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Rising geopolitical and geo-economic tensions are the most urgent risk in 2019

MD Staff

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The world’s ability to foster collective action in the face of urgent major crises has reached crisis levels, with worsening international relations hindering action across a growing array of serious challenges. Meanwhile, a darkening economic outlook, in part caused by geopolitical tensions, looks set to further reduce the potential for international cooperation in 2019. These are the findings of the World Economic Forum’s Global Risks Report 2019, which is published today.

The Global Risks Report, which incorporates the results of the annual Global Risks Perception Survey of approximately 1,000 experts and decision-makers, points to a deterioration in economic and geopolitical conditions. Trade disputes worsened rapidly in 2018 and the report warns that growth in 2019 will be held back by continuing geo-economic tensions, with 88% of respondents expecting further erosion of multilateral trading rules and agreements.

If economic headwinds pose a threat to international cooperation, efforts will be further disrupted in 2019 by rising geopolitical tensions among major powers, according to the report. Eighty-five percent of respondents to this year’s survey said they expect 2019 to involve increased risks of “political confrontations between major powers”. The report discusses the risks associated with what we describe as a “multiconceptual” world order – one in which geopolitical instabilities reflect not only changing power balances but also the increasing salience of differences on fundamental values.

“With global trade and economic growth at risk in 2019, there is a more urgent need than ever to renew the architecture of international cooperation. We simply do not have the gunpowder to deal with the kind of slowdown that current dynamics might lead us towards. What we need now is coordinated, concerted action to sustain growth and to tackle the grave threats facing our world today,” said Børge Brende, President of the World Economic Forum.

In the survey’s 10-year outlook, cyber risks sustained the jump in prominence they registered in 2018, but environmental risks continue to dominate respondents’ concerns beyond the short term. All five of the environmental risks the report tracks are again in the high-impact, high-likelihood category: biodiversity loss; extreme weather events; failure of climate-change mitigation and adaptation; man-made disasters; and natural disasters.

Alison Martin, Group Chief Risk Officer, Zurich Insurance Group, said: “2018 was sadly a year of historic wildfires, continued heavy flooding and increasing greenhouse gas emissions. It is no surprise that in 2019, environmental risks once again dominate the list of major concerns. So, too, does the growing likelihood of environmental policy failure or a lack of timely policy implementation. To effectively respond to climate change requires a significant increase in infrastructure to adapt to this new environment and transition to a low-carbon economy. By 2040, the investment gap in global infrastructure is forecast to reach $18 trillion against a projected requirement of $97 trillion. Against this backdrop, we strongly recommend that businesses develop a climate resilience adaptation strategy and act on it now.”

Environmental risks also pose problems for urban infrastructure and its development. With sea levels rising, many cities face hugely expensive solutions to problems that range from clean groundwater extraction to superstorm barriers. Shortfalls of investment in critical infrastructure such as transport can lead to system-wide breakdowns as well as exacerbate associated social, environmental and health-related risks.

John Drzik, President of Global Risk and Digital, Marsh, said: “Persistent underfunding of critical infrastructure worldwide is hampering economic progress, leaving businesses and communities more vulnerable both to cyberattacks and natural catastrophes, and failing to make the most of technological innovation. Allocating resources to infrastructure investment, in part through new incentives for public-private partnerships, is vital for building and strengthening the physical foundations and digital networks that will enable societies to grow and thrive.”

At an individual level, declining psychological and emotional well-being is both a cause and consequence within the wider global risks landscape, impacting, for example, social cohesion and political cooperation. The Global Risks Report 2019 focuses explicitly on this human side of global risks, looking in particular at the role played by complex global transformations that are under way: societal, technological and work-related. A common theme is that psychological stress relates to a feeling of lack of control in the face of uncertainty.

This year’s report revives the Future Shocks series, which recognizes that the growing complexity and interconnectedness of global systems can lead to feedback loops, threshold effects and cascading disruptions. These “what if” scenarios are food for thought as world leaders assess potential shocks that might rapidly and radically disrupt the world. This year’s sudden and dramatic breakdowns include vignettes on the use of weather manipulation to stoke geopolitical tensions, quantum and affective computing, and space debris.

The Global Risks Report 2019 has been developed with the invaluable support throughout the past year of the World Economic Forum’s Global Risks Advisory Board. It also benefits from ongoing collaboration with its Strategic Partners Marsh & McLennan Companies and Zurich Insurance Group, and its academic advisers at the Oxford Martin School (University of Oxford), the National University of Singapore and the Wharton Risk Management and Decision Processes Center (University of Pennsylvania).

