The US-China Trade War Is About to Hit the Middle East

For the last two years, the US and its allies have engaged in a frenzy of infrastructure projects in the Middle East, seeking to consolidate influence in the region. This bid for hegemony is coming up against a new force: Chinese capital.

Chinese company Huawei’s building in Dubai’s Jumeirah district. (Karim SAHIB / AFP via Getty Images)

On April 1, Israel and the United Arab Emirates announced a free trade agreement that covers 95 percent of economic activity between the two countries, projected to reach up to $1 trillion in value within the next ten years. “This milestone deal will build on the historic Abraham Accords and cement one of the world’s most important and promising emerging trading relationships,” said United Arab Emirates (UAE) minister of foreign trade Thani Ahmed Al Zeyoudi.

The Abraham Accords, signed between Israel and the UAE in 2020, have effected a major shift in the region. While financial deals were previously viewed begrudgingly or conducted in secret, in the aftermath of the Accords, regional trade with Israel has exponentially increased, an unlikely coalition has formed in the East Mediterranean Gas Forum (EMGF), and grand inter-regional infrastructure projects have been in production.

The Abraham Accords were designed to promote US — and, by extension, Israeli and Gulf — hegemony in the region through this rapid consolidation of economic and diplomatic partnerships. Now the United States is seizing the moment by boldly pushing its Arab allies toward diplomatic normalization with Israel, as reflected in the ham-fisted passage of Jared Kushner’s so-called “Deal of the Century.” It’s also banking on market interests to act as the diplomatic glue that brings these nations together in an economic bloc under its patronage, with little to no concessions made by Israel on the illegal occupation of the Palestinian territories.

Having one of the lowest inter-regional trade rates in the world, with just 5 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 long resulted in 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.

The agreements struck in the Abraham Accords and its aftermath has attempted to change that in the United States’ favor, and US interests have so far been served well. What remains to be seen is whether they can effectively stave off a new force in the Middle East political and economic landscape: the arrival of Chinese capital.

China in the Middle East

China has in recent years developed considerable economic influence in the Middle East. In 2019, Saudi Arabia and the UAE contracted Huawei to build 5G telecom infrastructure amid a concentrated US-led effort to boycott the company internationally. In 2020, Iraq signed a $3 billion agreement with the state-owned China ZhenHua Oil Company, with the country being China’s second-largest source of imported oil. In Egypt, the China State Construction Engineering Corporation is heading the $3 billion project to build the military government’s New Administrative Capital.

China also enjoys “comprehensive strategic partnerships” with Algeria, Egypt, Saudi Arabia, the UAE, and, particularly, Iran, with whom China purchases oil in violation of US sanctions and has conducted joint military drills alongside Russia. Hezbollah and other pro-Iran factions have also welcomed Chinese influence in the region.

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

Unlike other continents into which Chinese capital has extended, Chinese economic deals in the Middle East have received little coverage. For example, the $400 billion strategic partnership between China and Iran only became public following a leak. While in November, the UAE halted the construction of a secret infrastructural project inside a Chinese-owned port following pressure from the United States, which threatened to scupper the sale of advanced jet fighters and other advanced munitions to the UAE over speculative concerns about the project’s military potential.

This relative secrecy reflects China’s desire to maneuver about these political-economic deals and infrastructure projects covertly — a sentiment shared by the United States and its allies, who have undertaken similar covert, diplomatic maneuvering in response.

Consolidating American Influence

Still, the post-Accords Middle Eastern political and economic climate is highly favorable to US interests. Take, for example, the case of the East Mediterranean Gas Forum.

In September 2020, Israel, Egypt, Cyprus, France, Greece, Italy, Jordan, and the Palestinian Authority formed the 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 Egyptian and Israeli ministers of energy struck another deal in February 2021 to build a pipeline connecting Israel’s offshore Leviathan gas field to liquefied natural gas terminals in Egypt. The Leviathan gas field is operated by Houston-based oil and natural gas exploration and production company Noble Energy, with Chevron among its shareholders. Egypt and Israel are weighing 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 in 2020, which has long attempted to develop its own political-economic influence in the region, especially in Syria — much to the United States and Israel’s chagrin.

