Abstract
In July 2018, the Kuwaiti Emir made a state visit of great significance to China, as both countries agreed to establish a strategic partnership creating new opportunities for Kuwait, which aspires to diversify its economy and seek investment opportunities. This study investigates various aspects behind the establishment of this partnership and examines the synergy between the Belt and Road Initiative (BRI) and the Kuwait Vision 2035 (KV2035) to understand the extent of economic engagement and relationship between the two nations. However, despite the considerable increase in Chinese trade and investments in Kuwait, some significant internal obstacles and external challenges remain to the successful integration of KV2035 with the BRI.
Introduction
The past two decades have seen substantial changes in the global economy and geopolitical trends, with the rise of the People’s Republic of China (PRC) on the global and regional stage. These developments are creating new opportunities for the Middle East countries as they look to diversify their economies, increase trade, and seek investment opportunities in emerging markets; this includes schemes such as forging strategic partnerships with China to promote the new Silk Road vision and to incorporate it into their national development plan. All of this reflects a growing tendency among the Gulf Cooperation Council (GCC) states, which seek to benefit from the favorable business conditions in China, as well as the latter’s expertise and experience in its rapid path to economic development (Fulton, 2018a).
Kuwait, a tiny country with an area of about 18,000 square kilometers, is no exception to this burgeoning trend. This tiny emirate is nestled atop the strategic Arabian Peninsula located in the northwestern corner of the Persian Gulf, sharing 462 km of land boundaries with Iraq and Saudi Arabia, and commanding a coastline of 499 km. Kuwait was one of the first Gulf countries to establish diplomatic relations with China, 47 years ago, on March 22, 1971 (Niazi, 2009). The relations between China and Kuwait have been developing smoothly and growing steadily since then. The two countries enjoy cordial and friendly relations, share similar views on major international and regional issues, and are continually tendering sympathy and support to each other (Olimat, 2016). They have also been working in coordination to broaden and deepen cooperation in the political, economic, and social fields.
This study investigates some of the aspects behind the establishment of the China–Kuwait strategic partnership and examines the synergies between the Belt and Road Initiative(BRI) and the Kuwait Vision 2035 (KV2035). Since Chinese President Xi Jinping first unveiled the BRI in September 2013, Kuwait was among the first Arab countries to sign a cooperation agreement with China under the BRI framework and one of the founding members of the China-initiated Asian Infrastructure Investment Bank (Anderson, 2018).
The article’s main argument is that the PRC strategic partnership framework with Kuwait is based on shared or complementary economic and commercial interests, especially to integrate KV2035 into the BRI, two grand schemes that envisage transcontinental integration. Although these two ambitious infrastructure development plans— KV2035 and Belt and Road vision—were developed independently of one another, they have converged on a joint economic development path. Their synergetic strategy would bring new opportunities for both sides.
The Importance of Kuwait to China
Kuwait has a geopolitical value to PRC’s New Silk Road Strategy compared to other GCC states. First, the ongoing dispute between Qatar and its neighbors significantly weakened the unity of the six-nation GCC. However, Kuwait did not take part in the blockade of Qatar, maintained a smooth relationship with Doha, and has attempted to mediate to end the regional diplomatic dispute, albeit without success (Al-Jazeera, 2019). This approach is consistent with China’s mediation diplomacy to broker a peaceful resolution to the Middle East disputes. Beijing is using mediation to further its economic interests and political influence in countries and areas that some of its strategic rivals had previously dominated (Chaziza, 2018b).
Second, Kuwait has also shown a willingness to play a diplomatic role in some of the most complex contexts in the region, including Iran and Yemen. Kuwait has distanced itself from the anti-Iran stand taken by Saudi Arabia and the United Arab Emirates (UAE) and has ensured that a channel to Tehran remains open. Kuwait has tended to implement a policy of strategic hedging and balancing act, cooperating closely with Saudi Arabia while maintaining economic and political relations with Iran, they are even attempting to mediate between Saudi Arabia and Iran (Al-Arabiya, 2017). Moreover, while it has publicly expressed support for Iran’s right to maintain a peaceful nuclear program, conversely, it has agreed to comply with all sanctions the USA and the United Nations Security Council have levied on Iran (Fulton, 2010). This approach is fully compatible with the Chinese policy that opted to hedge and to balance its relationships with regional and international partners (Chaziza, 2020).
Third, in Yemen, Kuwait participated in the Saudi-led coalition war against Iranian-backed Houthis but agreed to host the signing ceremony to end the war in Yemen if the parties involved reach a consensus (Karabacak, 2018). In this way, Kuwait would be able to revert to its regular strategic hedging policies and balancing while maintaining its independence. The Kuwaiti position on the Yemen conflict corresponds to the Chinese policy driven primarily by its interest in maintaining close strategic relations with Saudi Arabia. PRC has regularly urged all parties of the conflict to reject the use of violence and to resolve the conflict by political means through intra-Yemeni dialogue (Xinhua, 2017).