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A comparison of strategic doctrines

Giancarlo Elia Valori

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In principle it is not political choices that generate strategic doctrines. The opposite is true, if anything.

 In the case of China, for example, it is very useful to study the evolution of recent strategic assumption and the most current military doctrines so as to later analyse political and even ideological changes.

Hence, which are China’s future and preferential battlefields? Which are the threats that the Chinese decision-makers regard as primary and what is their origin? What wars will China wage and fight? Indeed, inter alia, a strategic doctrine also answers these questions.

First and foremost, China’s military leadership has shifted the centre of gravity of its defence activities from the terrestrial centre of the country to the peripheries, hence mainly to the coasts and, ultimately, to China’s regional seas.

 During the Cold War, China had adopted a defensive “all-out war”.

Currently the Chinese doctrine mainly concerns regional and limited wars, restrained both in time and space and in the use of force.

 This means that currently China has not yet vast global interests to defend with a war. It will soon have them, however.

 Moreover, currently the Chinese political and military decision-makers do not believe that – in the not too distant future – China will be involved in a global sea or territorial war.

The People’s Liberation Army (PLA) has a full monopoly of force in China.

  Moreover, the PLA does not depend directly on the Ministry of Defence, but only on the Communist Party of China (CPC).

 The PLA’s high-ranking officers report directly to the CPC’s Central Military Commission and not to other entities. Hence they take orders only from it. The PLA’s Commander-in-Chief is the General Secretary of the CPC; the Defence Minister reports only to the State Council and the Central Military Commission is only a very powerful body of the CPC.

With specific reference to military spending, the latest data reports a PLA’s annual cost of 250 billion U.S. dollars while, for example, the U.S. military budget amounts to 649 billion U.S. dollars, again based on the latest data available.

 The Chinese ground forces consist of 975,000 units, while the Navy of 240,000 and the Air Force of 395,000 units. The Strategic Missile Force uses 100,000 units, while the Strategic Support Force finally operates with 175,000 soldiers.

 Other unspecified tasks and functions are performed by 150,000 soldiers and officers.

As to materials used and weapons – which are a strategic indication and not just a mere information item – the PLA has 70 intercontinental ballistic missiles and 162 bombers; 3,860 armoured combat vehicles for infantry; 6,740 tanks and 13,420 artillery pieces; 57 missiles for submarine launch; 1 aircraft carrier, as well as 82 frigates and cruisers; 4 amphibious ships; 1,966 tactical aircraft; 246 attack helicopters and, finally, 77 military satellites.

So far the PLA has deeply studied the example of the U.S. war in Iraq and hence of the Revolution in Military Affairs (RMA).

This means a war fought above all with advanced technologies, communication networks and particularly with the highest-precision weapons and information technology.

 Until the RMA adoption, China relied above all on the clear numerical superiority of its ground forces.

 In other words, the Chinese military doctrine was based on the fight against a land invasion or an occupation but, after the Gulf War and the Iraqi war waged and led by the United States, China began to reduce the size of its ground forces so as to focus on more technologically advanced and better trained Forces.

 Another key factor of Chinese military modernization has been Taiwan’s political status.

During the 1997 crisis, in fact, China did not succeed in discovering the way and extent of U.S. military engagement in the region.

 It was after this failure that China began to produce anti-ship missiles, medium range ballistic missiles, A2 anti-ship missiles and other anti-access-area denial weapons, as well as cyber- and anti-satellite weapons.

As a whole, the People’s Republic of China has developed four military doctrines since 1949.

 The doctrines developed before 1993, however, were all centred on the Maoist concept of “People’s War”, i.e. the “long-term People’s War”.

It was mainly based on maintaining the support of civilian population for the Armed Forces and on combining the efforts of the working class and of the “Red Army” led by the CPC.

 The strategic goal of the “People’s War”was to force enemies to enter China’s large central area, where they would be besieged and then defeated, again by the combined effect of the working class and the Red Army.

 In essence, the People’s War was aimed at being prolonged as much as possible and hence wearing and tearing the attackers.

Moreover, again according to Mao Zedong, the “long-term war” was based on three phases: strategic retreat, strategic stalemate and strategic counter-offensive.

