For decades Pakistan has played a key role as a linchpin in China’s foreign policy and its strategy towards South Asia, Central Asia and even Middle-East. Without any doubt, China’s global footprint is deepening and what one sees in recent months is that China wants to expand its influence to the Middle-East more than before to have accessibility to energy-rich Persian Gulf and to have multi-dimensional cooperation in the region. China is fully determined to establish a comprehensive economic partnership with the Arab world and over the past few months it took up the proactive role of mediator in the decade long rivalry between Saudi Arabia and Iran. What one sees is that China wants a holistic and multi-dimensional partnership with the Middle-East and here Pakistan comes in. Pakistan’s geo-strategic position serves as a gateway to the Middle-East through which China can easily access the Persian Gulf region to cater its energy needs. As the international community lauds China’s role in mediation between Saudi Arabia and Iran to promote stability in the Middle East, this growing alliance opens a space for Pakistan to grasp the economic opportunities it holds for the country.
Engagements between China and Middle-East over the years
Economically speaking, the Middle-East has long welcomed China. China’s trade increased manifold in the region since the start of the 21st Century and continued to grow , increasing from $180 billion in 2019 to $259 billion in 2021. On the other hand, Middle-East’s trade with the US has dropped from $120 billion in 2019 to $82 billion in 2021. In the past few years, Gulf Cooperation Countries (GCC) have taken the centre-stage in China’s Foreign Policy. The centrality of China’s economic cooperation with the Middle-East was first reflected in two key Chinese government documents- “Arab Policy Paper” of 2016 and “Vision and Actions on Jointly Building Silk Road Economic Belt and 21st-Century Maritime Silk Road” published in 2015. The framework of cooperation outlined in these documents focused on trade, infrastructure construction, energy and investment in the Middle East. China is doing active efforts to develop its economic ties across regional divides, reinforcing its position as the largest trading partner to regional powers such as Saudi Arabia, Iran, Egypt, Jordan, Kuwait, and the UAE. China wishes to bolster its energy needs to further improve its economic growth and solidify its economic and diplomatic ties with the Middle-Eastern states through infrastructure construction and telecommunications both of which are central components of China’s flagship mega-venture, the Belt and road Initiative (BRI).Historically, China had a limited urge for challenging US-led security architecture in the Middle-East but this has changed to a greater extent now. China’s position as the second major power has allowed it to exert its economic centric approach and avoid the mistakes committed by US, without facing the same strategic dilemmas.
Engagements between China and KSA
Without doubt, the ballooning economic partnerships between GCC states and China’s increasing engagements with the Kingdom of Saudi Arabia are reflective that Beijing has not only replaced Washington as the largest trading partner of the Middle East but is also replacing the US on political, social and diplomatic levels. The recent KSA- Iran peace agreement mediated by China is a prime example of this. More recently, the 2022 China-Arab States Summit held on 9 December 2022 , in Riyadh, Saudi Arabia was the 1st summit of the heads of states and representatives of 21 countries of the Arab League, and the head of state of the People’s Republic of China.
Saudi Arabia has recently announced its intention to join Shanghai Cooperation Organization as a dialog partner, a few weeks after the Chinese brokered the Saudi-Iran deal. Other Gulf states such as Qatar, Egypt, UAE, etc. gained the status of Observer States. With regards to Saudi-Iran peace agreement, although both countries through back door diplomacy had been discussing ways and means to reduce tensions since 2021. However, the efforts made by China for the normalization of the Saudi-Iran ties is particularly significant in brokering the peace agreement. Beijing for quite some time has been encouraging KSA and other countries in the region to diversify their relations by getting into economic partnerships with China. If the Iran-Saudi Peace agreement fully materializes, it can open up numerous opportunities for China as well as Pakistan. KSA’s announcement to join SCO as a dialogue partner, delving into its security prospects for the region has the potential to totally transform the dynamics of the relations between China and Middle-Eastern region.This clearly indicates that; such actions will increase both China’s regional diplomatic influence as well as its steady economic influence.
China, Middle-East Engagements-Opportunities
China Pakistan Economic Corridor (CPEC) by far is still the most important and expensive project of China’s Belt & Road Initiative. This economic corridor, which is a mix of energy infrastructure and transportation projects is where Pakistan can become a key part of China-Middle East engagements. Pakistan has a lot to offer to the Middle-East and China through the framework of CPEC. Middle-East, as we know, is the largest seller of natural gas and crude oil to China. At present, these resources are transported through sea routes to the Eastern part of China. Once the CPEC pipelines and railways are fully functional in Pakistan, it will be much more cost effective for China to transport such commodities to Gwadar Port from Western China.
It would not be wrong to say that after the 2nd and 3rd phases of CPEC, this mega-venture is expected to create a new channel for the flow of goods between Middle-East and China. It will not only increase the economic and geo-political interdependence between these two parties but as all the connecting routes pass through Pakistan this could help Pakistan generate a lot of revenue. Moreover, through these shorter and cheaper routes, Pakistan can also export and import from the Middle-Eastern region at much cheaper rates than before.
