

14.0

States

Iran PersianGulf audiArabia

0.0%

23.3

22.8

Japan

Iran

10.2

PersianGulf
SaudiArabia OECD
_______

74.9

7.1%

Iran PersianGulf

5.4% 19.0%

4.0%

14.9

Source: Authors 'calculations are based on data drawn from Chinese Customs Statisti Customs General Administration of the People's Republic of China), and Internation (Washington,DC: Energy Information Administration, Official Energy Statistics from
*

Persian Gulf is inclusive of Saudi Arabia and Iran. ** "OECD Europe" (Organisation for Economic Cooperation and Development E Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Irel erlands.

EAST* 205 ENERGY, ANDTHEMIDDLE CHINA, GLOBAL China its Chinahas expanded economicties to IranandSaudiArabia. Moreover, often tends to view the United States as a strategicrival, and has become very conon cernedaboutbecomingdependent oil importsfromthe PersianGulf whereAmerican forceshavecontrol.Thus,Chinahas soughtto buyequitystakesin MiddleEastern Iran ties projectsandto improve withtwo of its mainsuppliers: andSaudi development of Arabia.For instance,in October2004, Chinaand Iransigned a memorandum unand in derstanding whichIranwouldallowthe ChinaPetroleum ChemicalCorporation oil to Group(SINOPEC) developIran'sYadavaran field (whichis its largestundevelliquefiednatural oped field) in exchangefor agreeingto buy 10 milliontons of Iranian energyrelagas annuallyfor 25 years.This massivedeal has solidifiedSino-Iranian of tionsagainstthe interest the UnitedStatesto isolateIran,andit hasbeenfollowedby and in 19 severalothercriticalgas andoil contracts 2005 and2006. Equallyimportant, as the planto builda pipelinein Iranto decooperation, two countries partof the strategic pipelinebetween alonganother liveroil to the CaspianSea, whichwill thenbe carried US further effortsto checkIran. and Kazakhstan China.This is likely to complicate with SaudiArabia,culits In the 1990s,Beijingimproved economicrelationship signed in Riyadhby thenagreement minatingin the 1999 StrategicOil Cooperation was struckon a simple quidpro JiangZemin.At its core, the relationship President and to quo. The Saudisopenedtheirmarket Chineseinvestment, Saudicompaniesbebusiness,therebywinninga foothold in refining gan participating China'sdownstream was This cooperation elevatedto a new level when SaudiKing in the Chinesemarket. on 'Abdullah, his firsttripoutsidethe MiddleEast since assumingthe throne,signed in 2006.20 ChinesePresin five majoragreements Chinaon energycooperation January of would "writea new chapter friendly identHu Jintaoassertedthatthis cooperation betweenChinaandSaudiArabiain the new century."2' cooperation its In part,Beijinghas soughtSaudimoneyandexpertiseto help it upgrade refineries to handleits growingoil imports.Meanwhile,as one Saudiofficialput it, Saudi Arabiamustaim to "investheavily"in Chineserefiningif Riyadhis to have a "domithat it Moreover, is probable Riyadhwill divertsome of its nantpresencein China."22 China,or enhanceits crudeexportsawayfromEuropeandthe US toward lower-sulfur overseasso as to provideChinawith higherqualityoil. The enhancedSinorefineries will likely is Indeed,theirbilateralenergyagreements Saudi relationship important. besolidify Riyadh'srole as China'stop supplierof oil, andcreateinterdependencies and tween the two countriesthatwill increasefuturecooperation, Beijing'sinfluence in Riyadh. Fourth,in the 1970s, Chinahad minimalnon-oil relatedtradewith the region; of consumer China'slight by the late 1980s,the MiddleEasthadbecomean important consumer,and technologicalgoods. China'sexportsto and importsfrom industrial, to the MiddleEast have risenquicklysince the 1990s, compared those of Russiaand
19. For instance,see "Sinopec Signs Up for Arak"MEED, Vol. 50, August 4, 2006, p. 17. ChinaDaily, January24, 2006. 20. "China,SaudiArabiaForgeCloser Relationship," 21. Quoted in "Chinaand Saudi Arabia Sign Historic Energy Deal," Taipei Times,January24, 2006, http://www.taipeitimes.com/News/biz/archives/2006/01/24/2003290537. 22. Nawaf E. Obaid,Amy Jaffe, EdwardL. Morse, Chad Gracia,and Kirk Bromley,"The SinoImplicationsfor US National Security,"The Gracia Group Report Saudi Energy Rapprochement: of DC: Department Defense, January8, 2002), p.14. (Washington,

EASTJOURNAL 206 * MIDDLE America(See Table2). The close ties betweenChinaandthe GCCwere strengthened of with the establishment a Free TradeArea Agreement(FTA),which was initiated an duringa GCCdelegationvisit to Beijingin July 2004. It has represented important on advance economic,trade,investment, technological and and cooperation,23 hascommittedthe partiesto "establisha joint economic and tradeco-operation commission consultative andofficiallylauncha bilateral mechanism."24 Table2: Exports to and Imports from the Middle East (value in million US dollars)
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Exportsto the China Middle East 2417.2 2658.2 3252.5 3285.8 3954.3 4448.6 4797.8 6677.3 7047.5 9928.8 14410.1 Importsfrom he Middle East 1957.6 1604.3 2129.4 2981.3 3779.3 3075.1 3431.3 9778.7 8909.6 9246.9 14269.1 Exportsto the Middle East 3081.3 1473.2 2483.5 3110.6 3565.4 3573.8 2921.6 6141.1 6147.2 6385.4 9601.0 Russ'ia?????? Importsfrom he Middle East 1129.4 400.5 Exportsto the Unite Middle East 15991.9 14002.6 14787.4117067.418712.2 20313.2 16620.3 15194.5 15194.9 15203.1 15705.5 Pe Middle Easq13296.3 13174.6 13533.3 14515.6 16386.4 14250.4 19532.1 30895.4 29873.1 26996.8 35061.2 States Importsfrom 541.5 735.5 994.1 614.0 412.5 478.5 602.3 831.0 1042.9

