May 2022

In May, following the Chinese government’s announcement easing lockdown measures in Shanghai, many commentators in the wider Mediterranean region have focused on the future of the global oil markets, which have witnessed tensions and uncertainties in past months due to the ongoing conflict in Ukraine and the global supply chain crisis aggravated by Beijing’s zero-COVID policy.

Against this background, the Emirati Policy Centre (EPC) showed some degree of optimism, forecasting that China will recover quickly, thus contributing to a rise in oil demand and prices. The recent increase of GCC oil exports (Saudi exports to China increased by 38 percent in April, the biggest increment since March 2020) seems to confirm this prediction. [1] However, this upsurge also regards Russia, which has been selling its oil at a discount of almost USD 30 on the barrel to increase its desirability in spite of Western sanctions. The EPC argued that if Beijing eases its COVID-19-related restrictions in June, it will likely refill its strategic stockpile by buying cheap Russian oil. If this occurs, then GCC countries will probably offer sensible discounts as well to improve their competitiveness vis-à-vis Moscow.

In contrast, Anis bin al-Faysal al-Hajji, a Saudi economic expert in energy matters, believes that the possible increase of oil prices and its impact on the global market, will “depend on whether or not the Chinese government returns to withdrawing from its strategic stockpile.” [2] Al-Hajji affirmed that, after replenishing its stockpile during the oil price crash of 2020, Beijing resorted to its reserves in 2021 to prevent prices from rising above USD 100. Regardless of whether China will decide to draw from its reserves or import Russian oil through its private refineries, he expects that the oil market, especially oil prices, will show only limited fluctuations     .

Iran followed a different approach, as there have been discussions among domestic and international institutions on the actual amount of Tehran’s oil exports. While Western media claimed that Beijing’s purchases of Russian oil have caused Iranian exports to China to decline by 50 thousand barrels per day in April, data published by OPEC+, and corroborated by several sources in the Iranian oil industry, say otherwise. [3] According to these statistics and Mohsen Khojaste Mehr, CEO of the National Iranian Oil Company, Tehran’s oil production and exports have increased by 40 percent last year and have remained overall stable. This prompted some high-level official to declare that the healthy state of Iran’s oil industry not only confirms the country’s ability to improve its economic situation even without the restoration of the JCPOA, but also highlights China’s significant dependency on Iran.

Clearly, these positions reflect political intents rather than facts, as the nature of Sino-Iranian relations continue to be deeply unbalanced. This is particularly evident when one looks at other fields of cooperation between Beijing and Tehran. For example, Masʿud Rezayi, a researcher of international relations and strategic studies, thoroughly analyzed in the progressive newspaper Etemad the extent of military cooperation between the two countries in light of the recent visit by Chinese defense minister Wei Fenghe to Tehran. [4] Contrary to the declarations of media and officials of both sides, Rezayi argued that military cooperation between the two countries faces many obstacles, lacks a consistent roadmap and, therefore, is currently limited to joint training and exercises. According to the researcher, expanding its military cooperation with Iran could be detrimental to China’s international position because it could disrupt the balance of power in the Middle East, thereby undermining Beijing’s role as a strong and neutral partner and its economic interests in countries such as Israel and Saudi Arabia. Moreover, as long as American sanctions against Iran remain in place, any action to strengthen military ties with Tehran would be too costly for China. Therefore, Rezayi suggests that China could negotiate agreements on military and strategic issues with the Islamic Republic only after the revival of the JCPOA and the normalization of Iran’s relation with the United States and its neighbors.