In 2019, Turkey and Libya signed a maritime boundary treaty delimiting exclusive economic zones and establishing military cooperation. The EMGF rejected the treaty’s validity, holding that it violates the UN Montego Bay Convention of 1982. The EMGF arranged for the signing of a similar maritime boundary treaty between Egypt and Greece to counter the perceived Turkish encroachment, an issue that repeatedly made headlines in 2020.

The diplomatic and economic offensive of the EMGF to consolidate Mediterranean trade under its wing and stave off Turkey’s economic expansion succeeded. In January 2021, the Libyan House of Representatives canceled the maritime treaty with Turkey deciding to adhere to international commitments.

The inability to exert regional influence in the Mediterranean and the wave of normalization and economic mobilization brought on by the Accords has shifted Turkish foreign policy toward alignment with Israel and the Gulf, with some analysts speculating Turkey’s eventual inclusion in the EMGF.

Turkey’s capitulation to this forming economic bloc reflects that the defensive and reactive character of the post-Accords political economic landscape are (re-)consolidating in favor of American capital.

Water, Energy, Hegemony

On November 21, 2021, Israel and Jordan announced an agreement brokered by the UAE that sees the kingdom export six hundred megawatts of solar energy to Israel in exchange for two hundred million cubic meters of desalinated water.

The agreement, which helps to ensure the water-poor kingdom’s continued stability, was met with considerable civil unrest in Jordan amid widespread opposition to the warming of ties with Israel. But its significance can be seen in relation to this bloc’s increasing normalization with another power in the region: Syria.

Throughout 2021 and 2022, UAE officials and Syrian president Bashar al-Assad have publicly met multiple times to thaw relations. In an interview with CNN in August 2021, King Abdullah II of Jordan expressed his desire to normalize relations with the Assad regime and bring Syria back into the regional diplomatic fold.

While the Biden administration has reiterated its opposition to the Assad regime, it reportedly gave Jordan guarantees that rapprochement with Syria won’t see them punished by the sanctions placed against the Assad regime. This tacit green-lighting of Syrian rapprochement has been seen as part of a proactive measure supported by the United States to limit Iran’s influence in Lebanon and Syria through Hezbollah.

As part of this US-supported initiative to consolidate the regional bloc and deter countervailing influences, Jordan spearheaded efforts to establish a deal in October 2021 to transfer electricity to Lebanon, which is suffering an acute energy crisis. The initiative facilitates the transit 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 grievances with Syria were put aside. But it’s not particularly surprising when viewed as a response to Iran’s shipment of fuel and pledges of economic support to Lebanon in September 2021.

For the United States, the consolidation of this economic bloc in the region through its staunch ally in Jordan distances Lebanon and Syria from Iran and its proxies. However, this geopolitical role has long burdened the economically weak and resource-poor 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 delicate (im)balance of relations within the region that sees American capital monopolize its markets. This allows economically underdeveloped yet important geostrategic allies like Jordan to play a crucial role in small-scale yet significant regional maneuvers, despite domestic economic instability ironically caused by American-exported neoliberalism.

A Trade War in the Middle East?

These partnerships’ emphasis on tangible infrastructural projects and commercial trade — in an age otherwise dominated by speculative economics and emerging digital markets — is particularly interesting to the developing geopolitics of the region. The projects, mapped across the Middle East, are an effort to consolidate the influence of American capital and rebuff competition from China by creating a physical, economic bulwark that strengthens American and European supply chains.

Since the advent of speculative economics and the collapse of the Soviet Union in the 1990s, the neoliberalization of Middle Eastern markets has long been taken for granted to align with US hegemony, despite the regional volatility it has spawned. But with the emergence of Chinese corporations as a global market competitor turning the heads of neoliberalized economies in the postcolonial world, both corporate actors and US allies are more comfortable diverging from the interest of US foreign policy. Most recently, ExxonMobil initially resisted exiting Russia following recent international sanctions, while Saudi Arabia and the UAE rejected President Joe Biden’s attempts to schedule talks regarding increasing oil and gas sales to meet global fuel inflation.

It appears the long arm of US imperialism is now reckoning with this volatile global free market it has architected, which threatens to leave the American state behind in its relentless pursuit of profit.