"Journey to the East" : Opportunities Arise Along With the Middle East Reconciliation Wave

Industrials Author: Xiaoguang Zhang Jun 29, 2023 06:41 PM (GMT+8)

At the beginning of 2023, a significant event unfolded in the history of Middle East diplomacy that sent shockwaves around the world. With no prior indication, Saudi Arabia and Iran, two major Middle Eastern powers, restored diplomatic relations with the mediation of China. This development has drawn attention to the "reconciliation wave" in the Middle East region.

middle east

Peace and Dialogue

With the reconciliation between Saudi Arabia and Iran, there is now a possibility of easing internal tensions in Yemen. Previously, Yemen had been embroiled in a prolonged conflict between the Saudi-backed government forces and the Iranian-supported Houthi rebels. According to Al Jazeera, following the Saudi-Iran reconciliation, official negotiations have commenced between Saudi Arabia and the Houthi rebels, bringing the Yemeni issue to the negotiation table.

The Yemeni war has caused severe humanitarian crises and wastage of resources for an extended period. Situated at the strategic gateway from the Red Sea to the Gulf of Aden, Yemen holds significant importance but has failed to fulfill its economic potential due to years of conflicts. Problems such as famine and medical shortages resulting from the war have garnered international attention. According to the United Nations, the Yemeni war has claimed nearly 380,000 lives since its outbreak in 2015. EqualOcean has learned that Yemenis have traditionally engaged in cross-border trade in the Middle East region, but the collapse of their own economy due to the war has prevented them from participating in domestic trade activities.

Dong Manyuan, a Middle East affairs researcher, stated in an interview with China News that the "reconciliation wave" in the Middle East is primarily characterized by the improvement of the security environment. The enhancement of the security environment will contribute to the development environment for Arab countries long plagued by conflicts. The themes of "peace" and "development" are gradually becoming mainstream in the Middle East. Since 2022, a series of diplomatic events have emerged under the backdrop of the "reconciliation wave" in the Middle East, including internal reconciliation among Arab countries and diplomatic reconciliations between Arab countries and non-Islamic nations such as Israel in the Middle East region.

US Strategic Contraction: Middle Eastern Countries Shift from "Looking at East" to "Going to East"

In July 2022, the visit of President Biden to Saudi Arabia sparked speculation about the relationship between the United States and the Middle East. Prior to this, the US withdrew its troops from Afghanistan, ending a 20-year military operation. This raised doubts among Middle Eastern countries about the US commitment to their security. The close relationship between the US and the Middle East during the Trump era had already undergone some changes. US officials attempted to shift their strategic focus to Europe and other Asian regions, leading to a contraction of their strategic direction in the Middle East.

According to The New York Times, the US and Saudi Arabia had previously accused each other in relation to the Jamal Khashoggi incident. During his election campaign, President Biden referred to Saudi Arabia as a "pariah" state, resulting in strained relations between the two countries. Shortly after Biden's visit in October 2022, the US and Saudi Arabia once again exchanged accusations over OPEC production cuts, accusing each other of using the issue for political gain. This further strained their relationship.

Saudi Arabia, which used to consider the US an ally in its fight against Iran, has now started seeking an independent and multi-faceted foreign policy. It aims to become a pole in a multipolar world. Following the outbreak of the Russo-Ukrainian conflict, the US president put aside "human rights controversies" and held talks with leaders of the "Gulf Six" and other Arab countries, attempting to persuade Middle Eastern countries to join the sanction on Russia. However, they refused to follow the US lead. Previously, Middle Eastern countries that maintained allied or friendly relations with the US did not adopt the same stance towards Russia but rather took positions that suited their own interests. Iran, facing US sanctions, strengthened its cooperation with Russia and signed cooperation agreements in energy and unmanned drone sectors.