In neighboring Iraq, there continue to be some tensions regarding the Iraq-China Framework Agreement on Cooperation. While the first projects implemented within this framework, mostly in the education sector, seem to be operational, some economic experts continue to warn about the uncertain future of this agreement. For instance, Fiqar Fadel, an expert in economic affairs, pointed out that those who most strongly support the agreement with China also hold pro-Iranian positions. As the tensions between China and the United States increase, and the negotiations over the Iranian nuclear deal remain in deadlock, external factors might easily derail the implementation of the agreement. [5]

Concerns about the penetration of Chinese influence in sensitive sectors are also present in Israeli media. An article published by Haaretz called on the ministries of Foreign Affairs and of the Interior to closely monitor the ties and agreements stipulated by Israel’s local authorities with their Chinese twinned cities. [6] The article suggests that, while Israeli local authorities see an opportunity to expand urban resources and provide jobs with these contacts, their Chinese counterparts may exploit these ties to promote the arrival of Chinese companies in Israel and advance China’s foreign policy interests. Israeli media also discussed the competition between China and the United States in their country, in particular in the car market. Globes claimed that in recent years Chinese companies have been rapidly overshadowing their American rivals for two reasons. [7] The first is a friendly regulatory environment that since 2020 allows for the import of vehicles made in China that do not meet the full requirements of European standards. The second is the accelerated transition of Israeli customers to electric vehicles. The Chinese are currently considered world leaders in the electric car market by a large margin and their cars are cheaper than their American counterparts. According to Globes, this is a great economic and strategic achievement for China.

Interestingly enough, a Palestinian author writing for al-Quds al-Arabi suggested that the intensification of Sino-Israeli economic ties could have a positive effect also for Palestinians. According to this rather unconventional point of view, China could “play the role of a mutually acceptable mediator in any upcoming negotiations” and use its influence on Tel Aviv to “pressure it to stop or reduce its oppression of Palestinians.” [8]

The importance of Beijing’s role as mediator is also highlighted by Egyptian researcher Mostafa Khalaf, who commented on the necessity of a tripartite negotiation between Egypt, Sudan and Ethiopia on the Grand Ethiopian Renaissance Dam (GERD), which is likely to be on the agenda of the China-sponsored Horn of Africa peace conference, that will be held in Addis Ababa on June 20-21. [9] Khalaf emphasized the importance of this round of negotiations for both Nile downstream countries and China. If a favorable solution for all parties is found, Beijing may be able to expand its influence and soft power to the detriment of the United States while also protecting its investments in the area. Against this background, it is important to note that Egypt continues to express its willingness to further develop its partnerships with the Asian power. In a meeting between the Minister of Finance, Mohamed Maait, and the Chinese Ambassador to Cairo, Liu Xiaoming, the minister stated that Cairo is aiming to strengthen the cooperation with the Chinese side to issue RMB-denominated Egyptian bonds in the Chinese market. [10]

The need to expand relations in several fields, including diplomacy and technology, were also voiced by the Jordanian Speaker of Senate Faysal al-Fayez, [11] while the Turkish newspaper Dünya Gazetesi reported that Huawei and the Turkish company SolarAPEX have signed a contract to expand solar power plants in Türkiye. [12]

Finally, we report that many African countries have shown increased interest in their relationship with China. For example, the Tunisian President Kais Sayed announced during his speech for the end of Ramadan on May 1st that Tunisia officially became a member of the Asian Infrastructure Investment Bank. The Emirati newspaper al-Khaleej pointed out that, although this news has not received much attention in Tunisian media, this announcement clearly signifies an “important shift in Tunisia’s foreign policies” toward the “Eastern axis” after it has struggled in the past years to obtain financial support from its traditional, Western allies and international institutions. [13] It is important to point out that China has become a major trading partner for all the countries of the Arab Maghreb—it is the first partner for Mauritania, Algeria, and Libya; and the third for Morocco and Tunisia—thereby increasing its competitiveness vis-à-vis European countries, mainly France but also Spain and Italy. [14] The European Union’s plan for a €20-billion investment package dedicated to African infrastructure, energy projects, and the digital, education and health sectors should be read as a move to counter Chinese influence in the continent. However, given China’s stable foothold and its overall positive reception from African countries, it is unlikely that European countries will be able to challenge it yet. [15]