With a view to completing these three phases, three types of Forces were needed: the regular army, the local forces and the guerrilla warfare forces.

 However, there is no theory of political warfare – also outside Marxism – which does not envisage guerrilla warfare.

 Towards the end of the Cold War, in 1980 China adopted the concept of the “People’s War under Modern Conditions”.

Again with the label of the Maoist “People’s War”, a war of defence was envisaged at various levels, which were already active at the borders, as well as far more offensive operations than those envisaged by the old “People’s War”.

 In 1993 – almost at the end of the Cold War, in which Mao Zedong never believed – China adopted a new doctrine, called “Winning Local Wars under High-Tech Conditions”.

While initially thePLA was thinking about a war of defence against a land invasion, in the case of that doctrine the Chinese decision-makers imagined a peripheral war in high-tech conditions.

 In other words, a defensive war against an attack by Taiwan, Japan, the United States or their regional allies.

 And by the Russian Federation, as well. The Chinese doctrine was no longer defensive, as it even suggested a first strike, including a nuclear one, to immediately provide China with an advantage over the attacker.

 The key concepts of the 1993 doctrine were the following: the “strategic frontier”, i.e. the limit beyond which you react, even with a nuclear salvo; “strategic deterrence”, which occurs when the enemy knows how China will react; “victory achieved through elite troops”, well beyond the old link between workers and the Red Army; “taking the initiative by striking first”; “victory over inferiority through superiority” – obviously of forces –  and finally “quick battles to force quick resolution”.

 A huge anthropological and cultural transformation, compared to the CPC’s political and military tradition.

 No longer war of attrition, but quick war not designed to annihilate the enemy. Then strategic deterrence is considered, i.e. the use of nuclear weapons, as well as the new role – certainly scarcely “Maoist” and scarcely “people-based” – of the elite troops.

 For Mao Zedong, at the core there was the “human sea” of his “People’s War”, not certainly the inequality between special forces and the rest of troops.

Moreover, there was another innovative aspect in the 1993 doctrine: the importance attached by China’s military decision-makers to the joint operations in its peripheries.

Reading between the lines, the CPC’s message was that, with the 1993 doctrine, China could solve the conflicts with its neighbouring countries by force.

 The 2004 doctrine was called “Winning Local Wars with Informatised Warfare”.

The core of the issue was “IT and computerization”, which replaced the more generic term used in the 1993 doctrine of “High-Tech Conditions”.

Besides underlining again the importance of joint operations, as in 1993, the 2004 doctrine highlighted the consistent, orderly and stable flow of information between the various command and control centres and the military operating on the battlefield.

 Therefore, since 2004 the core of the Chinese military reform has become the creation of a powerful command, control, communications, computers, intelligence and surveillance network (C4ISR).

The scenarios envisaged for the future war included, above all, the assault on the islands and the blockade of the islands, as well as counter-attack campaigns in border areas.

 Finally, there is also a new Chinese military doctrine, which is largely still operational.

 Released in 2014, it is called “Winning the Informatised Local Wars”.

The new Chinese “active defence” is based on it.

Although not radically changing the previous theories, the 2014 doctrine underlines the fundamental role of flexibility, mobility, joint operations, information dominance and precision raids.

 The strategic direction remains the usual one: South-East Asia and Taiwan, i.e. China, tell us – between the lines – that a future and probable conflict for Taiwan will also involve the United States.

Furthermore, the 2014 doctrine carefully sets the issue of Military Operations Other Than War (MOOTV), such as rescue operations; counter-terrorism; maintaining political and social stability; protection of rights and interests; peacekeeping activities and international humanitarian assistance.

 The Chinese PLA also distinguishes between MOOTW and Preparation for Military Struggle (PMS).

Therefore, incidentally, the primary goal is the war for conquering Taiwan, but the PLA is also preparing for regional wars in the South China Sea and Southeast Asia, while the current doctrine, from 2014 onwards, is a military theory linked to the solution of a “high-intensity conflict”.

 The Chinese planners’ idea is a “war for the destruction of systems”, as was the case during the Gulf War in 1991 or the Kosovo one in 1999.

 China currently implements the Effect Based Operation (EBO) criterion that the United States began to use in the mid-1990s.

The “war of systems” means that whoever wins paralyzes the enemies’  “system of systems”.

However, what would the United States do if it waged war against China? Most likely, it would start with operations on the Southern coast, with a view to decimating the Chinese Navy.

