The West’s Ukraine policy empowers China in the Middle East.
How Israel and the Arabs are coming closer to China, with Israel pressured to share technology with China and China to offer weapons, nuclear cooperation to Middle East partners.
Commercial Takeaway: China will seek to extract technology sharing from Israel in exchange for refraining from selling advanced weapons or nuclear technology to Saudi Arabia, Iran and Egypt. China can expand its influence in Iran and the Gulf by selling weapons systems and counter systems to several countries. Saudi Arabia no longer wishes to be a US proxy against Iran, seeking instead to neutralise itself from the Israel/US – Iran confrontation.
Executive Summary
Western sanctions on Russia frightened Saudi Arabia and other oil exporters, and they now need the sanctions on Russia to fail.
Saudi Arabia is trying to reduce the risk of it being used as a proxy in a confrontation with Iran, due to the lessons gleaned from Yemen and Ukraine.
The Saudis will seek deeper ties with China, including in the military and nuclear sphere.
This gives China leverage over Israel, which it may use to extract technological concessions in exchange for refraining from or reducing its prospective military and nuclear partnership with Saudi Arabia, Egypt and Iran.
Western sanctions on Russia frightened Saudi Arabia and other oil exporters.
Western sanctions on Russia concern Saudi Arabia for three reasons.
Sanctions on Russian energy: The security of energy supplies was seen as a sacrosanct principle of US policy. By imposing sanctions on Russian energy, the US alerted Saudi Arabia that its role as a top oil exporter does not grant it any special protection.
Sanctions on the Russian Central Bank: Sanctions on a central bank were seen as a tool that could be used against rogue small or mid-sized states – North Korea, Libya, Iran. But sanctions on the Russian central bank alerted the Saudis to the risk that a similar fate may one day await Saudi Arabia.
The ideological nature of sanctions: Sanctions against Russia extended to Russian athletes, businessmen, musical performers and others. Anything Russian could be sanctioned because it could somehow be tied to the Kremlin. In Saudi Arabia, everything is tied to the King and the Crown Prince. Therefore, anything in Saudi Arabia can be sanctioned under this logic.
Saudi Arabia and some Gulf Arab states need the Western sanctions on Russia to be seen to fail, in part to ensure that they are not next.
For the Saudis, the sanctions on Russia over Ukraine mean that the US could one day sanction them over the war in Yemen or human rights or carbon emissions. This naturally drives Saudi Arabia to seek to deepen its economic and political ties with China and other key clients of its energy, such as India. As a result, Saudi Arabia and some other Middle Eastern powers are seeking to join the BRICS, not because they believe equally in all BRICS countries or the BRICS project, but because they want to develop trading options independent of the West. This is also driving Saudi Arabia and OPEC to coordinate with Russia to make sure that the sanctions on Russia are seen to fail, so that similar sanctions on Saudi Arabia would not be contemplated. Of course, this is occurring within the context of OPEC and OPEC+. OPEC is notorious for the propensity of its members to cheat and fiddle with their numbers, and this is not changing any time soon. Though it is remarkable that no OPEC country has sanctioned Russia, and that the OPEC+ forum has proven to be quite durable despite pressure on all countries to reduce ties with Russia.
The destruction of Ukrainian sovereignty pushed Saudi Arabia away from the United States.
From a Saudi perspective, the US proved to be an unreliable security guarantor both to Saudi Arabia and to Ukraine. The US did not react to Iran threatening freedom of navigation using the Houthi in Yemen, or to attacks on international shipping off the coast of Oman, or to attacks on Saudi energy infrastructure. So what use is the US security guarantee? The lesson from Ukraine is even harsher. Ukraine would not have challenged Russia without Western support and encouragement. Ukraine’s productive sectors have already been destroyed. The country will require billions to be rebuilt. The provision of these billions will require Ukraine to transfer control of its mining, agriculture and industrial sectors to foreign multinational capital, meaning a loss of sovereignty. Therefore, even if Ukraine wins the military confrontation against Russia, it will no longer be a sovereign nation, at least economically. It will also not be politically independent, as it would be completely reliant on the US and EU.