Source:Datafor this table are drawn from International TradeStatistics Yearbook, Various Issues (NewYork: UnitedNations). In the contextof the multitude regionaltradeblocs thathavebeen established of to meetthe challengesof globalization, China'sFTAinitiative beenimportant. has China soughtto establishthe FTAas its nationalstrategy to the fact thatits economic due modernization export-oriented thatit lacks any defacto tradeblocs to stabilize is and its foreigneconomicrelations.In 2001, Chinaandthe Associationof Southeast Asian Nationssigneda framework tradeagreement aimedat establishing world'slargest the FTAby 2010.25 GCChas been the secondorganization The willing to haveFT7A talks withChina.InApril2005, the firstroundnegotiation theFTAwas heldin Riyadh.It on set up the workingoutlinefor the FTAnegotiation. secondroundnegotiation The was held in Beijing in June2005. The negotiations focusedon marketaccess for the FT'A and rules guidingthis interaction, yielded an agreementon tariffreductionson and The goods traded. thirdroundnegotiation heldin Beijingin January was 2006. Thetwo

23. See Yixue Wu, "Pact Ensures Benefits for Both China, GCC," China Daily, July 8, 2004, http://www.chinadaily.com.cn/english/doc/2004-07/08/content_346410.htm. Also see Yan Dai, "Closer Economic Ties with GCC Suggested," China Daily, July 8, 2004, http://www.chinadaily. com.cn/english/doc/2004-07/08/content_346425.htm. 24. For details, see The Joint Press Communiquebetween the People's Republic of China and the CooperationCouncil for the Arab States of the Gulf, Ministryof ForeignAffairs of the People's Republic of China, July 7, 2004. 25. Hepeng Jia, "FTAto Help Diversify China's Energy Sources,"China Daily, July 15, 2004, http://www.chinadaily.com.cn/english/doc/2004-07/15/content_348779.htm.

CHINA, GLOBAL ENERGY, AND THE MIDDLE EAST * 207

sides believedthatthis negotiation a good foundation futurecooperation.26 set for Overthe last decade,China'seconomic and traderelationswith the GCC have expanded greatly.Since the mid-1990s,Sino-Sauditradehas been increasingdramatically (See Figure 1). In 2002, SaudiArabia'stotal tradevolume with Chinaexceeded with Chinain the MiddleEast.The Sino$5 billion,makingit the largesttradepartner GCCtradevolumehasjumpedfrom $1.5 billion in 1991 to $33.7 billion in 2005. By 2004, the GCCcountries emergedas China'seighthlargesttrading partner, eighthlargest exportdestination, ninthlargestsourceof import.27 MiddleEastoil producand As ers investin China'sdownstream refinery petrochemical oil and industry upstream and and off-shoreoil exploration, as Chinainvestsin MiddleEast oil exploration proand mutualinvestment can duction,Beijing believes thatthe close upstream-downstream help securea morestableoil supplyfromthe MiddleEast.28 Figure 1: Sino-SaudiTrade Statistics

Sino-Saudi Trade Statistics

6000

5000

CO4000 r- 3000 2000 1000 0

1950 1960 1970 1980 1990 2000 2010

Year
Source: Data for this figure are drawn from Chinese Customs StatisticalYearbook, Various Issues (Beijing: Customs General Administration of the People's Republic of China).
The establishment of the FTA, which aims to facilitate mutual investments, may

leadtoevenbetter economic between China theGulfBloC.29 "China and The integration

of Plan"' the leadingpetrochemical companyin the Gulf,SaudiBasic Industries Corporation(SABIC),confirmsthis point.Abdulrahman Al-Ubaid,SABIC'sVice President.,
has asserted that SABIC's strategic goal has been to support China's economic devel-

26. "The3rd RoundNegotiationof China-GCCFTA Closed,"from The Chinese GovernmentOfficial Web Portal,January25, 2006, http://english.gov.cn/2006-01/25/content_170664.htm. 27. Wu, "PactEnsuresBenefits for Both China, GCC." 28. See ZhongqianYang, "Zhongguoshiyou anquanjiqi zhongdong shiyou zhanlue,"["China's Oil Securityand its Middle East Oil Strategy"],Shijiejingji yanjiu [WorldEconomic Studies], No. 1 (2001), pp. 19-22. 29. Jin Zhang, "ProgressMade in Free TradeTalks with GCC,"China Daily, July 5, 2004, http:// www.chinadaily.com.cn/english/doc/2004-07/05/content_345425.htm.

208 * MIDDLE EASTJOURNAL with China,and to meet its dramatically opment,to be in strongsupplypartnerships growingdemandas effectivelyas possible.30 SABIC has initiatedthreeprojectswith Chinesecompaniesto establishjoint-venture bases in China.3" the next In production ten years,thereis likelyto be a dramatic in tradeandmutual expansion bilateral investmentin each other'supstream-downstream andoil sector,as a way of creating energy moreenduring sustainable and interdependencies. Table3: China's Exports to and Imports from Iraq (value in million US dollars)
Year 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Total 135.72 158.32 76.67 63.78 94.74 79.52 0.36 1.27 5.52 2.42 0.91 1.15 93.20 164.53 264.07 974.90 469.99 517.06 56.38 46.98 82.40 Export 133.05 155.08 73.45 63.78 60.91 33.64 0.08 0.67 4.87 1.55 0.30 1.04 58.98 104.67 147.95 327.26 396.97 420.82 56.06 14.94 40.80 Import 2.67 3.24 3.22 0 33.80 45.88 0.28 0.60 0.65 1.07 0.61 0.11 34.22 59.86 116.12 647.64 73.02 96.24 0.32 32.05 41.60

