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C3S Dialogue: China and the Middle East

C3S Paper No. 0028/2016

The following is a dialogue conducted by C3S members and young scholars from February 11- 15 2016. The theme revolved the article “China: The New Lawrence of Arabia?” by Asma Masood, Research Officer, C3S (vide

Mr.Sivaraman IAS (Retd.),

Former Revenue Secretary, Ministry of Finance

Government of India.


China cannot replace the West in the Middle East. The emergence of distinct countries in the Middle East took place after World War II thanks to the interference of the West. The West is trying to get China involved in some of the major disputes, apart from inviting Indian mediation. Delhi has shied away from getting involved in a big way in these disputes. All the same, The Middle East countries trust India as Delhi does not take sides nor does it preach to them.

The region owes much to U.S.A and Europe. The Middle East oil fields have all been developed with technology from the West. Even now many of their oil giants have interest there even though they are slowly disengaging. Most of their weaponry has been supplied by the West. Their armed forces have been trained by them and also some by Pakistan. Besides, Saudi Arabia has procured all its tornado jets from UK in which there was also a huge bribery scam which led to a unique incident of Tony Blair ordering the withdrawal of the investigation by the UK Treasury Serious Fraud Office.

It is to be noted that most of the princes and sheikhs in the region are all western educated not in China.

Nevertheless the rich countries of the Middle East have enough wealth and do not require any financial support from China unlike the African countries.

Besides, many Middle Eastern countries have a sizeable Indian population and their businesses are controlled by locals jointly with Indians as per their policy. This is observed at the grassroots level.

However one wonders whether China can sell cheap goods in the Middle East as they sell to the West.  

Asma Masood

Research Officer, C3S

Asma Masood

When in Saudi Arabia, one observed and even participated in a very popular phenomenon: 2 riyal/5 riyal/10 riyal shops (1 riyal=Approximately Rs. 12). These stores are common there and sell attractive Chinese and Taiwanese goods ranging from electronics, home needs, and various merchandise all at rock bottom prices. They would be thronged with people of different cultures. Needless to say it demonstrates that Chinese products are a hit among customers in Saudi Arabia. Besides, another sector where the Chinese are demonstrating their efficiency in Saudi Arabia is  health care, especially as hospital nurses. They are observed as hard-working, thorough and dedicated.

K. Subramanian

Former Joint Secretary (Retd.)

Ministry of Finance, Government of India.


While describing the advantage China has in increasing its relations with Iran, it adds value to study China’s relations with Iran when the U.S-Iran sanctions were at their peak and fiercest. U.S.A had banned the export oil from Iran and also purchase by other countries. One remembers that Washington had even banned banking transactions with Iran and closed the SWIFT facilities for their banks. U.S.A put pressure on India to stop importing oil and we buckled under it. Delhi tried to circumvent the U.S sanctions on Iran, rather weakly, for some time and attempted several methods to pay for oil such as payment in rupees, payment through Turkish banks and later through Germany. All these were plugged by the U.S and India had to reduce imports from Iran substantially.

Even as these incidents occurred, China openly defied U.S sanctions and continued to import Iranian oil and made bilateral arrangements to pay for those imports. It supplied vast quantities of manufacture, engineering and consumer items to Iran which was starved of those items under U.S sanctions. Iran was sore with India’s behaviour and expressed its resentment. Tehran openly applauded China over its approach and was grateful. This background made it easier for China to move in once the sanctions were lifted. On the other hand, India is struggling to rebuild its broken relations with Iran.

One agrees that India is rudderless. It has not been able to re-articulate its strategy for the Gulf. Non-alignment is an empty card and is no longer relevant.

Asma Masood

It is true India may have lost an opportunity by disengaging with Iran amidst past sanctions. One asks, how does a country like India weigh the economic & political leverages against each other before making a decision? Which aspect, political or economic, dominates its foreign policy making?

K. Subramanian

That is a rather difficult question to answer. Or, rather, it highlights the essence of economic diplomacy. Often countries are forced to take decisions at a given point of time. There are short-term concerns which often guide (misguide?) decisions. Diplomats have to rise above short- termism and keep in mind the longer term requirements. This is easier said than done. For instance, India was under duress from the U.S to ban oil imports from Iran at a time when we were importing 20% of our total oil imports from Tehran. Delhi caved in. In greater part because India was, at that point, more keen about the nuclear pact with the U.S. Perhaps, India was not sure whether Iran sanctions would ever be lifted or there would be an agreement with Iran. India was also keener about greater U.S-India economic relations than with the Gulf region. Now the picture is wholly different. The nuclear deal is still a pie in the sky and not one plant has been established nor is likely to be in the coming decade. Our oil dependence continues. These are indeed imponderables. Some can be foreseen, not all. There are unknown unknowns as Cheney put it egregiously (or wisely!).