Kuwait has long been aligned with the USA, enjoying a long history of friendship and cooperation rooted in shared interests and institutional relationships. Washington is one of Kuwait’s largest suppliers of goods and services, and Kuwait is one of the USA’s largest markets in the Middle East. US companies do have a competitive advantage when it comes to the provision of advanced technology, especially in the fields of oil equipment and services, power generation and distribution, telecommunications systems, and military equipment. In turn, Kuwait has been pivotal to the decade-long US effort to secure the Persian Gulf region because of its consistent cooperation with US military operations in the region and its key location in the northern Gulf. Kuwait and Washington have a formal Defense Cooperation Agreement (DCA), under which the USA maintains over 13,000 military personnel in the country and prepositions military equipment to be able to project power in the region (Congressional Research Service, 2019).
However, the relative decline of US hegemony and power in the Middle East and the emergence of a rapidly rising China, which seeks to assume significant roles in the region, were seen to have the potential to impact the stability and balance of power (Layne, 2018). With this in view, Kuwait has started to seek ways to invest in stronger ties with Beijing and other powers, to strengthen its position in this increasingly vulnerable geopolitical region (Fulton, 2018b). Like the other GCC countries, Kuwait is determined to preserve its strategic alliance with the USA, but to guarantee its security in the future, it is also seeking to hedge itself against threats that emanate from regional crises or power competition (Harb, 2018).
Nevertheless, the partnerships between China–Kuwait experience difficulties from some of Kuwait’s vocal Islamist opposition members in the National Assembly. Since China expressed interest in connecting Kuwait’s Silk City to its ambitious multibillion-dollar BRI, conservative parliamentarians oppose China’s global ambitions and threaten to block its investments in Kuwait because of its treatment of the Uyghur Muslim minority in Xinjiang, a province in northwest China (Castelier, 2019).
The Silk City project in Kuwait is one of the largest and most ambitious developments in the Gulf and has drawn interest from China. PRC’s investment in the Silk City project would give it access to the broader Gulf region, providing a gateway for investment in Iraq and Syria. The Silk Road Economic Belt (SREB) that connects through Central Asia to Iran could also connect to the Silk City project. However, the Silk City mega project still faces significant challenges, including domestic political disputes and neighborhood security turmoil both of which underscore long-standing obstacles for Kuwait when it comes to attracting Chinese investors (Gorvett, 2019).
China Partnership Diplomacy
The post-Cold War order has provided PRC with a unique strategic opportunity to develop power and influence in the Middle East without facing overt challenges from the USA. Balancing against Washington during the unipolar era would not advance Beijing’s interests, but at the same time, neither would bandwagoning or neutrality. Dynamic balancing is too risky, and bandwagoning or neutrality is not consistent with Chinese ambitions (Goh, 2005; Tessman, 2012). Instead, Beijing has taken advantage of the relative stability provided by the US dominance to develop strong ties with strategically essential states in the Middle East (e.g., Iran, Egypt, Turkey, UAE, and Saudi Arabia). These relations have been built mostly on economic foundations, but as they become increasingly multifaceted, there is a corresponding growth of strategic considerations.
Beijing has had to build a regional presence that does not alienate the USA or any Middle East states while pursuing its interests. The Chinese diplomacy has provided the space to methodically build up its economic relations while the US security umbrella provides a low-cost entry into the region. Beginning with trade, economic ties became increasingly multifaceted and sophisticated, incorporating finance and investment. The relationships with the Middle East states have progressed beyond the economic to include political and security objectives but have consistently allowed China the flexibility of being everyone’s friend in the competitive regional environment (Fulton, 2019).
In recent years, partnership diplomacy has become a primary foreign policy tool for the Chinese government. Since the end of the Cold War, the number of partnerships has steadily increased, PRC has established partnerships with 78 countries and 5 regional organizations (African Union, Arab Union, ASEAN, Community of Latin American and Caribbean States (CELAC), and EU), which is 45 percent of the 174 countries that have formal diplomatic ties with China. In addition to its comprehensiveness, the network consists of different stratifications, going from regular partnership to a comprehensive strategic partnership (Quan & Min, 2019).
China partnership diplomacy includes a scale of relations, ranging from a friendly cooperative partnership at the bottom to a comprehensive strategic partnership at the high end (Su, 2000). Each of the five categories of relations features specific priorities, signaling the level of importance Beijing attaches to that state. Relationships can be upgraded depending upon the progress made, as in the case of Kuwait, with which China established a strategic partnership in July 2018 (Xinhua, 2018b).
According to Chinese levels of Strategic Partnerships diplomacy (from highest to lowest): Comprehensive Strategic Partnership (全面战略伙伴关系) is the full pursuit of cooperation and development on regional and international affairs. Strategic Partnership (战略伙伴关系) coordinates more closely on regional and international affairs, including military. Comprehensive Cooperative Partnership (全面合作伙伴关系) maintains the sound momentum of high-level exchanges, enhanced contacts at various levels, and increased mutual understanding on issues of common interest. Cooperative Partnership (合作夥伴關係) develops cooperation on bilateral issues, based on mutual respect and benefit. Friendly Cooperative Partnership (友好合作关) strengthens cooperation on bilateral issues such as trade (Quan & Min, 2019; South China Morning Post, 2016; Strüver, 2017).