China's relationship with Middle Eastern countries can be described as a "two-way journey." Data shows that in 2022, China's trade volume with Middle Eastern countries reached USD 507.152 billion. China has consistently been the largest trading partner for Middle Eastern countries for several years. The US strategic contraction has brought opportunities for economic cooperation to China. Amid the tense US-China relations, Middle Eastern countries are rethinking their position in the international order. In recent years, Middle Eastern countries, represented by Saudi Arabia, have strengthened their cooperation with China, India, and other Asian countries.


The "Triple Ring Summit" in 2022 undoubtedly exemplified this shift. In addition to economic cooperation, Middle Eastern countries have further strengthened their collaboration with China in politics, technology, energy, tourism, and culture. According to Global Times, on March 28, 2023, China National Offshore Oil Corporation (CNOOC) and the UAE's ADNOC completed the first-ever LNG purchase transaction settled in Chinese yuan, marking an important step in the internationalization of the renminbi and suggesting that energy trade settlement in yuan may become possible in the future, especially with closer economic ties between Saudi Arabia and China.

Sun Degang, a Middle East expert, pointed out in a 2012 article that "Chinese academia and politicians believe that the complexities of the Middle East's hotspot issues make it difficult to resolve and that diplomatic mediation would waste resources." However, China's deep involvement in the Saudi-Iran reconciliation indicates that this conclusion is outdated. In the future, official exchanges between China and the Middle East will deepen further. Middle Eastern leaders generally express fewer concerns about issues related to economic and trade relations with China compared to Western countries. With the convergence of official agendas, the pace of Chinese companies going global will accelerate.

The Possibility of Establishing a Unified Market

Throughout their development, countries in the Middle East belonging to different sects of Islam have been plagued by religious disputes (with the Sunni-Shiite opposition between Saudi Arabia and Iran as a major example). The restoration of diplomatic relations between Saudi Arabia and Iran is the first step towards resolving this issue. Recent progress has been made in transportation cooperation between Saudi Arabia and Iran, with the two countries considering the construction of a transnational railway. According to Xinhua News Agency, Iran is also negotiating cooperation on a free economic zone with Saudi Arabia and the United Arab Emirates. Moreover, several Middle Eastern countries are forming a new military alliance.

With closer economic ties, the likelihood of resolving conflicts in areas such as culture through political negotiations increases, reducing the chances of war breaking out. With the introduction of "Saudi Vision 2030" and similar plans like "UAE Vision 2030" and "Kuwait Vision 2035," Middle Eastern countries are striving to move away from oil-based economies and achieve economic transformation. China's Belt and Road Initiative (BRI) plays an increasingly significant role in the Middle East, offering the potential for assisting these countries in achieving market integration. In 2022, Chinese companies surpassed Europe to become the largest infrastructure contractor in the Middle East, capturing a market share of 40%. For instance, during the 2022 Qatar World Cup, although the Chinese national football team did not participate, the Lusail Stadium, the main venue of the World Cup, was a true "China-made" creation. It was constructed by China Railway Construction International Group, showcasing the power of Chinese infrastructure.

In this context, the unified language and script possessed by Middle Eastern countries become a significant advantage. This will lead to substantial cost savings in economic and trade cooperation and facilitate the establishment of unified standards. Companies involved in such cooperation will no longer need to reinvent the wheel in different countries. The establishment of a unified large market becomes a possibility, offering immense benefits for Chinese companies expanding overseas.

However, conducting business in the mysterious Middle East is not an easy task, despite promising prospects. According to Xiaguangshe's reports, companies venturing into the Middle East face numerous challenges beyond imagination, including complex political systems, diverse cultural habits, language barriers, and high entry barriers. Even leading companies like Baidu and JollyChic have suffered setbacks in the region. An operations expert from a prominent Chinese baby product e-commerce company revealed that their attempts to establish channels in countries like the UAE failed due to a lack of experience in offline retail operations, ultimately resulting in the termination of their plans. While everyone may entertain the idea of making a fortune in the Middle East, not everyone possesses the courage, patience, and opportunity to seize success.