 This would be followed by a U.S. attack against the Chinese command and control networks to prevent the PLA from striking back immediately.

In all likelihood, China would respond by using its artificial islands in the South China Sea and initially relying on information superiority, which would be followed by a joint operation against the U.S. fleet and later by a joint attack on one or many U.S. bases in the South China Sea.

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Could India’s Diplomatic Outreaches Be a Success amid Heightened Border Tensions?

Jelvin Jose

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The India- China border scuffle at Galwan Valley on June 15, in which India lost its twenty servicemen of Assam rifles wing, marked a watershed moment in the Sino-Indian Relation. Although the tensions from unsettled borders prevail over for more than a decade, fatalities occur after long forty-five years, at the 3500km long Line of Actual Control (LAC). The LAC lies in between two Asian heavyweights endures undemarcated for more than half a century. Even though Beijing hasn’tyet formally confirmed casualties on their side, several international bureaus and Chinese state-backed Global Times have reported death toll on either side.

The recurrence of violence at LAC has lit a fuse in between two nuclear powers in the continent, exacerbating the mutual skepticism and long-drawn-out conflict of interests. The hostility has grabbed international attention, as both parties involved possess substantial political and economic leverage, along with highly sophisticated weapons in their arsenal. The European Union and United Nations have expressed concerns over the conflict escalation and have insisted to peacefully resolve the dispute.

The Trump administration has articulated a paradigm shift in favor of New Delhi, from the initial offer for mediation in May last and the support for a peaceful resolution, soon after the standoff turned deadly on 15 June. Since tensions skyrocket, New Delhi and Beijing are mounting up firepower on their side of LAC. India, anticipating a conflict escalation or even limited war at the double frontier, taking the threat from Pakistan into account, are exploring all diplomatic pathways to enhance its position in the standoff. Under the current circumstances, the outcome of these diplomatic outreaches assumes new criticality in New Delhi’s strategic designs aimed to keep the dragon at bay.

India’s Diplomatic Outreaches

The New Delhi has invigorated its diplomatic channels amid intensified border tensions. New Delhi wants to ensure the flow of weaponry from top suppliers, foreseeing a persistent battle at the LAC. Indian strategic circles also anticipate the possibility of a multi-front attack, considering the strategic partnership and all-weather alliance prevailing in between Islamabad and Beijing. Several agencies report that Islamabad plans to move around 20000 Pak soldiers to the Line of Control (LoC), coupling with the Chinese presence in the East.

Given this, the firepower up-gradation on a war footing is ever more vital for India. The defense minister, Rajnath Singh, called on Moscow to attend the 75th Victory Day parade of the USSR’s victory over Nazi Germany, has thrust upon the Kremlin administration to expedite the delivery of S-400 Air Defense System. Russia is the host country for the RIC meet and Shanghai Cooperation Organization Summit (SCO) this year, offers plenty of occasions for bilateral engagement. Apart from this, the Indian Ambassador to Moscow, DB Venkatesh had a cellular conversation with the Russian Deputy Foreign Minister Igor Morgolov on June 17 regarding the clash between both countries. Beijing has already integrated the same to its defense complex, becoming the first nation to move in this direction in 2014.

The New Delhi has scaled up its diplomatic engagement with Washington in the backdrop of growing border frictions with Beijing. Both nation’s threat perceptions about the PRC go in line with the other’s. The New Delhi has been briefing the border situation to Washington’s circles. New Delhi is well aware that the U.S. support is indispensable during the Chinese aggression. The unflinching support of the United States would boost Indian morale and would exert pressure on Beijing in an aggressive standoff. Besides this, the access to state-of-art weapons and defense equipment from Washington at the time of conflict escalation or limited war is of paramount significance for Indian forces to cope up with the capabilities of the People’s Liberation Army. The Indian authorities are in attempts to speed up the supply of precision artillery weapons from the U.S.   

The delivery of Rafale fighter jets from the French firm, Dassault Avionics, assumes top priority in Indian defense acquisition plans. France has reaffirmed its commitment to deliver the fighter jets on time in a conversation with the Defense minister Rajnath sigh and French defense minister Florence Parly. The initial transfer of four aircraft is expected by July end. The Indian leadership is leaving no stone unturned to raise the number of aircraft delivered in the first phase to six.

