Why the UAE?: behind the “central pillar” of China’s Middle East relations

China’s relations in the Middle East have made the headlines with surprising frequency over the last few months. In March, Foreign Minister Wang Yi went on a six-country deal- and accord-signing tour of the region. This month China’s comments on the Israel-Palestine crisis – ranging from a rather sharply worded call for Israeli restraint to offers to step in as a mediator – raised eyebrows. And just yesterday it was revealed in the Wall Street Journal that China’s ever closer relationship with the UAE is raising concern among the American intelligence community.

Neither the largest nor most powerful of economies in the region, the emergence of China’s multifaceted relationship with the UAE is an interesting case study of what makes a strong bilateral relationship with China tick. Last week Panda Paw Dragon Claw spoke with Jonathan Fulton, Assistant Professor of political science at Zayed University and senior non-resident fellow of the Atlantic Council, about this increasingly significant relationship.

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Panda Paw Dragon Claw (PPDC): You made a comment in a recent interview with the China Africa Podcast that the China-UAE relationship increasingly looks like a “central pillar” in the China-Middle East policy. Why do you see this relationship – rather than relationships with the bigger countries such as Saudi Arabia and Iran, which tend to grab more headlines – as so significant for China in the region? How did it develop into such a strong relationship?

Jonathan Fulton (JF): Saudi Arabia and Iran would seem to make more sense at first glance – they are much larger markets and are more conventionally powerful than the UAE.  But size is distracting in this case. The UAE is a logistics hub for the Middle East and North Africa (MENA), the Horn of Africa, and South Asia – it is the most connected country in the region. This is a really important point when considering the Belt and Road Initiative (BRI) and its focus on promoting connectivity.

In contrast, Iran is very much isolated within its own region, and its economy is consistently either under sanctions or the threat of sanctions. This makes it really hard for Chinese companies – or any companies, for that matter – to invest in Iran. Saudi Arabia is a much easier business environment to navigate than Iran, but is socially more conservative, making it a less favorable destination for global companies to set up regional HQs – the expatriate business community would much rather live in a more cosmopolitan environment like Dubai or Abu Dhabi. 

So economically the UAE is much more attractive. It has by far the largest Chinese community in the Middle East, and can be used to service contracts across multiple regions and countries. Politically it’s seen as a more moderate and stable government with a vision of the Middle East status quo that is more aligned with Chinese interests. On top of that, at the elite level they’ve done a lot of work to build strong relationships. So I think the UAE serves a much more diverse set of needs for China than its larger neighbors. It’s a really substantial and forward-looking bilateral relationship.

PPDC: The big concrete deal to come out of Wang Yi’s visit to the UAE in March was the establishment of a production base for China’s Sinopharm vaccine in the country. Is this emblematic of the trust that has been established between the two countries? What will the UAE be hoping to gain from this role as a manufacturer and distributor of the vaccine?

JF: The establishment of a vaccine production base in the UAE is an important indicator of the political trust the two countries have been building over recent years, especially since upgrading to a “comprehensive strategic partnership” during President Xi’s state visit in 2018. China and the UAE have been working closely throughout the pandemic and it appears to be an indicator of future collaboration as well. The projects that have laid the groundwork have the potential to lead to a lot more cooperation, especially in AI initiatives. 

PPDC: In a recent interview with the Belt and Road Portal WeChat account, the UAE’s ambassador to Beijing, Ali Obaid Al Dhaheri, stated explicitly that the country is expanding collaboration with the Chinese government and Chinese companies in order to diversify the UAE economy and prepare for the “post-oil era”. How significant are Chinese investments in the UAE’s strategy to pivot away from reliance on hydrocarbon exports? 

JF: The UAE has positioned itself better than most of its neighbours for a post-hydrocarbon future, and there’s a lot of synergy between what it’s trying to do in this regard and the type of cooperation priorities China has targeted for both the BRI and its China Arab Policy Paper.  The Policy Paper was rolled out in 2016 and emphasized the 1+2+3 cooperation pattern, defined as “[taking] energy cooperation as the core, infrastructure construction and trade and investment facilitation as the two wings, and three high and new tech fields of nuclear energy, space satellite and new energy as the three breakthroughs.” 