T.V. Krishnamurthy

Management Professional, Chennai.


Fact-file on Middle East, as observed under one’s personal experience:

  1. The Middle East is very European driven for higher education. They do not go to U.S.A’s Universities.

  2. The work force at the lower levels consists of Indian labor and skill sets, of at least 70%.

  3. The top positions in almost all companies owned by the Arabs are dominated by Indians. Almost 70%. That includes CEOs, CFOs, engineers and any number of finance professionals.

  4. The Arab owners of big or small companies rarely engage the Pakistanis at the top level; it indicates a hint of hesitancy.

  5. Egypt does not engage outsiders, given their educated population and advantage of early education from Europe, mainly U.K.

  6. The infrastructure and engineering companies are mostly European with the Italians and the British leading the pack.

  7. The British and some Indians from Army are among the personal advisers for the ruling class in matters of internal security.

  8. Almost all members of the ruling elite have presence in businesses.

  9. The defense equipment are almost 99% Western, mainly made in the U.S.

  10. The markets have peculiar characteristics: Most high end merchandise is European. Most low end merchandise is global in nature. There is no Chinese domination. Huge amount of food items are imported from India. Pakistan has some share in rice, etc. Among the joint ventures majority of them are with Indian entrepreneurs, except in engineering goods. Indian top talent is highly respected.

  11. Banking, insurance and retailing are thriving sectors, except for minor periods.

  12. Iranians and Lebanese are dominating the business in the entire Middle East. Particularly the Iranians who migrated from Kutch in India some 800 years back. However most Arab states are not overtly comfortable to do business with Iran as a country.

  13. The Chinese can never ever replace the Indians from the psyche of Middle East citizens be it the ruling class or the common man.

  14. Despite perceived positions on Palestinians, all Middle East countries are not welcoming towards them. Saudi Arabia deported several thousand of them in the 1980s. They are scared about their presence and possibilities of them upsetting local populations.

  15. If China were to offer freebies economically or militarily, the Middle East nations and some African nations may just cold shoulder them.

Col. R. Hariharan,VSM,

Retired Officer of Intelligence Corps, India.


Comments are welcomed on the following article analyzing the role of Sectarian divides in the current  confrontation between Iran-Syria and Saudi Arabia-Turkey:

Asma Masood

One is reminded of the fierce nationalism borne by Saudis as seen in one’s personal experience. They are a proud race, and if fact even sometimes display billboards saying “Be proud, you are a Saudi!” in Arabic. These tendencies seem to display a sense of insecurity.

In addition, the Saudis are predominantly Sunni, and one hardly hears of attacks carried out by Shiites in the Saudi media. Such reports are suppressed domestically.

The Iranians are no less proud about their national identity. It is a sight to see them during Umra (Minor Haj pilgrimage) at the Makkah mosque. They all, including women in their unique hijab, stand shoulder to shoulder and march ahead around the Kaaba at full steam, marking a distinctive sight.

It is to be noted there are a few pockets of bias among Saudis against Indians despite the latter’s contribution to their economy. However, despite differences with Damascus, Saudi Arabia welcomes Syrian citizens fleeing instability.  One has dined with them and they are at ease with all cultures. It is similar to the Indian-Pakistan scenario. The conflict is between governments and politicians, not the people. Yes, there is a sense of national fervour, but not enmity among the common men and women of the different countries. They all pray side by side when at Makkah or Madina, not heeding to divides in sect, class or race. It is a magnificent view, one that stays in the mind forever…

Cmde. R. S. Vasan IN (Retd.)

Director, C3S.


While the situation regarding sectarian divides remains calm at the level of the common man in the Middle East, there is apprehension within governments on another issue: plummeting oil prices. If this, coupled with China’s economic slowdown is to carry on, then the buying power of the Middle East will also decrease. In such a scenario, the ability to withstand market turbulence will be affected, which in turn will cause more vulnerability in the region. It could even trigger further unrest. The funds available from Saudi Arabia to Pakistan will dip, thus the luxury with which the Saudi authorities engage with China’s “all-weather ally” could diminish. There could be an erosion of the economic clout of Saudi Arabia and other countries in the region. Thus the global economic scenario, including Chinese developments, could have far reaching consequences in the Middle East. The possible results cannot be quantified. However certain trends can be established.

(All views expressed in this dialogue are the members’ own.)

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