August 2020

August was a month full of interesting commentaries that suggests a sharp downward turn in the relations between China and some of the key countries in the wider Mediterranean region. In particular, terrible news come from Iraq pertaining to the future of the so-called “oil-for-reconstruction” deal between China and Iraq. This month we also cover interesting news in Israel, Iran, Lebanon, France, Oman, and Italy.

The newspaper Yaqein reported the statements made by Ali al-Lamy, a member of the Economic Committee of the Iraqi Parliament, regarding the so-called “oil-for-reconstruction” deal signed in Beijing by the former Iraqi Prime Minister Adil Abd al-Mahdi in late 2019. [1] Al-Lamy stated that: “The economic agreement with China is important, and the committee has demanded more than once to start implementing it, but there is American external pressure to cancel it.” He further added, “Prime Minister Al-Kazemi has no intention to move forward with the Chinese agreement.” According to al-Lamy, Chinese companies were meant to be already working on the new projects identified in the agreement. Uday Hatem, a member of the Parliamentary Services Committee, declared that it is not clear whether the agreement has been definitively cancelled or put on hold as the government has not provided any information. That said, Hatem complained about the government decision, instead, to sign new agreements with the United States during the U.S.-Iraq Strategic Dialogue on August 19. According to him the United States failed to deliver on previous promises about training the Iraqi army and putting an end to the electricity shortages in the country. Despite previous negative comments by Iraqi journalists, Hatem believes that the agreement with China “could have changed the situation of the country.” As our data show, Iraq has emerged in recent years as an important economic and energy partner of China in the region and its position would have surely become stronger with the implementation of the agreement. This is an important issue that we will keep following.

American pressure has also “triumphed” in Israel. Israel picked a side and joined the “Clean Network initiative” of the United States. According to an article in the Globes, this decision put Israel in a “troubled position vis-à-vis China, as a tool in the struggle between the superpowers.” [2] Huawei is/was probably better than its competitors in technical terms, hence, the journalists argue, this move sent a clear signal to China about how Israel looks at the bilateral relationship. Meanwhile, Ariel Kabiri wrote in the Haaretz that the government should have acted earlier. [3] Ben Gurion, Kabiri writes, put the alliance with the United States at the very center of Israeli national security but many in Israel have long forgotten this fact. As the relations between China and the United States worsened significantly, Israel should have understood earlier what was necessary to do and align with the United States, while cutting down cooperation and economic engagement with China. According to Kabiri, “Sino-American competition in the Middle East will create new opportunities for Israel’s neighbors to find a powerful sponsor, this will have the greatest impact on the national security of Israel throughout the next decade.”

Moving to Iran, concerns about the 25-year cooperation agreement with China continue to appear in the media. Alireza Kolahi, the Vice President of the Commission for Industries and Mines of the Tehran Chamber of Commerce, wrote in Donya-ye Eqtesad that Iran must be “vigilant” in order to make the most out of the relationship with China. [4] China is an opportunity to “convert” underground energy resources into much-needed cash. However, China will buy Iranian oil at discount. Moreover, there is the risk that Chinese goods will flood the Iranian market, thereby threatening local companies. According to Kolahi, “the best strategy to survive this battle full of ambiguities and make the most out of it is to stay true to the revolutionary slogan ‘neither West, nor East’.” Another member of the Tehran Chamber of Commerce, Feryal Mostowfi, joined the debate as well, criticizing the Iranian government for not having sought advice and not having engaged Iranian private companies during the negotiations with China. [5] Like Kolahi, Mostowfi, too, invites the government to ensure that the problems that similar agreements between China and other countries will not arise in Iran’s case. Amir Pasandepur, a journalist at Sharq is much more straightforward in criticizing the government. [6] According to him, the government is blind to Chinese intentions. From restricting the range of activities of Iranian entrepreneurs in China to opposing Iran’s full membership in the Shanghai Cooperation Organization, “the Chinese government has repeatedly shown that it takes its interests seriously and acts accordingly in a pragmatic manner.” China’s resistance to American sanctions is mere rhetoric, he argues. Chinese companies will not choose Iran over their ties with the US-centered financial system. Thus, “expecting a miracle from the elixir of the strategic agreement with China is like mourning a grave in which there is no dead body” and it is up to the Iranian government to understand this fact.

Meanwhile, there are some in Lebanon arguing that China is the best partner to repair the port of Beirut. According to Maher Hussayn of the newspaper Al-Akhbar, China has the financial strength and the experience to take care of this project. [7] While, as Hussayn writes, “this is what Lebanon needs,” not everyone agrees that China is the right partner or that China wants to be the right partner. Last month, indeed, we found articles that argued Hezbollah is spreading the narrative that China will invest in Lebanon to support the Arab country and the other members of the so-called “Axis of Resistance,” i.e. Iran and Syria. The issue of China’s eventual role in Lebanon was also part of an article published by the French newspaper Ouest France, though providing no evidence about China’s interest in the Arab country. [8]

Surely, cooperation with China is good for many countries. For example, the Chinese energy market is crucial for the Gulf countries. Sultan Ahmed Al Jaber, Minister of State in the United Arab Emirates and the Director-General and CEO of the Abu Dhabi National Oil Company (ADNOC), declared that Chinese demand for oil is seen as a crucial factor for ADNOC–which recently entered a shipping and logistic joint venture with China's Wanhua Chemical Group. [9]Oman sold to China more than 88% of the oil produced in July, despite a slight decrease compared to the previous month. In general, it seems that there is optimism about the future of the relations with China. According to the Oman Daily, the trade war between China and the United States will hurt China but only in the short term. [10]

Finally, Italian media paid great attention to the visit of the Chinese Foreign Minister Wang Yi to Rome, which has been seen as a crucial test for Italy’s policy on China. [11] This visit took place against the background of the approval of increasingly stringent measures by the Italian government that do not target Chinese telecommunication companies but, in practice, make very difficult for them to enter in the Italian market. [12] It is evident that Italy has reoriented its foreign policy, adopting a clear pro-United States line, while also trying to preserve good relations with China. However, this can hardly be seen as the end of the evolution of the Italian approach to China, as strong voices in favor and against a closer relationship continue to exist. [13]

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