Jerusalem is another door for New Delhi to knock in time of watershed moments. Israel, during the 1999 Kargil skirmish, provided technical backstopping for IAF to integrate the Paveway Laser Guided Missiles into Mirage 2000 fighters. This technological advancement, with Israeli assistance, played a pivotal role in Indian success during the conflict. India, which has been Jerusalem’s top defense export destination, is actively going in pursuit of a SPIDER in service Air Defense System from the Jewish state.

Apart from this, the Indian external minister explained the border situation to his French foreign minister, Jean Yves Le Drian. The Indian secretary of foreign affairs, Harsh Vardhan Shringla, has also reached out to this French counterpart in a video conference. As part of these interactions, Paris has expressed its willingness to boost cooperation with India in the Western Indian Ocean and Indo-Pacific. The New Delhi on similar lines has discussed the India-China Border scuffle with one another European power, Germany. The interaction took place between the German state secretary, Miguel Berger Friday, and India’s HV Shringla.

Outcomes of these Engagements

The outcomes of New Delhi’s diplomatic engagement would be a determining factor concerning the Indian aspirations to emerge victorious in its ongoing and future border strife with Beijing. The Indian endeavor to win the support of Moscow in any skirmish with Beijing is critical as it has a historic friendship with New Delhi and an ongoing economic and strategic partnership with Beijing. Taking the depth of its engagement with Beijing into account, the Kremlin does not want to get dragged into the India-China bilateral power rivalry. But at the same time, Russia has assured to hasten the delivery of weapons amid the worsening scenario at LAC.

Albeit the fact that both the New Delhi and Washington share common anxiety regarding the rise of China and its security implications, the extent to which the U.S. be willing to get involved in the India-China dispute remains contentious. The White House has reiterated its support to New Delhi in its border clash with Beijing. However, the Trump administration’s first response to the deadly standoff on 15th July sounds the alarm on the U.S.’s commitment to the Indian security concerns. Washington’s initial statement has been to find a peaceful settlement, taking a neutral stance. The U.S. could ensure the supply of arms and ammunition to New Delhi during the crisis.

Similarly, Israel, despite its increased economic interaction with PRC would supply sophisticated weapons to New Delhi. The enhanced cooperation with France would provide a booster to Indian initiatives to counter the Chinese naval dominance in IOR. Likewise, the mutual exchange with Berlin assumes greater importance for India as it would hold the presidentship of the EU for the next five years. The intensified interaction with the European powers would help to exert diplomatic pressure on Beijing to exercise restraints at Border.

The support from key allies is critical at this stage as New Delhi faces a huge engulf in firepower, both in terms of nuclear warheads and conventional power, with PRC. But, the extent of support that these countries be willing to provide is questionable. On these grounds, the strategic option before New Delhi seems to be limited, compelling New Delhi to sort out the situation, on its behalf to a great extent.

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Turning Gulf Security Upside Down

Dr. James M. Dorsey

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Like many paradigms across the globe, the pandemic and its associated economic downturn have changed the paradigm shaping debates about Gulf security that was inevitably set to gradually migrate from a unipolar US defense umbrella that shielded energy-rich monarchies against Iran to an architecture that was more multilateral. In many ways, the pandemic’s fallout has levelled the playing field and not necessarily in ways that favour current policies of Gulf states.

Saudi Arabia’s relations with the West are increasingly being called into question, with the Saudi–Russian oil price war in March potentially having broken the camel’s back. The Kingdom and the United Arab Emirates (UAE) stand to lose at least some of the financial clout that allowed them to punch above their weight even if they are likely to exclude arms purchases from their austerity measures.

Weakened financial clout comes at a moment when the Gulf states and Iran are gearing up towards an arms race in the wake of Iran’s recent satellite launch and unveiling of an unmanned underwater vehicle against the backdrop of the 2015 international agreement that curbed the Islamic Republic’s nuclear programme inching towards collapse. The unmanned underwater vehicle puts Iran in an elite club, of which the only other members capable of producing them are the United States, Britain and China.[1] The satellite adds Iran to a group of only about a dozen countries able to do launches of their own. [2]

Add to this the fact that none of the regional players — Saudi Arabia, the UAE, Qatar, Iran, Turkey and Israel — feel secure that any of the external powers — the United States, China and Russia — are reliable security and geopolitical partners.

