• How the US-China Trade War is Shifting Middle Eastern Regional Politics

    How the US-China Trade War is Shifting Middle Eastern Regional Politics

    In the year since the signing of the Abraham Accords between Israel and the United Arab Emirates (UAE), the Middle East’s political-economic landscape has rapidly shifted. While financial deals between Israel and other Middle Eastern nations were previously conducted in secret, regional trade with Israel has exponentially increased. An unlikely coalition has formed the East Mediterranean Gas Forum, and grand intra-regional infrastructure projects are in production.

    This swift movement from cold to warm peace reflects a significant change in U.S. foreign policy in the region. In prior decades, the cold peace between Israel and its neighbors allowed the U.S. to delicately balance its diplomatic and economic interests in the region. But with China gaining political ground, the global economic cold war brewing between it and the United States is surfacing in the Middle East.

    Recently, the United States has taken a bolder approach to push its Arab allies toward cooperation with Israel, with the ham-fisted passage of the Deal of the Century a reflection of it. The United States is counting on shared economic interests to act as the diplomatic glue that brings these nations together under a new bloc, with little to no concessions made by Israel on the illegal occupation of the Palestinian territories.

    This emphasis on tangible infrastructural projects is particularly interesting to the developing geopolitics of the region. Moreover, the projects, mapped across the Middle East, are an effort to consolidate the region’s U.S.-led political-economic status quo and rebuff competition from China.

    Chinese Encroachment & Forming the Economic Bloc

    Through its Belt and Road Initiative (BRI), China has started developing economic influence in the Middle East in recent years. In 2019, Saudi Arabia and the UAE contracted the Chinese company Huawei to build 5G telecom infrastructure amid a concentrated U.S.-led effort to boycott the company internationally. In 2020, Iraq signed a $3 billion contract with the state-owned China ZhenHua Oil Company, with Iraq being China’s second-largest source of imported oil. Currently, the China State Construction and Engineering Company (CSCEC) is heading the $3 billion project to build Egypt’s New Administrative Capital.

    China also enjoys “comprehensive strategic partnerships” with Algeria, Egypt, Saudi Arabia, the UAE, and particularly Iran, from whom China purchases oil in violation of U.S. sanctions. In addition, China is currently conducting joint military drills alongside Russia. Hezbollah and other pro-Iran factions have also welcomed Chinese influence in the region. Such partnerships represent the pinnacle of China’s foreign relations and highlight the geostrategic importance of the Middle East.

    The Belt and Road Initiative has even extended to the Israeli market. The China Railway Construction Corporation (CRCC), which the Biden administration issued an executive order against, banning them from receiving U.S. investment due to concerns “directly threaten[ing] U.S. security,” is currently constructing a railway between Tel Aviv and Jaffa. In 2020, Chinese company Pan Mediterranean won a contract bid to construct and operate a port in Ashdod, while a new port terminal in Haifa operated by the Shanghai International Port Group (SIPG) was inaugurated in September. The U.S. Navy is reportedly reconsidering its practice of periodically docking at the Israeli naval base in Haifa as a result.

    Unlike in Africa, South America, and other continents where the BRI has extended, Chinese deals in the Middle East have received little media coverage. For example, the $400 billion comprehensive strategic partnership between China and Iran only became public knowledge due to a leak. Similarly, the construction of a secret infrastructure project inside a Chinese port in the UAE was recently halted by developers following pressure from the United States. This relative secrecy reflects China’s desire to covertly maneuver about these political-economic deals and infrastructure projects to avoid upsetting the United States and accelerating the trade war — a sentiment shared by the United States and Israel.

    Having one of the lowest intra-regional trade rates globally, with just five percent of exports going to neighboring countries, the Middle East has no broad regional infrastructure to foster economic cooperation. For American and other multinational corporations, this has meant disconnected supply chain logistics, investment barriers, and a lack of consistent regulatory frameworks between countries in the region — and with it, susceptibility to foreign economic influence providing alternatives and solutions. However, the agreements struck in the Abraham Accords and its aftermath have since attempted to change that.

    Tracks for Regional Peace

    One of several major infrastructural projects to emerge in the post-Accords landscape is the UAE-Israel railway. Though first proposed in 2018, the “tracks for peace” initiative has been fast-tracked since the signing of the peace agreement. The ambitious project seeks to connect the port of Haifa with Jordan’s railway, which would be linked to Saudi Arabia and extended to the UAE. Since the signing of the Accords, the railway proposal has been revived to consolidate the forming economic bloc it has kicked off.