Source:Department Western AsianandAfrican of Ministry Commerce the of of Affairs, People'sRepublicof China.Datafor this table are drawn from http://www. mofcom. gov.cn. Beyondthe GCC,Sino-Iraqi tradehas been influenced greatlyby Iraq'spolitical situation. After the 1991 Gulf Warand the accompanying sanctionsagainstIraq, UN tradewas minimal(See Table3). By the end of the 1990s, it rose dramatiSino-Iraqi
30. "Fang shate a'la'bo jichu gongye gongsi fuzongcai a'er wubeide" ["Interviewingthe Vice Presidentof the Saudi Basic IndustriesCorporation Al-Ubaid"],People's Daily (Overseas Edition), July 8, 2004, p. 2. 31. "Zhongdong huagongjutoujiyu zhongguoshichang"["TheMiddle East PetrochemicalGiants are Seeking Opportunities China'sMarket"], in Finance News], July Guojijinrong bao [International 5, 2004, p. 16.

ANDTHEMIDDLE EAST* 209 GLOBAL ENERGY, CHINA, productsin cally when the UN beganto allow Iraqto sell its crudeoil andpetroleum with Iraqto exchangefor humanitarian supplies.In 1997, the CNPCsigneda contract for field in 1998.32 developits al-Ahdab field andbegannegotiating the Halfayah oil trade,but Chinahas shown interestin The 2003 Gulf WardeflatedSino-Iraqi positionthere. helpingreconstruct and has madeeffortsto restoreits investment Iraq In late 2003, interimTradeMinister'Ali 'Allawiwas invitedby the ChineseMinistry of Commerceto visit Beijing to promoteSino-Iraqieconomic relations,and China pledged$25 millionin humanitarian assistanceto Iraq.33 for The PRChas attempted lay the politicalgroundwork strongrelationswith to post-Saddam Iraq.As ChineseAssistantForeignMinisterShen Guofangpointedout, Chinese companieshave helped Iraqin the past and the "ChineseGovernment will in to thesecompaniesin theirparticipation Iraqi adoptall necessarymeasures support At reconstruction."34 some stage, Iraq,which holds the world'ssecond largestoil reserves,mayregaina vital role in the MiddleEast.Gaininga footholdin Iraqcan serve whichBeijingvalChina'senergysecurity, promisesmajorbusinessopportunities and ues highly. that In line with its growinginterestin Iraq,Beijinghas stressedrepeatedly the In UN shouldplay a crucialrole in Iraq.3s March2004, whenmeetingBahrUl-Uloum, the visiting Presidentof the IraqInterimGoverningCouncil,Chinese PresidentHu with Iraq Jintaosaid that,"Chinawill consolidateand developbilateralco-operation and on the basisof mutualrespect,equalityandreciprocity" emphasized againthe role In and of the international governing Iraq."36 the Fourth community the idea of "Iraqis Session of the TenthChineseNationalPeople'sCongress,which was held in Beijing in in March2006, Minister Foreign of AffairsLi Zhaoxingstressedthreeprinciples the and territorial of sovereignty, integrity,and reconstruction Iraq:Iraqiindependence, in he called for a greater role for the UnitedNationsandinternational community the In of reconstruction Iraq.37 effect,thatmeansin partthatBeijingprefersless American of globalstrategy seekinga multipolar powerin Iraq,a notionthatties into its broader Americanrole world in lieu of a hegemonicone. Among otherthings, a diminished

Implicationsfor US National 32. See Obaid, et. al., "The Sino-Saudi Energy Rapprochement: Security." 33. "The China-IraqRelations,"Ministry of ForeignAffairs of the People's Republic of China, December22, 2003, http://www.fmprc.gov.cn/chn/ziliao/wzzt/2272/tIO427.htm. inFBIS:CHI-2003-1024(WNC#Ohnf4u9O3e96tm). 34. QuotedinBeijingXinhua,October24,2003 Also, see comments by Chinese Vice-PremierZeng: "China,Iraq to StrengthenEnergy Cooperation," China Daily, December 2, 2004, http://www.chinadaily.com.cn/english/doc/2004-12/02/content_396982.htm. 35. See, for instance, Beijing Xinhua, May 27, 2004 in FBIS: CHI-2004-0527 (WNC #Ohyfec9014hj2c). Also, Beijing Xinhua,March25, 2004 in FBIS: CHI (WNC #Ohv6t8cO3plqy9). ChinaDaily, March26,2004, http://www2. 36. "HuOffersHelp to IraqiPeace andDevelopment," Also, see Liangxiang Jin, "Energy chinadaily.com.cn/english/doc/2004-03/26/content_318057.htm. First:Chinaand the Middle East,"Middle East Quarterly,Vol. 12, No. 2 (Spring2005), esp. p. 6. Situation 37. "Ministerof Foreign Affairs Li Zhaoxing answeredthe questions on International and China's Foreign Policy,"People's Daily, March 8, 2006. On the importanceof sovereigntyas a concept in China's domestic and foreign policy, see Allen Carlson, UnifyingChina, Integratingwith the World:Securing Chinese Sovereigntyin the Reform Era (Stanford:StanfordUniversity Press, 2005).

