China seeks to rally regional and international support for its initiative known as One Belt, One Road (OBOR) or the new Silk Road, launched in 2013 to create routes to link western and southern China to the three old continent - Asia, Africa and Europe. China has in fact committed billions of dollars to support the initiative on the sidelines of the Belt and Road Forum for International Cooperation, held in Beijing earlier this month.
Over the past years, China welcomed Middle East states to the initiative due to their high strategic and logistic importance that undoubtedly contribute to linking its markets to Asian and European markets. At the same time, governments of the region initiated efforts to consolidate cooperation with China on the initiative. Recently, both parties signed a number of memorandums of understanding (MoUs) and cooperation agreements to boost investment in constructing infrastructure required for the OBOR initiative.
Theoretically, there would be economic and political gains that Middle Eastern countries could make by joining the initiative. For one, it will contribute towards supporting rapprochement with China, which in turn would bolster China’s efforts to settle regional crises. Moreover, stronger cooperation would further support China’s standing as an important economic partner of the region. The initiative represents a favorable foundation for launching efforts to deepen trade and investment relations between the two sides while capitalizing on China’s potential and capabilities in enhancing infrastructure of regional economies.
However, anticipated gains for China and the Middle East will not be as fast-paced as expected. That is, there are still several potential obstacles that might block and even delay the implementation of the initiative consequently affecting the benefits expected by Middle Eastern states. Most importantly is the high cost of the initiative's required infrastructure projects, that coincides with rising global concerns over China’s declining economic performance. In addition to that, garnering full international support for the initiative does not appear to be certain, given reservations from India and Europe about its implementation, as well as the persistent geopolitical and security turmoil in some of the involved regional states.
Common Preparations
Beijing's view is that it is indispensable for Middle East states to join the so-called Maritime Silk Road, also known as the "21st Century Maritime Silk Road, or One Belt, One Road (OBOR)", because this plan aims to connect China’s southern and western regions with Europe, Asia and Africa through land and maritime routes and networks. Undoubtedly, the strategic location of the Middle East will consolidate any efforts to be made towards linking Asian markets to European and African markets, with the Suez Canal being a pillar of this connectivity because it has been a main corridor for Chinese exports to several European markets over the past years. To engage partners from the Middle East in the initiative's implementation launched in 2013, China has been seeking to strengthen frameworks of investment cooperation in the infrastructure sector with many of these countries.
As part of this quest, during the November 2015 G20 Summit in the Turkish city of Antalya, China and Turkey signed an MoU to enhance their trade and maritime relations within the Belt and Road project, and another on the OBOR's middle corridor. China also signed an MoU with Egypt in January 2016 to enhance cooperation on the implementation of the new Silk Road. The Egyptian government backed the initiative which will undoubtedly reflect positively on the logistical importance of the Suez Canal.
China’s first practical move towards consolidating connectivity with the Middle East was when the first freight train to travel the old Silk Road arrived in Tehran carrying goods from China and making the journey through Kazakhstan and Turkmenistan in just 14 days, compared with around 45 days by sea between China’s Shanghai port to Iran’s Bandar Abbas port. The journey represented a crucial step in the revival of the ancient Silk Road and set the stage for a new era of profitable cooperation between Tehran and Beijing.
Because Israel, too, represents a central and pivotal location for the implementation of China’s maritime Silk Road, Chinese companies, supported by the government, started to pump investments in the transportation, shipping and ports sectors to facilitate trade between Israel and Asia. One of them, China Harbour Engineering Company, was awarded a contract in 2014 to build a new port in Ashdod, Israel, which is scheduled to become operational in 2021. In 2015, Shanghai International Port Group obtained the right to run Haifa Port for 25 years.
Anticipated Gains
In theory, the new Silk Road project can achieve several gains for the Middle East that can be tackled as follows:
1- More Investments. Geopolitical developments taking place in the Middle East since 2011, in conjunction with declining roles of some international powers in regional crises, have bolstered China’s political and economic presence as a reliable economic partner for governments of some Middle Eastern countries. Last year, China’s regional investments peaked at US$28.1 billion, three times bigger than in 2010.
Needless to say that the new Silk Road, for which China committed $128 billion this May, will allow many Middle East countries to benefit from its financial and production potential required for supporting infrastructure and economic connectivity between the 65 countries involved in the initiative. During his Middle East tour in January 2016, Chinese president Xi Jinping offered $55 billion of financial support, loans and investments to the region.
2- Boosting Trade. In 2015, volume of trade between China and the Middle East stood at $191.1 billion, according to figures from the World Trade Organization. No doubt, the new Silk Road is a continuation of China’s policies that seek to bolster trade with the Middle East. Overall, China seeks to increase trade with the countries involved in the new Silk Road to $2.5 trillion within ten years after the launch of the initiative, an ambition that will be backed by easier access to markets in these countries, especially as road, rail and port infrastructure and networks are being developed between China and the rest of the world.
3- Supporting Infrastructure. China’s ties with the Middle East have deepened recently to involve a large number of Chinese companies working on infrastructure development. Currently, projects worth $25 billion in the energy, bridges and transportation infrastructure sectors are being constructed by Chinese companies, according to BMI Research. Nonetheless, given new financial capabilities committed to the implementation of the new Silk Road plan, China can be expected to become a major partner in construction and funding infrastructure. Currently, there are many funding mechanisms launched by China to support this initiative, including a special fund for the new Silk Road which will provide $40 billion and the Asian Infrastructure Investment Bank (AIIB) which will provide $100 billion in funds. According to BMI Research, there are plans to carry out projects worth $35 billion of infrastructure with support from China.
Potential Obstacles
Despite China’s push for completing the new Silk Road plan in a few years, there are still obstacles that can block it. The first obstacle is geopolitical and security tensions taking place in some partner countries undergoing crises that can disrupt project implementation. The second obstacle is the high costs of developing the planned projects. According to PricewaterhouseCoopers, China needs to commit up to one trillion dollars to the implementation of this initiative, amid concerns about whether China would be able to fund these projects and make profits despite its slowing economy. The third obstacle is failure to secure full international support for the initiative. Some countries have recently expressed reservations about the plan. Germany required guarantees for free trade and competition to join the initiative. India too opposed the China–Pakistan Economic Corridor, a major component of the new Silk Road which is planned to pass through Kashmir, a region disputed with India.
In conclusion, it can possibly be said that difficulties in securing adequate funding and implementing the new Silk Road can limit the gains expected by the Middle East. However, it will be a symbolic shift in the level of economic cooperation between this region and China in the coming period.
