Saturday, July 21, 2018

President Xi Visits the UAE and Only the UAE

President Xi Visits the UAE and Only the UAE
Nader Habibi
July 21, 2018

On his way to a tour of several African nations China’s President Xi Jinping paid an official visit to the United Arab Emirates. The UAE government went out of its way to honor President Xi by projecting the Chinese flag on several high-rise buildings in Dubai and Abu Dhabi and awarding him the Order of Zayed. The multi-day visit signifies the significance of UAE as a major economic partner for China in the Middle East. During this visit China and the UAE signed several important trade and economic agreements. The fact that China’s President chose to spend two full days in the UAE (arriving 19 of July and leaving on 21st) points to the significant of this visit from Chinese point of view.
Yet an even more significant aspect of President Xi’s visit, that has not received any media attention, is that unlike his previous visit to the Middle East, President Xi did not stop at several capitals and instead limited his visit to one country. Visiting only the UAE is unusual for several reasons. First, in his January 2016 visit President Xi stopped in Tehran, Riyadh and Cairo. The stops in Riyadh and Tehran symbolized China’s desire to establish good diplomatic relations with both Saudi Arabia and Iran while maintaining neutrality toward their ongoing proxy war.
Second, in light of China’s large dependency on the Middle East oil, the UAE is not its most significant economic partner in the region. China buys more oil from Saudi Arabia and Iran than the UAE.  Although China’s exports to the UAE are large, most of them are re-exported to other Middle East and African destinations (the UAE serves as the main regional re-export hub for products of many countries including China.) If we exclude the re-exports the volume of China’s exports to the UAE is smaller than Iran or Saudi Arabia. Similarly, Iran and Saudi Arabia both offer attractive investment opportunities for China, which are as significant as the ones available in the UAE.
So why did President Xi select the UAE for his Middle East visit? The answer might lie in China’s desire to avoid an official state visit to Tehran at this point.  Over the past two decades China has developed strong economic ties with Iran, partly because of the Western economic and diplomatic sanctions that have forced Iran to seek economic and strategic partnerships with Russia and China. As important as the energy and economic relations with Iran are for China, she is not willing to sacrifice her economic interests with the United States and Iran’s regional rivals (the GCC countries and Israel) for them. Instead, China has tried to play a balancing game between its interests in Iran and Iran’s adversaries.
In recent months the United State has called on China and other consumers of Iranian crude oil to end their purchases by November 2018. After a unilateral withdrawal from the multilateral 2015 nuclear agreement in May of this year, the U.S. has also threatened all international firms with denial of access to the U.S. markets if they continue to do business with Iran. China wans to preserve its relations with Iran but cannot ignore the U.S. demands entirely. It is currently lucked onto a trade war with the Trump administration with an uncertain outcome. It is in China’s economic interest to contain this trade tension through negotiation and, in this context, a visit to Iran would have been viewed as a deliberate provocation by China and hence would have created mote tension in U.S.-China relations.
China’s decision to avoid an Iran visit might have contributed to the decision to bypass Saudi capital as well. Visiting Riyadh without a stop in Tehran would have signaled an end to China’s neutrality in the Iran-Saudi proxy war, which is not China’s intension at this point. Once Iran and Saudi Arabia were removed from the list of potential stops for President Xi, then it was clear that the UAE was the best choice for single single stop in the region.
It should also be added that China has been successful in expanding China-Arab relations in a coordinated effort through the China-Arab States Cooperation Forum (CASCF), which has been convened at the ministerial level eight times so far. The most recent one took place in Beijing on July 12, 2018 only a few days before President Xi’s visit to the UAE.

Nader Habibi is a faculty in Brandeis University. He is affiliated with the Crown Center for Middle East Studies  and the department of economics in that university.