210 * MIDDLE EASTJOURNAL may increasethe PRC'seconomicprospects, becauseWashington a primecompetiis tor and has soughtto check China'sabilityto penetrate post-warIraq.Of course,the PRCmustalso at leastconsiderthatif the UnitedStatesfails in Iraq,Iraqmaydescend into even moreseriouscivil strifeandChina'seconomicprospects therewill diminish dramatically.
ARMS SALES

Armssales havebeen an important of China'sbroader part in strategy the region. In the 1980s,Chinabeganto see the MiddleEastas a largemarket arms,a percepfor tion thatwas buoyedby the Iran-Iraq War. Arms sales providedit with hardcurrency whichwas a key interest,but also enhancedits influence.38 Beijingdevelopedan arms with IraqandSaudiArabia,as well as with some of the smaller relationship ArabGulf with Iranwas the most developedand dangerous, states,but its relationship fromthe US perspective. increasingly Iran viewedChinain the 1980s as a potential against ally both Moscow andWashington. instance,Iran'sSpeakerof the Parliament, For Akbar in meetingswith the Chinesein 1987 that he had confiHashemiRafsanjani, noted dence that Chinawould "win back a majorpartof the international arena" from the And superpowers.39 Chinahad financialand politicalinterestsin pursuingits ties to Iran,not to mentionthe strategic goal of balancing superpowers. the China'sarmssales to the regionexpandedsignificantly duringthe Iran-Iraq War to the tuneof over$12 billion.Its relationship withIrandevelopedin earnestafterRafsanjanivisited Beijingin 1985 and signed agreements the sale of missile technolfor ogy, whichlaunched broader cooperative effortsin the design,building,andtestingof missiles. Subsequently, Chinasold Iranlargequantities conventional of weapons,and the equipment,materials,and technicalassistancethat could be useful in producing weaponsof mass destruction ballisticmissiles. and Chinesetechnologytransfersand, in particular, sale of Silkwormanti-ship the missiles to Iranin 1986, posed severalproblemsfor Washington, with one being key. Significantglobal oil travelsthroughthe narrowStraitof Hormuz,which is only 34 miles wide and connectsthe Gulf of Omanto the ArabianSea. The Straitconsists of 2-mile wide channelsfor inbound outbound and tanker traffic,as well as a 2-mile wide bufferzone. Irandominates Straitin partthrough controlof key islandsinsidethe Gulf the its and positionsalong the northern coast of the Gulf. As a result,Irancould harassoil tankers exitingthe Gulf as it did whenUS shipsreflaggedKuwaititankers 1986-87. in Irantripledthe numberof missiles deployedon its Gulf coast and began fittingChinese-builtcruise missiles on its navalboats in 1995-96, which addeda "newdimension"to its threat.Beijing'sarmsconnectionto Irantroubled Washington enoughthat of Secretary DefenseWilliamPerryraisedit with his Chinesecounterparts "thefirst as issue" that could be a "potential flashpoint" Sino-American in In relations.40 a press
38. See Gill, ChineseArms Transfers,pp. 116-117. 39. Gill, ChineseArms Transfers, 97-99. pp. 40. "Remarks Secretaryof Defense William H. Perryto the WashingtonState China Relations by Council, October30, 1995,"Defense Issues, Vol. 10, (Washington,DC: Departmentof Defense, Office of the Assistant Secretaryof Defense, 1995).

EAST* 211 ANDTHEMIDDLE ENERGY, GLOBAL CHINA, the that asserted Iransupported freeflow of Iran'sDeputyForeignMinister conference, It the the but oil through Strait, reserved optionto close it downif it was threatened.4' is, of course,possiblethatIranwouldtakesuchactionif the UnitedNationsor the United A States took serious action to curbits nuclearprogram. United Nations'economic to Tehran tryto close the Strait,as wouldthe US-leduse of embargo Iranmighttrigger wouldcausea severespikein globaloil prices of force.Closureof the Straitof Hormuz natusuch as theAbqaiq-Yanbu routes(if available), the andrequire use of alternative ral gas liquidsline acrossSaudiArabiato the Red Sea. But thatwouldimposehigher lag costs transportation andgreater timesfor delivery. War,China'sregionalarmssales fell by about40%, alFollowingthe Iran-Iraq thoughthe Middle East remainedChina'slargestarmsmarket.From 1994 to 1997, of with statesin the MiddleEast, as a percentage all such China'sarmsagreements
agreements to the region, was approximately 3.49%.42 From 1998 to 2001, China's

arms agreementswith states in the Middle East, as a percentageof all such agree3.49%to 2.23%.43From2002 to mentsto the region,decreasedfrom approximately of with statesin the MiddleEast, as a percentage all 2005, China'sarmsagreements to suchagreements the region,jumpedslightlybackto 2.85%.4WhileChinaandIran in agreement 1990, andhad engagedin cooperation signeda formalnuclearresearch Rafsanjani's it was not until afterthen-President as some cooperation early as 1985, of armsand visit to Chinain 1992thatChinabecameIran'schief supplier conventional Despite the relativelylow became more seriouslyinvolvedin its nuclearprogram.45 to of percentages China'sshareof armstransfers PersianGulf states,the natureand of sophistication the technologyinvolved(specificallymissile technologies)has made and suchtechnologysales a majorissue andhas raisedseriousconcernsin Washington elsewhere. the throughout technologyto IranandIraqcontinued The sale of missile-related commitments Chinato limitthe sales. by formalandinformal 1990s, despitesporadic albeit arguing(as did And Beijing also continuedto supportIran'snuclearprogram, Atomic Energy was peacefuland respectedInternational Russia)thatIran'sprogram Chinabackedoff only when the United States exerted Agency (IAEA) safeguards. fell and and pressure, eventhenits compliance shortof whatWashsignificant repeated ingtondesired. the Throughout 1990s, the United States not only continuedto challengethe with IranandIraq,butalso to defeatits effortsto gain market PRC'sarmsrelationship shareacrossthe Gulf. Indeed,afterthe 1991 GulfWar,Kuwaitforgeddefenseand seof members the UN SecurityCouncil,and,in fact, curitypactswith all five permanent thanBritainor the United fromChinarather millionof 155mmhowitzers bought$186

41. Cited in WorldOil Marketand Oil Price Chronologies: 1970-2000, www.eia.doe.gov/emeu/ p. cabs/chron.html, 19. 42. See Richard F. Grimmett,ConventionalArms Transfersto Developing Nations 1994-2001 (New York:Novinka Books, 2003), p. 54. 43. See Richard F. Grimmett,ConventionalArms Transfersto Developing Nations 1998-2005 (CongressionalResearchService Reportfor Congress,October23, 2006), p. 59. to Arms Transfers Developing Nations 1998-2005, p. 59. 44. Grimmett,Conventional 45. John Calabrese,"China'sRelations with the Gulf Countries," Pacific Affairs, Vol. 65, No. 4 (Winter1992-93).