    “Beyond its contribution to Israel’s economy, the Jordanian and the Palestinian economies, the initiative will connect Israel economically and politically to the region and will consolidate the pragmatic camp in the region,” stated Israeli Transportation Minister Israel Katz. In March, the UAE established a $10 billion investment fund supporting “multiple sectors in Israel,” with an emphasis on ports, railways, and other transport infrastructure.

    Though still in a preliminary stage of planning, the railway is meant to serve as an alternative route to the politically unstable Strait of Hormuz in the Persian Gulf and the Bab al-Mandab Strait at the southern end of the Red Sea. The railway is expected to help secure inter-regional trade and regional exports — particularly oil exports. But it represents only one element of the ambitious infrastructure-centered vision that the Accords lay out.

    The East Mediterranean Gas Forum & the Israeli-Egyptian Pipeline

    In September 2020, Israel, Egypt, Cyprus, France, Greece, Italy, Jordan, and the Palestinian Authority formed the East Mediterranean Gas Forum (EMGF), with the United States as a permanent observer. The coalition seeks to “cooperate on developing an infrastructure for gas trade within the region and with external markets.”

    Soon after the formation of the EMGF, the Egyptian and Israeli ministers of energy struck another deal in February 2021 to build a pipeline connecting Israel’s offshore Leviathan natural gas field to liquefied natural gas (LNG) terminals in northern Egypt. The Leviathan gas field is operated by Houston-based oil and natural gas exploration and production company Noble Energy, with Chevron and Delek Drilling among the shareholders. Egypt and Israel are currently expanding the operation by constructing an additional $200 million pipeline.

    The formation of the EMGF and the construction of the Israeli-Egyptian pipeline came as tensions simmered in the Mediterranean with Turkey. Turkey has attempted to develop its own political-economic influence in the region, especially in Syria — much to the United States and Israel’s displeasure. In 2019, Turkey and Libya signed a maritime boundary treaty outlining exclusive economic zones and establishing military cooperation. The EMGF rejected the treaty’s validity, claiming that it violates the UN Montego Bay Convention of 1982. Soon after, the EMGF constructed the Israeli-Egyptian pipeline and arranged for the signing of a similar maritime boundary treaty between Egypt and Greece to counter the perceived Turkish encroachment in the Mediterranean, a topic which repeatedly made headlines in 2020.

    The EMGF’s diplomatic and economic efforts to control Mediterranean trade and stave off Turkey’s economic expansion succeeded. In January, the Libyan House of Representatives canceled the maritime treaty with Turkey to adhere to its international commitments. The inability to establish political and economic dominance in the Mediterranean, along with the pressure created by the Accords, has shifted Turkish foreign policy toward alignment with Israel and the Gulf.

    During a diplomatic visit to Cyprus in March 2021, Israeli Energy Minister Yuval Steinitz said Israel is ready to cooperate with Turkey on natural gas in the Eastern Mediterranean. Since then, Turkish President Recep Tayyip Erdoğan has softened his previous stance and pursued normalization with Israel and Gulf states alike, with some analysts speculating Turkey’s eventual inclusion in the EMGF. Turkey’s decision to back down from challenging the EMGF is evidence that the vision laid out in the Accords is becoming a reality: China and any other nations that are trying to compete with American economic influence in the region are increasingly being sidelined.

    The Jordan-Israel Water-for-Energy deal

    Most recently, on November 21, 2021, Israel and Jordan announced an agreement to exchange solar energy for water. Brokered by the UAE, the agreement’s declaration of intent states that Jordan’s photovoltaic plants will export 600MW of solar energy to Israel in exchange for 200 million cubic meters of desalinated water.

    The agreement, which helps ensure the water-scarce kingdom’s continued stability, has caused considerable civil unrest in Jordan amid widespread popular opposition to the warming of ties with Israel. While it may appear a small-scale instance of regional economic cooperation, the deal’s geopolitical significance is understood when taking into consideration increasing normalization with another power in the region: Syria. 