Gulf states have, for years going back to the era of Barak Obama if not Bill Clinton, increasingly perceived the United States as unfortunately their only option on the premise that they are not willing to change their policies, particularly towards Iran, but one that is demonstrably unreliable, unwilling to defend Gulf states at whatever cost, and at times at odds with them in terms of policy objectives.

The Gulf states’ problem is that neither Russia nor China offer real alternatives at least not on terms that all Gulf states are willing to accept. Russia is neither interested nor capable of replacing the United States. Moreover, its Gulf security plan is at odds with at least the policy of Saudi Arabia.

The plan calls for a security arrangement modelled on that of Europe under the auspices of the Organization for Security and Cooperation in Europe (OSCE). It would be an arrangement that, unlike the US defence umbrella in the Gulf, includes Iran, not directed against it. It would have to involve some kind of regional agreement on non-aggression.[3]

Saudi Arabia, under Crown Prince Mohammed bin Salman, has made clear that it is not interested, as is evident in the pandemic where it has refrained, in contrast to other Gulf states, from reaching out to Iran with humanitarian aid even though it last year engaged in an indirect exchange with the Islamic Republic. That exchange died with the killing by the United States in January of Iranian general Qassim Soleimani.

The Elephant in the Room

China is obviously the elephant in the room.

Logically, China and the Gulf states are in the same boat as they grapple with uncertainty about current regional security arrangements. Like the Gulf states, China has long relied on the US defence umbrella to ensure the security of the flow of energy and other goods through waters surrounding the Gulf in what the United States has termed free-riding.

In anticipation of the day when China can no longer depend on security provided by the United States free of charge, China has gradually adjusted its defense strategy and built its first foreign military facility in Djibouti facing the Gulf from the Horn of Africa. With the People’s Liberation Army Navy tasked with protecting China’s sea lines of communication and safeguarding its overseas interests, strategic planners have signalled that Djibouti is a first step in the likely establishment of further bases that would allow it to project long-range capability and shorten the time needed to resupply.

But like with the Russians, Chinese strategic planners and their Gulf counterparts may part ways when it comes to what would be acceptable geopolitical parameters for a rejuvenated regional security architecture, particularly with regard to Iran. Any new architecture would break the mould of Chinese engagement in the Middle East that is designed to shield the People’s Republic from being sucked into the region’s myriad conflicts.

The assumption has long been that China could at best postpone execution, but that ultimately, it would have no choice but to engage in the politics of the region. More recently, influential Chinese analysts are suggesting that China has another option: turn its back on the region. That may seem incredulous given China’s dependence on Middle Eastern energy resources as well as its significant investments in the region.

These analysts argue, however, that China is able to diversify its energy sources and that Chinese investment in the Middle East is but a small percentage of overall Chinese overseas investment. They describe Chinese Middle Eastern economic relations as past their heyday with economies of both in decline and the prospects of the situation in the Middle East getting worse before it becomes better.

“China–Middle East countries is not a political strategic logic, it’s an economic logic. For China, the Middle East is always on the very distant backburner of China’s strategic global strategies … Covid-19, combined with the oil price crisis, will dramatically change the Middle East. (This) will change China’s investment model in the Middle East … The good times of China and the Middle East are already gone… Both China and the Middle Eastern economies have been slowing down … In the future, the pandemic, combined with the oil price problem, will make the Middle East situation worse. So, the China economic relationship with the Middle East will be affected very deeply,” said Niu Xinchun, director of Middle East studies at China Institutes of Contemporary International Relations (CICIR), widely viewed as China’s most influential think tank.[4]

Pessimistic forecasts of economic prospects in the Middle East bolster Niu’s prediction. Data and analytics company GlobalData predicted in an email that depressed oil markets and prices in the Middle East and North Africa would lead to a contraction in non-oil sectors, including construction. “Construction activity for the remainder of 2020 is set to see poor performance … In addition, public investment is likely to be moderate, which will translate into fewer prospects for private sector businesses to grow — especially within sectors such as infrastructure. Expected increase in taxes, selected subsidy cuts and the introduction of several public sector service charges will influence households’ purchasing power, having a knock-on effect on future commercial investments,” said GlobalData economist Yasmine Ghozzi.