212 * MIDDLE EASTJOURNAL A and States- a deal thatdrewcriticismfromWashington London.46 seniorKuwaiti had coercedKuwaitby hintingstronglythatif Kuwaitdid officialassertedthatChina Chinawouldwithholdits support the UN at not engage in the $300 millionpurchase, But for extendingtradesanctionsagainstIraq.47 Kuwaitalso may havebeen seekingto improveties with a criticalUN member. As withtradeandforeigninvestment, Chinaalso angledfor significant armstrade with Saddam's if Iraqandcan be expectedto do so with the new regimein Baghdad it to managesto stabilizethe country. Iraqmay find it politicallyattractive establishan with Beijingso as to allow it some distancefromWashington, armsrelationship while also benefitingfromAmericanknow-howand technology.That would be especially trueafterUS forces withdraw fromIraqandrelationsbetweenWashington Baghand daddiminishin relativeimportance. in The PRC's armsapproach the regionis not divorcedfrom its broader political and economic goals. Arms sales and technologytransfers help Chinadevelopregionalpoliticalandeconomicties, andalso provideChinawithbargaining leverageon global-levelissues. These factors,in additionto the monetary benefitsof armssales, help explainwhy the UnitedStateshas had to exertmuchpressureto obtainChina's sometimeshalf-hearted complianceon armssales andtransfers. LikeRussia,Chinaalso argues,to someextentlegitimately to someextentfor and its In effect, thatit has difficultycontrolling defense-related companies. fact, President Zemindid orderthe Chinesemilitaryin JuneandJuly 1998 to haltbusinessactivities (involvingperhaps18,000 firms),sayingthatthey were a huge sourceof corruption.48 Thatdid indicatehis intentionto curbillicit activity.The problem,however,has been In exacerbated sheernumbers. the eraof Chairman by Mao, few Chinesetrading companiesexisted,butby the early 1990stherewere well over 1,000trading entitiesat the nationallevel.49 It was only from 1997to 2000 thatBeijingbeganto address problem this moresein riously,by puttingin place new exportcontrolregulations September 1997covering the exportof technologiesand materials with directnuclearapplications, in June and 1998 dealingwith the sale of dualuse nuclearequipment. as a relativenewcomer Yet, to globaltrade,Beijing'sexportcontrolsarestill in development may not be effecand tive for some time.Theproblem establishing of effectiveexportcontrolsis complicated but by sheernumbers, also by the fact thatChina'smanyfirmsareproducing dualuse for and capabilities commercial military purposes. Thatmakesit harder follow their to activitiesandto determine whichareproblematic, evenif the government demands that companiesabideby internal regulations. Overall,while it may well be thatmissiles or nuclearproduction havenot beenexported capability withouta genuineanddeliberate decisionfromthe government, lesseritems of militaryimportance havebeen.50

46. Reuters,March 16, 2000. 47. John Lancaster,"U.S. Role as Arms Merchantto Kuwait Faces Challenges By China,"The Washington Post, July 15, 1997, p. A14. 48. Cited in David M. Lampton,Same Bed, DifferentDreams: Managing U.S.-ChinaRelations, 1989-2000 (Berkeley:Universityof CaliforniaPress, 2001), esp. pp. 159-203. 49. See QuanshengZhao, InterpretingChinese Foreign Policy: The Micro-MacroLinkageApproach (New York:Oxford UniversityPress, 1996), p. 90. 50. This paragraph based on several off-the-recordinterviews with American and Chinese ofis [Continuedon nextpage]

EAST* 213 AND THEMIDDLE GLOBAL ENERGY, CHINA, effortsto to So far,Chinahas been largelyresponsive the US StateDepartment's help Beijing set up a rigoroussystem of exportcontrolsto regulatethese companies, to and has attempted rein in its companies,as was the case, for instance,after the US chargedthe PRC with helpingdevelopIraq'sfiberoptic cables, which would be has beneficialfor modernizing Iraq'sair defense system.5'But Beijing'scooperation one Indeed,the UnitedStatessanctioned been farfromconsistentandcomprehensive. in and American five Chinesecompanies June2006 for assistingIran'sballisticmissile withthe In 33 and programs hadpreviouslysanctioned Chinesecompanies.52 addition, aid of Chinesetechnology,Iranhas developedmore recentlythe Noor radar-guided
anti-ship missile, which is modeled after the Chinese C-802.53 And Iran armed Hizbul-