    Embroiled in civil war since 2011, with multiple international actors supporting their own proxies in the conflict, Syrian President Bashar al-Assad has managed to be the only survivor of the Arab Spring, reconsolidating his regime’s authority. Aside from isolated fighting mostly concentrated in the northwestern province of Idlib, Assad’s Ba’ath party has firmly reestablished military and civil control of the majority of Syria. While the war has not been declared over, and the Biden administration has reiterated its opposition to the Assad regime, other actors with stakes in Syria have conceded on the warfront to secure their interests in the region. 

    Since Assad’s re-establishment of authority, there has been increasing Arab normalization with Syria. In August 2021, in an interview with CNN, King Abdullah II of Jordan expressed his desire to normalize relations with the Assad regime and bring Syria back into the regional diplomatic fold after the Kingdom’s participation in foreign intervention efforts in the civil war. The UAE has also joined Jordan in shifting toward normalization with Syria, after years of financing opposition fighters in Syria to deter Iranian influence, with Foreign Minister Sheikh Abdallah bin Zayed having met with Assad on November 9th, 2021. 

    While the United States recently doubled down on its opposition to the Assad regime, it reportedly gave Jordan guarantees that reconciliation with Syria won’t see it punished by the sanctions placed against the Assad regime. This softening towards the Syrian government has been seen as part of a proactive measure supported by the United States to limit Iran’s influence through Hezbollah in Lebanon and Syria.

    As part of this American-led initiative to consolidate the regional bloc and deter outside influences, Jordan spearheaded a deal in October 2021 to transfer electricity to Lebanon, which is currently suffering an acute energy crisis. Additionally, the deal would enable the transport of Egyptian gas to Lebanon through Jordan and Syria. “The Americans have given the green light to the project,” noted Jordanian Energy Minister Walid Fayad. This swift unrolling of an inter-regional solution to Lebanon’s energy crisis comes as a surprise after years of regional diplomatic immobility, to the extent that Lebanon put grievances with Syria aside. However, it is not so surprising when seen as a response to Iran’s fuel shipment and pledges of economic support to Lebanon in September.

    For the United States, the consolidation of this friendly economic bloc in the region through its staunch ally in Jordan distances both Lebanon and Syria from Iran and its proxies. However, this geopolitical role has long burdened the economically weak and resource-poor Jordanian kingdom. Alongside aid received from the United States, post-Accords Israeli and Gulf-led infrastructure initiatives like the water-for-energy deal work to maintain the region’s delicate (im)balance of relations. They also allow geostrategically important yet economically underdeveloped nations like Jordan to play a crucial role in regional geopolitics despite domestic economic instability. 

    A Trade War in the Middle East?

    The Abraham Accords have changed the political-economic landscape of the Middle East, with a range of major infrastructure initiatives providing a window into the foreign policy motivations behind these shifts. Through its staunchest regional allies, Israel and the UAE, the United States seeks to deter China and others from encroaching into the region.

    In contrast to the United States’ region-wide approach, China’s Middle Eastern foreign policy is pursued primarily on a bilateral and multilateral basis. The CCP’s inability to approach the Middle East as a whole is further underpinned by the fact that there is no regional cooperation framework that would include all Arab states, Israel, Iran, and Turkey — what the Accords have sought to change in the U.S.’s favor. Expansion of the Belt and Road Initiative into the Middle East has been conducted quietly to disrupt the delicate and volatile regional order, not to draw the explicit ire of the United States and Israel.

    Where China, Iran, and Turkey maneuver covertly by striking deals directly with independent governments, the United States and Israel are looking to call their bluff by taking that approach to an intra-regional level. Currently, there is an uneasy coexistence of Chinese, American, Israeli, and Gulf investments dominating economic initiatives in the region. At the same time, China-aligned Iran continues to support its political and military factions in the region. Whether those tensions will come to a head is yet to be seen with the ever-evolving nature of the U.S.-China trade war. Either way, it is certain to play a crucial role in the future of Israeli and Gulf economic and foreign policy.

    Edited by Pearl Zhou

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    Majeed Malhas

    Majeed Malhas

    Majeed is from Amman, Jordan and graduated from the London School of Economics & Political Science with an MSc in Social Anthropology in 2020. Since graduating, he has freelanced for Adbusters and Mondoweiss Magazines. His writing address issues of political economy manifesting in public health, contemporary political developments, and social & cultural strife with a strong focus on the MENA region and other post-colonial contexts. Outside of writing and researching, Majeed spends his time playing guitar, reading comic books and hanging out at the beach.

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