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Alex Kimani

Alex Kimani

Alex Kimani is a veteran finance writer, investor, engineer and researcher for Safehaven.com. 

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What’s At Stake for China As Houthis Attack the Red Sea

  • Japanese shipping operator Nippon Yusen has become the latest among dozens of shipping companies to suspend sailings through the Red Sea.
  • Beijing has so far remained tight-lipped about the raging war between Israel and Hamas in the Gaza Strip despite China being Israel’s second-largest trading partner.
  • Beijing has called for an end to attacks on civilian vessels in the Red Sea.

With the Middle East conflict now past the 100-day mark, the Israeli military has launched a barrage of strikes deep within southern Lebanon while Iran has attacked a site in Iraq it has alleged is being used by Israel’s Mossad, stoking fears that the conflict could escalate into a full-blown regional conflict. Israel has, however, declared that it has ended its "intensive" phase of operations in northern Gaza and plans to do the same in southern Gaza.

Japanese shipping operator Nippon Yusen has become the latest among dozens of shipping companies to suspend sailings through the Red Sea following incessant attacks on ships by Yemen's Houthi movement. A week ago, China's state-owned shipping company COSCO suspended shipping to Israel due to the elevated risk of coming under Houthi attacks. Beijing has so far remained tight-lipped about the raging war between Israel and Hamas in the Gaza Strip despite China being Israel’s second-largest trading partner.  This comes as little surprise considering that the war has come at a time when China has been prioritizing enhanced relations with the Muslim states of the Middle East, and has no tradition or commitment to support Israel’s security. Further, for decades, China has maintained a policy of non-interference in the domestic affairs of other sovereign states and has, therefore, been unwilling to take a position that would upset relations with countries like Yemen, Egypt and Iran, all members of its ambitious Belt and Road Initiative. Related: Largest Lithium Deposit in the World Suspends Output

That is, until now. Beijing has finally spoken out, calling for an end to attacks on civilian vessels in the Red Sea--and for good reason. After all,  there’s too much at stake for the Middle Kingdom to continue playing the passive observer in all this mayhem. 

"The situation in the Red Sea has escalated sharply recently, and China is deeply concerned about this. China calls for a halt to the harassment and attacks on civilian ships and for the maintenance of the smooth flow of global industrial and supply chains and the international trade order," Chinese Foreign Minister Wang Yi has said.

China has ramped up investment and commercial activities along Egypt's Suez Canal by a significant amount ever since Egypt’s President Abdel-Fattah el-Sisi came to power in 2014. Beijing has actively encouraged state-owned companies to invest billions of dollars in Egypt's energy, transport and logistics sectors, and extended billions of dollars in loans to the north African nation, according to the World Bank.

Last March, China’s COSCO invested $1 billion in Egypt's port infrastructure. COSCO’s efforts will be supplemented by CK Hutchison Holdings, a prominent Hong Kong-based conglomerate, which announced plans to invest $700 million to develop a new container terminal in the Red Sea port of Ain Sokhna. Around the same time, Xinxing Ductile Iron Pipes unveiled plans to invest $2 billion in Ain Sokhna’s iron and steel plants. But the biggest deals came later in the year after state-owned China Energy and Egypt's Suez Canal Economic Zone struck a $6.75 billion deal to develop green hydrogen and green ammonia projects while Hong Kong-listed United Energy Group agreed to invest $8 billion to build a potassium chloride production site, all in the Sokhna Industrial Zone.

Middle East Peace Broker

China has lately displayed a willingness to become a peace broker in the Middle East. Last year, it brokered a detente between regional rivals Saudi Arabia and Iran in a bid to end decades of enmity and a formal cutting of ties in 2016. Viewed as a diplomatic win for all the parties concerned, China’s top diplomat pledged to firmly support Tehran on “issues concerning core interests” and said the deal was driving a “wave of reconciliation” in the Middle East.

For years, China has been working hard to strengthen diplomatic ties with Egypt, with Egyptians now rating China as the country’s most important ally ahead of the United States and Russia.

Further, it’s worth noting that whereas China might not be a powerful ally of Israel on the level of the U.S., the two nations share warm relations. Israel was the first Middle East state to recognize the People’s Republic of China in 1950, although they did not establish formal diplomatic ties until 1992. Relations have expanded particularly in the economic sphere over the past four decades, with Chinese companies upgrading ports and building infrastructure in Israel. Indeed, China now ranks as Israel’s second-largest trading partner, with bilateral trade between the two rocketing from just $50 million in 1992 to $24.45 billion in 2022.

The United States has welcomed China’s new-found role in the volatile region, and believes Beijing will play a key role in reining in Iran. China imports 10% of its oil from Iran.

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By Alex Kimani for Oilprice.com

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