Moreover, the downplaying of Chinese economic interest in the Middle East fits a pattern of reduced Chinese capital outflows. “What we may not have seen is how much China has retreated financially already for the past four years … Especially since 2016, China’s outflows have come down dramatically in both lending and investment. Foreign direct investment is now at about 30 per cent of what it was in 2016,” said Agatha Kratz, associate director of Rhodium Group, an independent research provider.[5]

To be sure, Chinese officials and analysts have consistently maintained that the Middle East is not a Chinese priority, that any future battles with the United States will be fought in the Asia Pacific, not in the Gulf. Their assertions are backed up by the fact that China has yet to articulate a comprehensive policy towards the region and in 2016 issued its one and only white paper on policy towards the Arab world that essentially was an elaboration of its basic foreign and defense policy principles.

More likely than China seriously entertaining turning its back on the Middle East is the probability that it is sending the region a message that is not dissimilar from what Russia is saying: get your act together and find a way to dial down the tension. It is a message that appears to varying degrees to have been heard in the smaller Gulf states but has yet to resonate in Riyadh. It is also a message that has not been rejected out of hand by Iran.

Discussing a possible extension of a United Nations arms embargo against Iran, Saudi Ambassador Abdallah Al Mouallimi, arguing in favour of a prolongation, suggested that it would serve Russian and Chinese interests even though they would not agree with that assessment. “They have their views, we respect their views, but their interests would be better served and promoted with the embargo extended,” said Al Mouallimi.[6]

A Chinese Communist Party newspaper made days later a first reference in the People’s Republic’s state-controlled media to reports of an alleged secret 25-year multi-billion-dollar co-operation agreement in Iran amid controversy in the Islamic Republic. Chinese officials and media have largely remained silent about Iranian reports of an agreement worth anywhere between US$120 billion and US$400 billion that seemingly was proposed by Iran, but has yet to be accepted by China.[7]

Writing in the Shanghai Observer, a subsidiary of Liberation Daily, the official newspaper of the Shanghai Committee of the Communist Party of China, Middle East scholar Fan Hongda argued that the agreement, though nowhere close to implementation, highlighted “an important moment of development” at a time that US–Chinese tensions allowed Beijing to pay less heed to American policies.[8] Fan’s suggestion that the US–Chinese divide gave China more room to develop its relations with Iran will not have gone unnoticed in Riyadh and other Gulf capitals.

An Emerging Tug of War

How all of this may shake out could be determined by the emerging tug of war in the Middle East between China and the US. Israel has already been caught up in it and has made its choice clear, even if it still attempting to maintain some wiggle room. Nonetheless, Israel, in the ultimate analysis, knows where its bread is buttered, particularly at a moment where the United States is the only backer of its annexationist policies. In contrast to Israel, the US is likely to find the going tougher when it comes to persuading Gulf states to limit their engagement with China, including with telecom giant Huawei, which already has significant operations in the region.

Like Israel, UAE officials have sought to convey to the US that they see relations with the United States as indispensable even though that has yet to be put to a test when it comes to China. Gulf officials’ stress on the importance of ties will, however, not shield them from American demands that they review and limit their relations with China, nor its warnings that involvement of Huawei could jeopardise sensitive communications, particularly given the multiple US bases in the region, including the US Fifth Fleet in Bahrain and the forward headquarters of the US military’s Central Command, or Centcom, in Qatar.

The US Embassy in Abu Dhabi, in a shot across the Gulf’s bow, last month rejected a UAE offer to donate hundreds of coronavirus tests for screening of its staff. The snub was designed to put a dent in China’s health “Silk Road” diplomacy centered on its experience with the pandemic and ability to manufacture personal protective and medical equipment.

A US official said the tests were rejected because they were either Chinese-made or involved BGI Genomics, a Chinese company active in the Gulf, which raised concerns about patient privacy. The US softened the blow when the prestigious Ohio-based Cleveland Clinic sent 40 nurses and doctor to its Abu Dhabi subsidiary. The Abu Dhabi facility was tasked with treating the UAE’s most severe cases of coronavirus.[9]

The problem for the US is that it is not only Trump’s policy or lack thereof towards the Middle East that undermines confidence but it is also policies that, on the surface, have nothing to do with the Middle East. The United States has been asking its partners including Gulf states to give it time to develop an alternative to Huawei’s 5G network. Yet at the same time, it is barring the kind of people entry that technology companies need to develop systems.

A Silver Lining

No matter how the tug of war in the Middle East evolves, the silver lining is that, like China, the United States despite its desire to reduce its commitment cannot afford a power void in the region. That is what may create the basis for breaking the mould.

