According to a new report, Chinese state-owned enterprises are expanding their presence near the Strait of Hormuz in the Middle East, boosting the potential of a future collision with US interests in one of the world’s busiest oil transitways.
The growing footprint of Chinese commercial activity in the region, including billions of dollars in investments in oil pipelines and storage terminals along the Persian Gulf, is raising concerns among US national security hawks, who fear Beijing will gain dangerous influence over a major choke point for petroleum shipments.
Approximately one-third of the world’s seaborne crude oil goes through the strait, which narrows to about 20 miles between Iran and the Arabian peninsula. According to the Center for Strategic and International Studies study, this includes up to 45 percent of China’s own oil imports.
According to the CSIS writers, China has historically exploited investment on pipelines, ports, and other commercial facilities to prepare the way for military sites at critical places such as the Red Sea’s mouth. China’s investment in regional ports and infrastructure in Oman and the UAE may now provide an entry point for Chinese naval ships in the strait. Such ships already patrol adjacent waters for pirate vessels.
“China has paved the way for something it may do in the future,” said Matthew Funaiole, senior fellow at the CSIS China Power Project. “It’s all about providing possibilities for itself.”
“China has thrown a wide net throughout the region, giving it lots of influence,” he continued. In terms of military planning, a military installation on the western edge of the Arabian Peninsula makes sense.”
According to a senior administration official who requested anonymity due to a lack of authority to speak to the media, the Biden administration has maintained an eye on Beijing’s activities in the area.
“The administration is focusing on China’s infrastructure buildout and has devised measures with our G7 allies to ensure a worldwide high-quality and diverse supply chain,” added the official.
The CSIS research details China’s billions of dollars on port facilities in the UAE and Oman, two countries that straddle the strait across the water from Iran. According to the report, the expansion of Beijing’s footprint at the Khalifa Port in the UAE, as well as its ownership stake in a fuels storage terminal at the country’s Port of Fujairah about 100 miles to the east, and investment at the Duqm Port in Oman, raise the issue of Chinese power growing in the region.
According to the article, the China Harbour Engineering Co. was awarded a contract in October 2022 to construct a 700,000-square-meter container yard and 36 supporting structures at Khalifa Port. The corporation is a subsidiary of China Communications Construction Co., one of the companies sanctioned by the Trump administration for assisting China in the construction of artificial islands in the South China Sea.
Years before, the Shanghai-based shipping behemoth COSCO agreed to develop a container terminal at the same port for $738 million. The agreement includes terms that grant China exclusive design, building, and administration rights to the terminal for a period of 35 years.
There are valid reasons to be concerned that the Chinese government may utilise its commercial contacts in the Hormuz Strait to establish a military footing in the region.
Beijing leveraged its trade ties with Djibouti to reach an agreement in 2014 to allow the Chinese navy to use the African country’s port near the Red Sea’s mouth. Beijing used that arrangement to set up a naval base in 2017 that the US Africa Command accused of employing military-grade lasers to harass US fighter jets landing in Djibouti.
Western interests are concerned that Beijing’s concentration on the region would eventually pave the way for the Chinese military to establish a presence there. For years, the US government has raised this as a concern. In a report to Congress last year, the Defense Department stated that China is “likely” evaluating the UAE as a location for military logistical facilities.
“The [Persian] Gulf region is now likely to become a contested territory, subject to superpower strategic competition,” said John O’Connor, CEO of J.H. Whitney Investment Management, a geopolitical risk analysis business. “This is a new feature, not a bug.”
However, not everyone believes that a military expansion is unavoidable.
Other views of China’s military in the Strait of Hormuz indicate that Beijing is unlikely to seek to expand its reach in the region by establishing facilities for People’s Liberation Army Navy troops or people. A December RAND Corp. research that graded the relative attractiveness of 24 countries for potential PLA installations rated the UAE as “poor feasibility” due to the Pentagon’s careful scrutiny of the country and the Arab nation’s dealings with potential adversaries.
And China is concerned about the flow of oil out of the strait, which is why it wants to build infrastructure there. It has eclipsed the United States as the world’s largest user of oil and relies largely on the Middle East for a large portion of its supplies. Ports and storage facilities might be used to protect China’s own supply from disruption in a region rife with regional instability.
According to some commentators, the PLA does not need to create formal military facilities in strategic ports where Chinese state businesses already operate.
“Rather of raising foreign threat perceptions through overt military presence, the PLA may choose to instal plainclothes operatives… could employ purportedly civilian warehousing, communications, and other equipment to meet military needs quietly,” concluded an article in the spring 2022 issue of the journal International Security.
Despite China’s substantial and growing economic and political ties with the UAE and Oman, “I don’t see any indications that China currently seeks to establish a base or enduring military presence in either of those countries, or elsewhere in the Middle East,” said Dawn Murphy, associate professor of national security strategy at the National War College and a Middle East expert. “I see no signs that China desires to fundamentally change its security presence in the Middle East, pick sides between countries, or challenge the U.S. security role in the region – for now China is primarily an economic and political power in the region.”
Nonetheless, a significant Chinese presence in the area might roil oil markets if fears of military confrontations with the US or Europe over Taiwan leak into the area. Crude prices frequently rise when tensions between the United States and Iran rise.
The fact that China’s development in the area is causing anxiety in the United States demonstrates how oil politics continue to loom large for the world’s largest oil producer. Even a benign presence at the choke point would give Chinese companies information about fuel or ship movements that they could send back to Beijing as intelligence, said Republican aides with the House Foreign Affairs Committee.
“Everything in the Chinese private sector is somehow tied to the greater CCP or the PLA,” said the official, who requested anonymity because he was not authorised to be cited in the media. “Even if you’re a private enterprise, the Chinese government may request information from you.”
At worst, having a direct PLA presence on the Strait of Hormuz would set off alarm bells among energy security experts, said Scott Modell, chief executive of consulting firm Rapidan Energy and a former Central Intelligence Agency officer who served in the Middle East, Central Asia and Latin America.
“National security hawks like me will view the news of Chinese bases along the Strait of Hormuz as an unacceptable threat to U.S. national security, sensing that Beijing’s long-term objective is the placement of military bases at choke points around the world to offset the risk to strategic commodity flows in the event of a major geopolitical event such as a forced reunification with Taiwan,” Modell said.