Gwadar Port has a lot to offer to China, connecting it to the larger Middle-Eastern region and enhancing its role in the Indian Ocean, and the Arabian Sea is the prime advantage that China will have here. Pakistan too can greatly benefit from China-Saudi partnership in the domains of infrastructure development, port operations and management, industrial and Special Economic Zones (SEZs), energy cooperation, trade & connectivity, tourism and hospitality and security and maritime cooperation.
The project of the Gwadar Free Zone will certainly help bring various businesses home. The tax exemptions given by the Pakistani government will attract more investors. Chinese and Middle-Eastern manufacturing industries could be attracted to be set up in Gwadar. China- Middle-Eastern Connectivity through Gwadar can also improve the face and optics of Gwadar. China and Pakistan are developing a key oil and petrochemical investment zone in Gwadar, which will attract significant investment from Middle Eastern oil exporting countries. The Gwadar Oil Terminal City will include large terminal and storage facilities for crude oil and associated petrochemical industries. Many oil exporting Arab countries have already announced major investments in this initiative. In February 2019 Saudi Arabia announced a $10 billion petrochemical investment in Gwadar during an official visit by Crown Prince Mohammed bin Salman to Pakistan. In October of the same year the UAE announced that it was close to finalizing a $5 billion joint venture agreement with Pakistan for the construction of an oil refinery in Gwadar.
Challenges
Despite its potential and the ability to act as a bridge between China and the Middle-Eastern region, there are some key challenges which Pakistan faces today or might face in the future. Some of the challenges are discussed below:
Pakistan needs to navigate a complex regional environment with various actors and their competing interests. Balancing its relationships with China and other Middle Eastern countries, such as Saudi Arabia and Iran, can be challenging.
Security is one of the major concerns. Although the government is taking steps to improve the situation in the region still it remains one of the main problems. Until and unless proper security is ensured and transportation routes are not made secure it will be hard to give a push to new businesses and engagements. Pakistan’s engagement with China in the Middle East may have geopolitical implications. It could strain Pakistan’s relationship with the United States, a key ally that has its own interests and influence in the region. Balancing these relationships requires careful diplomacy.
The Middle East is a region plagued by conflicts, terrorism, and regional rivalries. Pakistan needs to be mindful of the security risks associated with its engagement with China in the Middle East, especially considering the potential spill over effects of regional instability.
Infrastructure development is another key challenge. The government is working to improve road and rail connectivity in the region, but progress is very slow. The port’s development has often been criticized because of this as it hampers the development of the area and the local communities. The tensions between Pakistan and India have also created instability in the region. These tensions and hostilities are making it extremely challenging to convince investors to commit to long-term projects in the area.
Conclusions
By leveraging these opportunities, Pakistan can achieve economic growth, enhance energy security, and strengthen its regional influence. Engaging with China in the Middle East can provide Pakistan an opportunity to play a constructive role in promoting regional stability, resolving conflicts, and fostering dialogue among regional stakeholders.
Pakistan can establish Special Economic Zones within the framework of CPEC dedicated to technology innovation. These zones can attract Chinese and Saudi tech companies offering incentives like tax breaks, streamlined regulations and access to research organisations.
Pakistan can leverage its strategic location by creating an economic corridor that connects China’s BRI with Saudi Arabia’s Vision 2030. This corridor can serve as a trade route promoting commerce, investment and technology transfer between the three countries.
Both China and Saudi Arabia have expertise in the energy sector, and their engagement with Pakistan can help address country’s energy needs. KSA, as an oil-rich nation, can contribute to Pakistan’s energy security through investments, oil supplies & cooperation in the renewable energy sector. Moreover, China and KSA have been making significant investments in renewable energy. Pakistan can collaborate with both countries and develop a tri-lateral partnership focused on renewable energy projects.
Pakistan can facilitate cultural exchange programs between China, Saudi Arabia and its own diverse population. This can involve student exchanges, artist residencies’, and tourism promotion. By promoting cultural understanding, Pakistan can foster stronger diplomatic ties and people-to-people linkages. Islamic tourism promotion is another domain where Pakistan can work with Saudi Arabia and China. Religious tourism circuits, development of infrastructure around historical and religious sites and marketing campaigns targeting Muslims can attract visitors and boost Pakistan’s tourism industry.
Pakistan can position itself as a financial technology hub within the framework of CPEC. By collaborating with Chinese and Saudi Arabian fin-tech companies, Pakistan can foster the development of digital payment systems, mobile banking solutions and financial inclusion initiatives. This will not only improve financial services for unbanked population drive innovation in the financial sector.
Successful realization of these opportunities requires careful planning, effective governance, and inclusive participation of all stakeholders. Policymakers and non-governmental stakeholders should work together to capitalize on these opportunities while addressing potential challenges, ensuring sustainable development, and fostering regional cooperation. By thinking creatively and embracing out-of-the-box approaches, Pakistan can position itself as a key-player and realize its potential as a vital player in regional connectivity, economic growth, and stability within the broader China-Middle East engagement framework.