It’s actually the third area, which includes satellite and digital projects, with the most room for coordination between China and the UAE, as the Emirates continue to develop a lot of projects involving AI, fintech, 5G, digitization – all areas where Chinese companies have a strong competitive advantage.

Sheikh Mohamed bin Zayed, Crown Prince of Abu Dhabi

PPDC: The UAE is not just a receiver of FDI for infrastructure projects, however. UAE companies are also actively investing overseas. For example, UAE power company Masdar recently signed a joint EPC contract with Power China for the construction of Asia’s largest floating solar plant in Indonesia. Is collaboration between UAE companies and Chinese companies in emerging economies something we should be watching? 

JF: The two did sign a joint investment agreement in 2015 during a state visit by Mohamed bin Zayed, Abu Dhabi’s crown prince and the de facto ruler of the UAE. It is run between the UAE’s Mubadala, China Development Bank Capital, and China’s State Administration of Foreign Exchange, and capitalized it to the tune of USD 10 billion, with USD 5 billion from each side. There have been few details on how it operates but the idea was to collaborate on projects that align with the BRI and Abu Dhabi 2030. 

Internationally, I suspect UAE investment in Khorgos, the dry port connecting China and Kazakhstan, or some projects in the Horn of Africa are being developed with an eye toward things that China is doing in those countries and regions.  It is not clear if the UAE and China are actively coordinating but given the trajectory of the bilateral relationship it would make sense.

PPDC: Looking beyond just the UAE, a big question on the lips of Middle East observers is how long can China be friends with both Iran and Saudi Arabia. It was interesting that shortly after Wang Yi’s Middle East tour, even Hua Liming, a former Chinese ambassador to the UAE and Iran, commented that China should be “cautious” about expanding relations with Iran and Saudi, and aim to reach a “subtle balance”. What are your thoughts on this and how does the China-UAE relationship fit into the picture of the big regional rivalry? 

JF: On this issue China doesn’t face the same pressures as the US does because it doesn’t have the same history with Saudi Arabia or Iran.  The US military power in the Gulf and its defense cooperation agreements with Gulf Cooperation Council (GCC) countries reinforce certain outcomes, like balancing against Iran and maintaining a regional security framework that excludes the largest country in the Gulf.  China has a non-alliance policy and instead uses strategic partnerships, which are interest-based rather than threat-based. This gives it a lot of room to maneuver and be seen as an economic partner that isn’t actively trying to disrupt a delicate regional balance. 

This doesn’t mean it’s neutral. As I’ve argued frequently, China’s interests in the region are largely economic and it is much more deeply engaged with the Arab side of the Gulf. So China does favor the GCC over Iran, but doesn’t see the need to alienate the Iranians – it is a potentially important market.  So I think China actually has a pretty sustainable approach for the near term. 

PPDC: Lastly, and not related to the UAE, China just issued a quite direct statement at the UN Security Council on its position on the violence in East Jerusalem. Though the statement called on “all sides to exercise restraint”, it was clearly sympathetic to the Palestinian side and critical of Israeli actions. Is this surprising? What does it tell us about China’s relationships in the Middle East and the image of itself that it wants to present?

JF: It’s not at all surprising. The PRC has always self-identified as a developing country and has used cooperation with the developing world in international organizations as a way to garner support.  Under Mao, China described itself as a leader of the Third World and support for Palestine was always explicit – after all, Israel was the last MENA country to formalize diplomatic relations with the PRC, as late as 1992.  So it’s consistent with Chinese foreign policy values and practice, but it also serves more practical purposes.  It helps build legitimacy among other Arab countries for one, and also helps China distinguish itself from the US, which consistently undermines its own rhetoric on values and human rights with its unconditional support for Israel. It’s a low cost diplomatic win for China, all the more impressive since its economic relationship with Israel is leaps and bounds beyond that with Palestine.

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