struckan Israeliship missile. On July 14, 2006, Hizbullah lah with this Noor anti-ship the to with the Noormissile, whichappeared surprise Israelimilitary. While Beijing has takensome measuresto reign in its militaryexports,its poin The Iraniannuclearcrisis has sition on Iranhas been controversial Washington. officials unfoldedin slow motion,but it escalatedon January10, 2006 when Iranian at prohibited brokethe IAEA seals on equipment the Natanzfacilityin orderto restart activities.Since then,in particular, Chinahasbeenon the hornsof uranium enrichment and a dilemma.It wantsto developrelationswith Iranfor strategic economicreasons, not to strainSino-American relationstoo muchin the process. but around proIran economicrelationship revolvesfundamentally The Sino-Iranian viding Chinawith crudeoil and strategicminerals,while Beijingprovidesa growing mining,transquantityof technologyand engineeringexpertiseto Iran'sindustrial, is and construction, energy sectors.But this economicrelationship tied to portation, that broader politicalrealitiesand goals. Indeed,it is also probable ChinaandRussia see Iranas a quasi-allyin the effortto checkAmericanglobalpowerand influencein the Middle East. In July 2005, Iran(togetherwith India and Pakistan)was granted a observerstatusin the Shanghai Cooperation Organization, regionalsecurityarrangeandseparatism. soughtto join the Iran mentaimedat combating terrorism, extremism, to organization enhanceits relationswith Beijingandpossiblyto increaseits leverage has with Washington, energyties to Tehran, althoughBeijing,while seekingstronger to been reluctant allow Iransuch leverage.54 Washington, meanwhile,has been coninfluencein the oil-richPersian cernedthatthis organization aimto gainincreased may if the groupeffectivelymergessecurity Asia.55 is conceivablethat It Gulf andCentral role andenergyconcerns,andif Iranassumesa moreimportant in the group,Iranmay and to be able to use the groupperiodically balanceUS pressures to enhanceits own
[Continuedfrompreviouspage] ficials. 51. See JenniferLee, "U.S. Officials ComplainThatChinese CompaniesSupplyRogue Nations," Times,November 12, 2001, p. C2. TheNew York Arms ControlToday,Vol. 36, 52. Wade Boese, "U.S. Sanctions Five Companiesfor IranTrade," No. 6 (July-August2006), p. 36. AviationWeek& Space Technology, 53. "IranAcquiresAdditionalChinese Missile Technology," April 10, 2006, p. 33. xiwangjiaru shanghai hezuo zuzhi"["Iranis Eagerto Join the ShanghaiCooperation 54. "Yilang Qingniancankao [Elite Reference],May 20, 2006. Organization"], 55. Wendell Minnich and Gopal Ratnan,"U.S. WarilyEyes Agenda of ShanghaiOrganization," Defense News, Vol. 21, May 29, 2006.

214 * MIDDLE EASTJOURNAL influencein the PersianGulf. At the globallevel, it also maybe truethatChinaopposesa strongstanceagainst Iranbecauseit coulddamageChina'simagein the developing world.56 Beijingmaynot be aggressively pursuing globalinfluence,butit does not wantto alienatean important in base of support the developingworld,whichit has soughtto cultivate. WhileChinahasgood economicandpoliticalreasonsto wantto support even and protectIran,Beijing also has amplereasonto temperits position.First,China'seconomicgrowthdependson American in support international institutions especially and on the US market, and and technology, investment, Beijingis acutelyawareof thisreality.57 UnitedStatesis far moreimportant Chinathanis Iran,becauseChinacan The to achieveeconomicgrowthwithoutIran'soil, but not withoutAmericansupport.58 The is globaloil market fluidandif oil does notcome to ChinafromIran,it will be imported fromelsewhere,althoughalong insecureoil lanes androutes.However,it is very hard for Chinato replacethe massivegrowthbenefitsthataccruefromits relationship with the UnitedStates.This typeof asymmetry interdependence the globallevel affects in at China'sbehavior the PersianGulf arena. in views in Beijing, ChineseForeignMinistrySpokesSecond,reflectingbroader man Qin Ganghas assertedthat"China's positionhas been consistenton the Iranian nuclearissue. We standfor maintaining rigorandeffectivenessof the international the nuclearnon-proliferation regimeandhope to solve the issue properly through negotiain tion."59 Proliferation Iran,NorthKorea,or in othercountries wouldcreateinstability thatcouldhurtBeijing'sprospects economicgrowthandgenerate for securityconcerns as well. The benefitsand costs to Chinavis a' vis its relationswith Iranhave left it with whatappears be a splitpolicy.On the one hand,the PRChas opposedthe use of outto righteconomicsanctionsagainstIranandhas argued member that statesto the Nuclear Nonproliferation Treatyare entitledto peacefuluse of nucleartechnology,so long as they comply with the nonproliferation provisions;and it also has stressedrepeatedly thatthe disputeshouldbe resolvedwithinthe IAEA framework through negotiation.60 On the otherhand,while Tehran clearlywantsChinato checkthe UnitedStatesin the UN SecurityCouncil,Beijing has been reluctant challengethe US. It has strongly to encouragedIranto accept an offer from the five permanent membersof the United

56. See Chong Wang, "Yilangheweiji kaoyan zhongguo waijiao" ["The IranianNuclear Crisis Put Pressureson Chinese Foreign Policy"], Zhongguo qingnian bao [China YouthDaily], January 18, 2006. 57. See Steve A. Yetiv, CrudeAwakenings:Global Oil Securityand AmericanForeignPolicy (Ithaca, NY: Cornell UniversityPress, 2004), chp. 7. 58. See Meng Wang, "Yilangweiji de zhongguohanyi"["TheImplicationsof the IranianNuclear Crisis to China"],Nan'feng'chuan[The Windowof SouthernWind],May 8, 2006. 59. "ForeignMinistrySpokesmanQin Gang's RegularPress Conferenceon 28 March2006,"The Ministry of ForeignAffairs of the People's Republic of China, http://www.fmprc.gov.cn/eng/xwfw/ s25 10/2511/t243018.htm. 60. Jing-dongYuan,"Chinaand the IranianNuclear Crisis,"China Brief, Vol. 6, No. 3 (2006), p. 2. Also, see the statementby the Ministerof ForeignAffairs, Li Zhaoxing, People's Daily, March8, 2006. In addition, see "ForeignMinistry SpokesmanKong Quan's RegularPress Conferenceon 17 January2006," Ministryof ForeignAffairs of the People's Republicof China,http://www.fmprc.gov. cn/eng/xwfw/s2510/2511/t231665.htm.

