Between 1413 and 1433, admiral Zheng He led a huge fleet to demonstrate Chinese power in the Indian Ocean, visiting Hormuz, Muscat, Aden and Mecca. Now emissaries from across the world are hurrying to sign up to the modern world’s version, the Asian Infrastructure Investment Bank (AIIB).
The UK, Germany and Russia have announced they will join, along with United States allies in Asia such as South Korea and Australia, and major oil exporters including Iran, Saudi Arabia, Qatar and the UAE, which confirmed its participation on April 5. The AIIB goes together with the One Belt One Road initiative, a grand design to create trade routes through Central Asia and its maritime equivalent around the Indian Ocean.
The creation of a Sino-centric Asian economic order offers great opportunities to the Middle East, but whether it fails or succeeds also poses dangers.
If it fails, this initiative might leave behind it a series of uneconomic white elephants, badly conceived and left unfinished, or causing environmental degradation and social upheaval. Souring relations with China, the Middle East’s largest future energy consumer, trade partner and perhaps investor, would be very damaging.
After the fall of the Soviet Union, there was much talk of a New Silk Road, which never really came into being. The realities of geography, conflict, inadequate transport and poor and corrupt countries meant that China looked more to its sea routes.
Dusty outposts such as Gwadar in Pakistan attracted analysts more than business people. But some important energy trade did emerge – oil and gas pipelines heading west from Azerbaijan, east from Turkmenistan, and both ways from Kazakhstan.
If One Belt, One Road succeeds, the benefits would be enormous. Landlocked countries would be able to develop and export their natural resources. Better interconnections would make trade routes more diverse and secure. And the Middle East countries would cement their role as energy providers to the locus of world demand.
Already projects are being proposed under the new initiative, such as a Chinese offer to finance the long-awaited gas pipeline from Iran to Pakistan.
But there are potential risks, economic and political. The Middle East, Africa, Russia and Central Asia must be wary of becoming natural resource colonies of the Chinese giant, exporting cheap raw materials in return for costly, high-tech manufactured goods. To retain their economic dynamism, they need to become more sophisticated and diversified, and maximise the wider gains from One Belt projects.
The GCC has good infrastructure, easy access to markets, does not need capital and can choose from the world’s best technology, so the Chinese offering is less attractive than it is to countries such as Pakistan, Kazakhstan, Egypt or Iran. Petroleum exporters would be driven to compete against each other, for instance Turkmen and Russian gas challenging Qatar in China.
This growing integration would also tie the Middle Eastern economies more closely to China’s. Of course, Chinese energy demand will continue to be the dominant global factor, but its commodity-intensive phase of growth seems to be over. In 1998 and again in 2008, global oil prices plunged when economic crises hit. Policymakers in Riyadh, Tehran or Abu Dhabi may soon be watching the Shanghai stock exchange more closely than the NYSE.
Politically, the US has been obstinately opposed to the AIIB, but has been undercut when most of its main allies signed up. A greater Chinese political, and eventually, security role in the Arabian Gulf may be inevitable – worrying not only the US, but also the Asian powers India and Japan.
A divided and conflict-ridden Middle East, without a vision for its role in shaping the new economic order, is badly placed to define and protect its interests against an assertive Beijing. This region should be the destination of the One Belt, One Road, not a way station.
Robin Mills is the head of consulting at Manaar Energy and author of The Myth of the Oil Crisis
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