The breakneck pace of developments in Syria over the last week – America’s withdrawing troops, Turkish forces invading from one direction and Syrian and Russian forces coming in from the other – is like watching a time-lapse video of America’s withdrawal from the Middle East.
But America’s retreat isn't going to end with the troops being called home. Since U.S. oil companies first discovered petroleum in the desert wastes of Saudi Arabia, America has been a major economic player in the region. Oil, arms and business all went hand in hand.
Israel wasn’t exactly part of that system, but America has long been our biggest trade partner and foreign investor.
We aren’t going to be treated to images of American executives in suits fleeing with wheeled luggage down airport corridors to waiting planes, but the fact is, a slow process of U.S. economic retreat is underway. But in this case, Russia and Iran aren’t going to fill the vacuum. Their economies aren't up to it.
Rather, it will be China, and that could have implications for Israel and the Middle East far beyond who controls Syrian Kurdistan.
China’s economic interests in the region already surpass America’s. Since 2010 it has been the Arab world's largest trade partner. Asian economies, led by China, buy three quarters of the oil exported from the Gulf, a proportion expected to grow even more in the years ahead.
Chinese companies building giant infrastructure projects have fanned out across the region – ports in Oman, factories in Egypt and Algeria, and they’re building many of the skyscrapers adorning Egypt’s new capital city. Chinese investment in the region is growing quickly as is China’s human presence, represented by 550,000 expats, many working on those big infrastructure projects.
Israel is far more intertwined with the U.S. economy than anyone else in the Middle East. Its relations are of a totally different kind: the big business is high-tech and to a lesser degree, infrastructure projects. But here too, the same process of looking east is underway. The U.S. remains Israel’s biggest export market (27.1% in 2018) but China and Hong Kong are No. 2 (14.5%) and their proportion is rising fast. If current trends continue, China/Hong Kong will eventually overtake America.
Israel’s Startup Nation and America’s Silicon Valley are joined at the hip. Most investment in Israeli tech companies still originates in the U.S. and the American market is still the one they covet. But China is also coming up fast in tech too. Beijing believes it can learn to emulate Israeli innovation in order to help its industrial sector compete on equal terms with the U.S. and Europe, and in order to solve critical problems in water and energy conservation and food supply.
Sweating bullets in Washington Chinese companies are involved in building some of Israel’s biggest infrastructure projects: the new Haifa and Ashdod ports and parts of the Tel Aviv Light Rail. A Chinese company is part of a group bidding to build the world’s largest desalination plant and may end up in control of Israel’s second-largest cellular company. There is no American presence in any of these projects.
What America does have is growing anxiety about Israel-China commercial ties. Israel could give China a leg up in the race with America for world technology leadership; Chinese corporate presence at critical facilities could be used for espionage or worse.
But, tellingly, Israel hasn’t acted, for instance by setting up a mechanism for vetting foreign (read: Chinese) investment.
Ten years ago, choosing between Washington or Beijing would have been simple because the U.S. was too big and powerful to defy it. Today, Israel doesn’t want to take sides at all. Ten years from now, the calculations may well favor China.
So far, China has been content to do business in the Middle East and let the U.S. entangle itself in the region’s endless crises. The U.S. dispatches troops, imposes boycotts and brokers deals, making enemies and depriving its companies of business opportunities while China simply does deals. Indeed, it has happily done deals simultaneously with bitter enemies like Iran and Israel without paying any price. Barack Obama couldn’t see the logic, and Trump has taken the reasoning even further by forswearing America’s role as guardian of the world order.
Even if it didn’t play out in quite the same dramatic speed as the Kurdish debacle, observe the irony that occurred after Saudi oil facilities were struck by (presumably) Iranian missiles last month. The U.S. resisted calls to respond, which is understandable: America doesn’t need Saudi oil, so the threshold for risking action is high. It was China that was threatened by the supply disruption, yet no one imagined that Beijing could or would do a thing to ensure Saudi Arabia’s oil infrastructure remains safe.
There must a lot of serious thinking going on in Beijing these days. The security umbrella that America provided for China’s vital energy supplies and business deals is being lowered. Someone will have to provide the aircraft carriers and troops to maintain a semblance of order in a region that seems incapable of maintaining it on its own. Who you gonna call?
Just like Britain handed over the job to the U.S. 40 years ago when it withdrew from the Gulf, it looks like America is about to do the same and give it to a reluctant China. Welcome to the New Middle East.
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