It will require a backing away from approaches that treat conflicts as zero-sum games not only on the part of regional players but also of external players, like in the case of the US versus Iran, and it will require engagement by all regional and external players. To achieve that, players would have to recognise that in many ways, perceptions on both sides of the Gulf divide are mirror images of one another: all parties see each other as existential threats.

Failure to break the stalemate risks conflicts becoming further entrenched and threatening to spin out of control. The opportunity is that confidence-building measures and a willingness to engage open a door towards mutually acceptable regional security arrangements and conflict resolution. However, for that to happen, major powers would have to invest political will and energy at a time when they feel they have bigger fish to fry and prioritise geopolitical jockeying.

In a twist of irony, geopolitical jockeying may prove to be an icebreaker in a world, and certainly a region, where everything is interconnected. Increasingly, security in the Gulf is not just about security in the Gulf. It is not even just about security in the Middle East. It is about security in the Mediterranean, whether one looks at Libya on the sea’s southern shores, Syria in the east, or growing tension in the whole of the Eastern Mediterranean. And it does not stop there with regional rivalries reaching into the Black and Caspian Seas and into Central Asia.

Finally, there are the grey and black swans built into partnerships and alliances that are either becoming more fragile like those of the United States or ones that have fragility built into their DNA like the ties between Iran, Turkey, China and Russia. Those swans could at any moment swing the pendulum one way or another.

To be sure, contrary to Western perceptions, relations between Iran, Turkey, Russia and China are not just opportunistic and driven by short-term common interests but also grounded in a degree of shared values. The fact of the matter is that men like presidents Recep Tayyip Erdogan, Vladimir Putin, Xi Jinping and Ayatollah Ali Khamenei find common ground in a view of a new world order that rejects democracy and the rule of law; disregards human and minority rights; flaunts, at least for now, violations of international law; and operates on the principle of might is right.

That glue, however, is insufficient, to prevent Turkey and Russia from ending up on opposite sides of conflicts in Libya and Syria. It is also unlikely to halt the gradual erosion of a presumed division of labour in Central Asia with Russia ensuring security and China focusing on economic development. And it is doubtful it would alter the simmering rivalry between Iran and Russia in the Caspian Sea and long-standing Russian reluctance to sell Iran a desperately needed anti-missile defense system.

In short, fasten your seat belt. Gulf and broader regional security could prove to be a bumpy ride with unexpected speed bumps.

[1] “Iran’s UUV to add new dimension to its warfare capability: Forbes”, Tehran Times, 30 May 2020, https://www.tehrantimes.com/news/448370/Iran-s-UUV-to-add-new-dimension-to-its-warfare-capability-Forbes.

[2] Mike Wall, “Iran launches its 1st military satellite into orbit: reports”, Space.com, 22 April 2020, https://www.space.com/iran-launches-first-military-satellite.html.

[3] Theodore Karasik, “Is Russia’s ‘old’ Gulf security plan the best it can do?”, Arab News, 20 July 2019, https://www.arabnews.com/node/1533096.

[4] Niu Xinchun speaking on “How are China’s Relations with the Middle East Evolving During the COVID-19 Pandemic?”, Chatham House, 19 May 2019, https://www.facebook.com/watch/?v=2721841274725780.

[5] Agatha Kratz speaking on “China and the Mediterranean Region in and Beyond the Pandemic, German Marshal Fund”, 3 July 2020, https://www.gmfus.org/events/china-and-mediterranean-region-and-beyond-pandemic.

[6] Joyce Karam, “Russian and Chinese interests ‘better served’ if Iran arms embargo is extended, says Saudi official”, The National, 2 July 2020, https://www.thenational.ae/world/the-americas/russian-and-chinese-interests-better-served-if-iran-arms-embargo-is-extended-says-saudi-official-1.1042822.

[7] Seth J Frantzman, “Iran media discuss 25-year deal between Iran and China”, The Jerusalem Post, 3 July 2020, https://www.jpost.com/middle-east/iran-media-discuss-25-year-deal-between-iran-and-china-633739.

[8] Fan Hongda, “Iran announced a 25-year comprehensive cooperation plan with China, can Sino-Iranian relations get closer?” [观察家 | 伊朗宣布与华25年全面合作计划,中伊关系能否进一步走近?], Shanghai Observer, 20 June 2020, https://www.shobserver.com/news/detail?id=264494.

[9]Interview with the author, 8 June 2020.

Author’s note: This story first appeared as an MEI Insight

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