Commentary: China’s Saudi Arabia-Iran diplomatic move highlights its rising influence in Middle East

RISING INFLUENCE OVER MIDDLE EAST

Commentators see the agreement as a positive step but wonder about the influence that Iran and Saudi Arabia can have in lessening the internal conflicts in several nearby countries. This is particularly where they support rival parties, including in Lebanon, Syria and Yemen.

What the deal does highlight is the rising influence that China can exert and the waning of the United States’ power over the Middle East regional order.

Studies have shown that political instability in neighbouring countries negatively affects the economic performance of a nation by disrupting trade flows and increasing defence expenditures while lessening investment, for example, in education.

Under such conditions, economic incentives can drive a peace-building process. Peacefully resolving conflicts benefits countries not directly entangled in the disputes.

Since the 1990s, China has gradually become the largest trade partner of the Arab region overall and the top trade partner of Saudi Arabia. China’s exports to Saudi Arabia have annually increased at 15.3 per cent year on year on average, amounting to US$905 million in 1995 and US$31.8 billion in 2020.

Meanwhile, over the same period, China’s imports from Saudi Arabia rose from US$393 million to US$33.4 billion, an average annual increase of 19.4 per cent. In 2019, China and Saudi Arabia signed 35 trade and investments deals.

STRENGTHENING TRADE RELATIONS

Similarly, China’s exports to Iran have increased at an average 14.7 per cent annual rate from US$276 million in 1995 to US$8.51 billion in 2020. And its imports from Iran have also risen by 14.5 per cent annually between 1995 (US$197 million) and 2020 (US$5.85 billion).

By 2022, exports totalled US$9.44 billion and continued to grow exponentially in early 2023. Russia has recently overtaken China as the largest foreign investor in Iran, but China remains its largest oil customer.

China’s main exports to Saudi Arabia and Iran include broadcasting equipment, motor vehicles and air pumps. Its main imports are crude petroleum, ethylene polymers and acrylic alcohols.