China's Risky Gambit: Escalating Tensions from Russia to the Middle East

Beijing is once again attempting to have it both ways.

For more than a year, China has been cautious in acknowledging Russia's involvement in the war in Ukraine. Rather than condemning the invasion, the Asian superpower has provided substantial diplomatic and economic support to Moscow.

However, as the conflict between Israel and Hamas intensifies and poses a potential threat to regional stability in the Middle East, China has stepped in and called for a ceasefire. While criticizing Israel's actions, China has refrained from condemning Hamas for what has been described as the most devastating attack on Jews since the Holocaust. Instead, it has expressed its support for a two-state solution for both Palestine and Israel.

China's support for Palestinian statehood aligns with its long-standing stance on the issue. However, this support also serves to emphasize the notable differences between China and the United States, as the US strongly supports Israel's right to retaliate against Hamas. Additionally, this position highlights China's significant economic interests in both Russia and the Middle East, which it is determined to protect at any cost.

As the world's second largest economy, China relies heavily on Russia and the Middle East to meet a substantial portion of its energy requirements. Furthermore, these regions play a crucial role in Beijing's Belt and Road initiative. This ambitious and controversial endeavor aims to enhance global connectivity and trade through Chinese investments and expertise in infrastructure development.

Analysts have stated that both of these factors will remain significant in influencing Beijing's response to geopolitical fault lines. According to Eswar Prasad, a professor at Cornell University and former head of the IMFs China division, China is also keen on showcasing solidarity with major oil-producing nations and minimizing the potential consequences that could exacerbate the situation. This includes preventing any disruption to oil supplies and mitigating the increase in energy prices.

Hello, old friend

China is the worlds largest oil importer and buys 71% of its oil consumption from foreign countries.

It has increased its oil purchases from Russia following the latter's invasion of Ukraine, taking advantage of discounted supplies while Western sanctions on Moscow were in place. Currently, Russia is China's largest supplier of crude oil, surpassing Saudi Arabia.

Russian President Vladimir Putin and Chinese leader Xi Jinping shake hands during a meeting in Beijing on October 18.

Sergei Guneyev/AFP/Getty Images

Xi warmly received Vladimir Putin, the diplomatically isolated leader of Russia, in Beijing this week. During their meetings, Xi referred to Putin as an "old friend" and honored him as a guest at a summit celebrating the 10th anniversary of the Belt and Road Initiative, in which Russia plays a major role.

A study conducted by Fudan University in Shanghai reveals that, among the countries involved in the initiative, Russia has received the second largest amount of energy investments from China between 2013 and 2021, following Pakistan.

China and Russia, who have both increased their shared rhetoric regarding the need to reform a global order they perceive as being led by the United States, have called for a ceasefire and denounced Israel's actions. China's Foreign Minister Wang Yi stated last weekend that Israel's actions have exceeded the boundaries of self-defense.

According to Jean-Loup Samaan, a senior research fellow at the Middle East Institute of the National University of Singapore, both countries maintain close ties with Iran and view US involvement in regional affairs as a contributing factor to the instability in the Middle East.

Hamas and Iran have been long-standing allies, although Tehran has denied involvement in the Islamist group's operation on October 7th, which resulted in the death of approximately 1,400 people in Israel. In the wake of a fatal hospital explosion in Gaza and several days of airstrikes by Israeli fighter jets, anti-Israel protests have erupted throughout the Middle East, claiming the lives of nearly 3,500 individuals.

The entity responsible for the explosion remains uncertain. Israel has presented evidence suggesting that a misfire by the militant group Islamic Jihad was the cause, a claim supported by US President Joe Biden on Wednesday, citing US intelligence. However, Islamic Jihad has refuted these allegations.

Oil, oil, oil

The region plays a crucial role in China's economic development. The Middle East accounts for over 50% of the country's oil imports, which constitutes approximately one third of its overall oil consumption.

China's national oil and gas producer stated in March that over one-third of the crude oil consumed by China is sourced from the Middle East.

According to Chinese customs, Saudi Arabia has traditionally been China's primary crude oil provider, contributing to 17% of its oil imports in 2022. However, Russia surpassed Saudi Arabia as China's largest crude supplier in the first two months of this year.

China's reliance on gas trade is significant. Qatar holds the position of being China's second biggest provider of liquified natural gas, accounting for 25% of the country's imports. Chinese customs statistics indicate that LNG imports from Qatar increased by 75% last year compared to the previous year. Additionally, China has strengthened its economic connections with Iran, despite the United States imposing sanctions on Iran in 2018 due to its pursuit of nuclear capabilities and military hostility.

Chinese imports of Iranian oil, despite being subject to sanctions, almost matched the record set in August, reaching 1.2 million barrels per day in the first half of September, as revealed by data from tanker tracking company Vortexa. Given the considerable economic difficulties China is currently experiencing, ensuring energy security has become a top concern. President Xi has repeatedly stressed that securing a reliable supply of energy is of utmost importance for the country's overall development.

In the past year, Beijing has significantly raised its energy investment in the Middle East. In April, Sinopec, the largest global oil refining and gas conglomerate, made its first equity investment in the Gulf states' gas production by acquiring a stake in a Qatari gas field.

According to the Chinese refiner, QatarEnergy entered into a 27-year supply agreement with Sinopec last November. Under the agreement, Sinopec will receive 4 million metric tons of LNG annually.

The Belt and Road Initiative sees the Middle East as a crucial component, with Chinese investment in Arab and Middle Eastern countries experiencing a significant 360% increase in 2021 compared to the previous year, as highlighted by a study conducted by Fudan University. Furthermore, Chinese involvement in construction endeavors in the region also surged by 116% during this timeframe.

Stability needed

Analysts suggest that if the conflict between Israel and Hamas expands to involve other nations, it could have severe implications for China. Ahmed Aboudouh, an associate fellow at Chatham House's Middle East program, emphasized that both China and the US have a vested interest in upholding regional stability.

"Regional conflagration means long instability and long instability means no business for China in the Middle East,"he added.

"Of course, China doesnt want to see its economic interests bleed."

On Saturday, China's Foreign Minister Wang Yi and US Secretary of State Antony Blinken had a phone conversation, as confirmed by both parties. In the call, Blinken emphasized the significance of upholding stability in the region and deterring involvement of other entities in the conflict, as conveyed in a statement released by the US Department of State.

File photo released by the US Navy showing the amphibious assault ship USS Bataan, front, and the landing ship USS Carter Hall in the Red Sea in August 2023.

Riley Gasdia/US Navy/AP

US Marine rapid response force moving toward Israel as Pentagon strengthens military posture in region

China has urged for the immediate organization of an international peace conference, according to a statement by Wang's ministry.

Samaan noted that China's main economic concerns in the region revolve around securing energy resources from the Gulf, as well as engaging in business ventures related to digital connectivity and infrastructure in various countries.

He stated that if the conflict with Iran intensifies and poses a threat to the stability of the Persian Gulf's maritime waters, it would adversely affect those interests. Interestingly, China stands to benefit from the involvement of the United States.