For Saudi Arabia, a war with Iran would have destroyed its shipping, aviation, refining and oil industries. To rebuild, foreign capital would be required, meaning that Saudi Arabia would not be able to influence energy markets in line with its political and economic interests. It would lose its sovereignty. It was therefore wiser from the Saudi perspective to reach an accommodation with Iran, even if under Chinese auspices, to prevent that scenario and to neutralise Saudi in the US /Israel – Iran confrontation.
Previously, during US – Russia confrontations, Saudi Arabia was willing to sacrifice its economic interests to further American geopolitical objectives. This clearly is no longer an option, with Saudi Arabia cutting oil production to boost prices both to harm President Biden ahead of the midterm elections and to help support its own – and Russia’s – finances.
Saudi Arabia will no longer be a US proxy and will acquire Chinese weapons and seek Chinese nuclear technology.
The Ukraine war, falling as it did in the aftermath of the Yemen war, taught the Saudis that they could not rely on the United States. From their perspective, the West encouraged Ukraine to challenge Russia, but failed to protect it adequately, setting Ukraine back decades economically and in population terms due to the Ukrainian refugee exodus. Egypt, the UAE and other Gulf Arab states have likely drawn a similar lesson – the US could lead them to confrontation, but they ultimately will pay the price of that confrontation themselves. In response to this reality coming into sharp relief, Saudi Arabia sought a deal with Iran that would give it economic influence in the Middle East while ensuring that the US cannot use it in a proxy war against Iran in a similar way that Ukraine is being used.
The US Saudi relationship is not over, obviously, as the US retains a large military presence in the region and is a major Saudi weapons supplier, but it has been severely degraded. Crucially, the US holds back from Saudi Arabia the most advanced weapons systems, as the US is bound to protect Israel’s military superiority. Saudi Arabia will turn to China to gain such weapons, giving China significant leverage in the Middle East. This opens up the prospect of Saudi Arabia not only purchasing ballistic missiles and drones from China, but also command and control systems, radars, anti-ship and anti-aircraft systems, all of which would pose a threat to the US’ role in Saudi Arabia and to Israeli security. Critically, China can work with Saudi Arabia to develop a Saudi civilian nuclear programme, in line with Saudi Arabia’s stated nuclear ambitions.
China will play a balancing game to maximise its advantage.
The war in Ukraine has offered China gains in the Middle East. With US weapons shipments being prioritised for Ukraine and Taiwan, China can dangle the prospect of selling advanced weapons to Saudi Arabia, Iran and Egypt to extract economic concessions from them that further its Belt and Road Initiative, deepening its influence at the expense of that of the US. For example, it can sell J-10 jets to Iran, and offer Saudi Arabia the same aircraft with more upgrades, or with air defence systems. China can also extract concessions from Israel: it can request that Israel share advanced industrial and military technology with China in exchange for Chinese investments, with the threat of selling advanced weapons to Iran, Saudi and Egypt if Israel does not play along. China can offer these countries cooperation in the nuclear sphere as well, with Israel being pressured to make large concessions to China to prevent that. If Israel sticks to the US side, China still gets to sell more weapons to the Middle East and still gains more economic leverage. If Israel does agree, China can limit its weapons sales and nuclear cooperation to some degree, but not end either. To further deepen its role in the Middle East, China will become more involved in the Israeli-Palestinian peace process, not because it believes peace can be attained – it cannot – but because it can use the issue to gain leverage, using its economic clout and the prospect of Chinese investments to bring parties closer to it on political and economic issues. The US has shown that it can no longer play the role of a balancer in the Middle East. China can now insert itself with the promise not of peace, but greater economic prosperity and of a hedge against the US’ unpredictability.