CHINA, GLOBAL ANDTHEMIDDLE ENERGY, EAST* 215 Nations SecurityCouncilplus Germany suspendits uranium to enrichment program andto satisfyotherinternational concernsaboutits nuclearprograms.6' Overall,China reluctantly acceptsthe notionthatIranshouldbe punishedfor enduring non-compliance,62 its definitionof "punishment" differedfrom thatof the UnitedStates. but has The moredefiantIranbecomes,and the morepressures Washington puts on Beijing, the morelikely Chinawill support toughermeasures.

CONCLUSION
The foregoingpagesunderscore evolutionof China'srole in the Persian the Gulf. Of all outsidestates,Chinais the most significant newcomerto the international relationsof the Persian Gulf,an evolvingdevelopment muchimportance. of Priorto World WarI, Chinaappeared be a vulnerable to for target European colonialaspirations which from 1875to the turnof the century beenrealizedoverthree-quarters the globe. had of Yet,by the 1980s, Chinawas beginningto developas a majorglobal actorandone of growingimportance the Gulf. Whereasin 1980, China'sinterestin the regionwas in not significant, 2000 the MiddleEasthadbecomea majorareaof importance. by In 1980,China'stradeandforeigndirectinvestment theregionwas limited,but in had developedsignificantly. Whereasin 1980, China'sarmssales to the region were negligible,they became more significantthroughout 1980s and 1990s, although the Chinaalso becamemorecircumspect whatit would sell. Whereasin 1980, China's in abilityto challengeUS actionsin the regionwas not significant, 2000 it wouldjoin by with FranceandRussiato do so. sporadically and Overall,Beijing'sinvolvement interestin the regionhave increasedsignificantly,andits powerhas risenas well. It seems likely thatthe PRCwill seek to play an salientregionalrole, whichwill standin sharpcontrast its previousdisincreasingly to tancedandpassiverole. Indeed,it has multiplemotivations enhancing position for its in the Gulf region:the monetary benefitsof tradeand armstransfers, over-riding the of importance tryingto ensurea futuresupplyof oil, and the geopoliticalbenefitsof playinga role in a criticalregion,includingthe potentialof checkingWashington and othermajorpowers. ThePRC'srisingrolein theregionis important Washington consider and for in to of itself andwithinthe contextof its broader concernsaboutthe positionof ChinaglobChinawill continueto have important reasonsnot to challengeUS intereststoo ally.63 muchin the region.This is largelybecause,in an interdependent worldwhereChina increasinglyneeds the United Statesfor a varietyof economicbenefits,Beijing cannot as easily affordto be bold in threatening interestsin variousregionsandissue US

61. "China Urges Iran to Respond Positively to Six-Nation Nuclear Package," Xinhua News Agency, August 16, 2006. Also, see "FM: China Works for Settlementof IranianNuclear Issue," XinhuaNews Agency, September22, 2006. 62. See Philip Shenon, "U.S. Says It Has Deal with Other U.N. Members to Penalize Iran for Nuclear Drive,"TheNew York Times,October7, 2006, p. A5. 63. For an example of these concerns, see Office of the Secretaryof Defense, Annual Report to DC: Department Congress:TheMilitaryPower of the People's Republicof China2005 (Washington, of Defense, 2005).

EASTJOURNAL 216 * MIDDLE would areas.64 Thus,in the 1990-91Gulfcrisis,Beijingknewfull well thatWashington relations was do whatever necessaryto meetits goals andit did not wantto jeopardize Not Beijingopposedthe 2003 US invasion by crossingtheUnitedStates.65 dissimilarly, thanthatof FranceandRussia,both of Iraq,but its positionwas muchmoremoderate to of which threatened wield their SecurityCouncilveto. Even with regardto Iran's nuclearprogram, Beijing has been carefulnot to assertitself too strongly,while still withIranoverthe use of economicsanctions, negotiations joiningRussiain promoting muchless force. Nonetheless,the PRC's growingrole, while checkedby the pressuresof interdependence,cannotbode well for the United States on the whole, unless the Sinomoreeffectivelyfromone of at Americanrelationship the global level is transformed to cautiousrivalrymixed with some cooperation one of more significantcooperation This is largelybecauseBeijingis concerned aboutAmerican mixedwith some rivalry. US globalpowerandperceived effortsto containit; it prefersa morelimitedUS role in the regionandcompeteswithit in key issue areas;andbecauseBeijingmaybe enticed with armstransfers, missile components, to assist "roguestates"(andothercountries) its or and conventional unconventional technologyin orderto safeguard own energy security. The questionof China,global energy,and the Middle East will only become more germaneover time, as China'sdependenceon PersianGulf oil increases.This, in turn,suggeststhatthe trendsin the evolutionof China'spositionin the Gulf, as laid in out herein,will likely accelerate, yieldingChinamoreinfluence theregion.Thismay put Chinaandthe UnitedStateson a collision coursein the region,or simplymakeit on harder the UnitedStatesto secureChina'scooperation a rangeof vital issues. for whatis moreclearis thatseriousand Whilethe futureis hardto predictin this regard, frictionpoints may well arise in Sino-American relations,if not managed dangerous well. Severalmeasures may help avoidsuchan outcome. First,both Chinaand the United States shouldtake priorsteps to decreasethe in and potentialfor greatpowerinvolvement rivalry the PersianGulf.The mostimportantlongerrun step in this regardis a far more seriousindependent coordinated and To effortto reduceoil dependence. be sure,the PersianGulf is important reasons for and terrorism, otherthanoil, includingissues of weaponsproliferation transnational but lesser global dependence oil will makeit less likely to be a focal pointof great on powertension. Second,Beijing has committedto finishingits firststrategicoil reservefacility capableof holding 32.7 million barrelsof oil by the beginningof 2007. But that is to minorgiven its futureenergyneeds and minimalcompared America's700 million A barrel reserves. farmoredevelopedChinesestrategic petroleum reserveis important in that it will increaseChina'sreal and perceivedenergy security.In turn,this may decreaseBeijing'sproclivityin the futureto protectits energysecurityin ways thatare inimicalto Sino-American relationsandbroader globalenergysecurity. involvetalkswithChinaaboutits potential Third,the UnitedStateshas initiated ment with the International requires EnergyAgency (IEA). While such membership

64. For extensive evidence, see Yetiv, Crude Awakenings, chp. 7. 65. See Yetiv, Crude Awakenings, chp. 7.

EAST* 217 ENERGY, ANDTHEMIDDLE GLOBAL CHINA, Beijing shouldbe affordedsome thatChinatake greatersteps to become democratic, in in role shortof membership the nearterm.An IEA role for Chinais important that betweenChinaandindustrialized memIEA scientificcooperation it wouldencourage and energypolicy in Chinaunderthe IEAumbrella; a bers;encourage market-oriented get Chinainvolvedin the IEA'sresponseto energyemergenciessome of which may are measures criticalfor putting arisefromthe PersianGulf. Suchconfidence-building
China on the right energy path in the 21St century.

Fourth, the United States and China should recognize that in a globalized world, regional and global politics are increasinglylinked ratherthan sepaon relationsin the Gulf will affect their interactions global israte. Sino-American sues and vice versa, especially given China'sheightenedrole in the region.This is theirglobal for meaningful both countriesbecauserivalryin the Gulf can undermine in level goals, while global level rivalrymay impedepotentialcooperation the Gulf. the Forinstance, UnitedStates'massivetradedeficitwithChinahas someobviousnegto ativeeffects forAmerica,butit also makesthe UnitedStatesmoreimportant China leveragein with some increased thanit otherwisewouldbe. ThatprovidesWashington affectingChina'sbehaviorin regionssuch as the PersianGulf. Indeed,it is precisely in that this type of asymmetry interdependence placessome limitsonjust how farBeiWhenAmericanpoliticiansconsiderthe costs jing will challengeAmericaninterests. andbenefitsof this tradedeficit,suchregionaleffects needto be considered. business effortsshouldbe madefor joint Sino-American Fifth,greaterbilateral with Gulf and in and involvement oil exploration development, for theircooperation at states in this arena.Cooperation the business level can be a confidence-building to that and measure can createa constituency helpsandprodsleadersin bothcountries couldbe especially in achievegreater cooperation the energysphere.Suchcooperation of or in important Iraqin the future,whether not it achievessomeroughsemblance stafor civil war,it will be important the bility.Indeed,even if Iraqdescendsinto outright fromothercountriessuch as China,to developa plan UnitedStates,with cooperation elementsin Iraq. to prevent Iraq'soil assetsfrombeingexploitedby extremist to Until 1973, approach energysecurity. Sixth,Chinaneedsto avoida nationalist oil oil prices were posted and controlledlargelyby the big international companies. these Nationaloil companiesrose in influencein the 1970s, slowly over-shadowing companies.But a tectonicchangeoccurredin the early 1980s:Powerover oil prices and shifted from international nationaloil companies,to newly createdoil markets like the New YorkMercantileExchange.Global oil marketsprovidestabilityin the sense thatall actorscan haveaccess to oil at similarprices.If countriesstartto pursue oil focusedon buyingor securing oil particular assetsin various nationalistic practices, for the mayweakenandrivalry energy regionsfor the homecountry, globaloil market in Gulfandelsewheresuggestsnationalistic will increase.China'sbehavior the Persian to inklingsin the globaloil sphere,whichcan contribute this outcome.Beijingshould considerthis possibleeffect as it plansits futurecourseof actionin the region.
Seventh, as the 21St century proceeds, China should be careful about how it ap-

It proachesthe PersianGulf strategically. is one thing to increaseits economic and politicalinfluencethere,butit wouldbe unwisefor Chinato tryto enhanceits military seem to suggestat a in positionin andnearthe region,as its effortsat Gwadar Pakistan dollar multi-billion moreminorlevel. The UnitedStateshas developeda sophisticated,

218 * MIDDLE EASTJOURNAL for with local states.Chinacannotconceivably capability this purpose,in conjunction protectthe 7,000 miles of oil lanes fromthe PersianGulf, muchless Gulf oil supplies in general.Indeed,effortsaimedat doing this will not only be costly to Beijing, but may generatetensionswithWashington leave Chinafeeling less rather that thanmore secure.As partof a broader aboutmutual in energysecurity, understanding cooperation Chinashouldindicatethatit will not competein this manner. Eighth,Chinaandthe UnitedStatesshouldexpandtheirbilateralenergypolicy dialogue.The firstmeetingof this kind, which involveschiefly US and Chinaenergy analystsand officials,was held in June2005, with a secondmeetingheld in September 2006. This dialogueis important dealingwith energyefficiency,confidencefor buildingmeasures,and China'spotentialrole in the IEA. It would be worthwhileto institutionalize these meetings;to expandthem to includemore departments both in countriesas well as higherlevel officials;andto lay out a set of achievable short-term goals betweenthe two countries. Sino-American relationswill likely shapeimportant contoursof the 21stcentury, and energy issues which fundamentally criss-crossthe Middle East are likely to be in increasingly important affectingrelationsbetweenthe two.66 UnitedStatesand The Chinamustdo moreto achievean understanding how to protecttheirenergysecuon rityand,in turn,thatof the world.Failureto reachsuchan understanding increase will the potentialfor tensionsin bilateralrelations,tensionsthatmay spill over into other areasof Sino-American relationsandgenerateinstabilitynot only in the MiddleEast, butalso around world. the

66. See Flynt LeverettandJeffreyBader,"Managing China-USEnergyCompetitionin the Middle East,"The WashingtonQuarterly,Vol. 29, No. 1 (Winter2005-06).