In the Persian Gulf, China partnership diplomacy includes seven relationships, spread across the region, which fall into three broad categories in line with their importance. The first category comprises comprehensive strategic partnerships with Iran, Saudi Arabia, and the UAE. The second covers strategic partnerships with Iraq, Kuwait, Oman, and Qatar. The third comprises a relationship with the regional smaller state, Bahrain (Chaziza, 2020).
China’s partnership diplomacy in the Persian Gulf began when it established a strategic partnership with the UAE in January 2012. Since then, every state in the Gulf except Bahrain (which has a friendly cooperative partnership status) has signed either a strategic or comprehensive strategic partnership with China. A key integral feature of the BRI is the designation of specific countries along the Silk Road routes as strategic partners. Unlike the USA, China does not have security alliances, but in lieu thereof it does have close diplomatic relations with all the Gulf states, which are labeled strategic partnerships. Such partnerships are predicated more on trade and economic relations than on security cooperation (Qian & Fulton, 2017).
The past two decades have seen substantial changes in the global economy and geopolitical trends, with China’s rise on the global stage. These developments are creating new opportunities for the Gulf countries as they look to diversify their economies, increase trade, and seek investment opportunities in emerging markets; this includes schemes such as forging strategic partnerships with China to promote the BRI and to incorporate it into their national development plan (Young, 2019). This reflects a growing tendency among the Gulf states to benefit from the favorable business conditions in China, as well as Beijing’s expertise and experience in its rapid path to economic development (Qian & Fulton, 2017).
The Gulf countries have strongly embraced and benefitted from a network of cooperation lines in various investment and infrastructure projects and other fields with China. Hence, they have much to gain from the realization of the Belt and Road vision as the project aims to enhance the China’s diplomatic and economic relations with countries that maintain a positive view of Beijing’s global economic and political ascendancy and can provide the energy resources that it needs to fuel its economy (Cafiero & Wagner, 2017).
In the wake of Arab uprisings and the civil wars, the Gulf countries were pressured to rebuild their economy or boost economic growth to maintain social stability. To this end, they have been actively rolling out plans for long-term development for rehabilitation and encouraging economic growth, and comprehensive and upgraded Chinese engagement would provide the impetus for it (Young, 2019). In this way, there is a common interest for PRC and the Middle Eastern countries to integrate and synergize the new Silk Road strategy with major initiatives (e.g., Saudi Arabia’s Vision 2030, Emirate’s Vision 2021, etc.) of future-oriented reforms for national rejuvenation (Cui, 2015).
Belt and Road Initiative
China’s most significant twenty-first-century diplomatic and economic activity is the launching of the new Silk Road strategy that has become the flagship foreign policy effort of the Xi administration. China’s BRI is comprised of two components: Silk Road Economic Belt (SREB) and the 21st century Maritime Silk Road Initiative (MSRI). The former links Beijing with Central Asia, the Middle East, and Europe on land, while the latter unites the major maritime trade routes of Africa, Europe, and Oceania as well as South and Southeast Asia (Xinhua, 2017). Each component has the potential to transform the global geopolitical landscape through the construction of interrelated infrastructure projects, including air and seaports, highways, high-speed railways, pipelines, and truck roads (Blanchard & Flint, 2017).
The new Silk Road projects are organized along seven corridors, which encompass as many as 72 countries. Overall, the 72 BRI countries cover two-thirds of the world’s population, 40 percent of the global gross national product, and an estimated 75 percent of known energy reserves (WWF’s recommendations for the finance sector—in conjunction with HSBC, 2018). The global infrastructure investment needed to support the currently expected economic growth rates is between US$3.3 trillion and US$6.3 trillion annually (Perlez & Huang, 2017). According to the chief economist of Bank of China, Beijing’s outbound direct investment in the BRI would reach US$300 billion by 2030 (Karoui, 2018). Furthermore, the BRI has the potential to establish a new order, not only in Eurasia but also in the entire international system.
In the last decade, PRC has increasingly become involved in the Middle East region, especially in the Persian Gulf. Almost all states in the Gulf are looking to China as a promising market and a provider of investment and finance without the conditional political ties about democracy and human rights that Western countries and institutions try to insist on. Of course, China has been economically active in the Middle East, especially in the Persian Gulf, for more than three decades, but its engagement has increased substantially along with its economic growth and its more assertive position in the global economy (Chaziza, 2020).
The economic relationships between PRC and the Gulf countries have thickened, including finance and investment, to complement the increasingly robust trade component, and not surprisingly, interests have become more complex. China increasingly sees the Persian Gulf as a strategically important region, and Gulf leaders increasingly look east when contemplating their long-term interests. The BRI is creating more opportunities for cooperation, and PRC-Persian Gulf nexus is becoming an essential geopolitical axis in understanding Eurasian international affairs.
The Middle East is the region that brings together the land and maritime Silk Road, coupled with its unique geographical location and diverse and complex humanitarian, religious, and ethnic factors, notably with an increasingly significant role in the energy sector. As an energy-rich zone, it plays a decisive role in the process of building the BRI. This region also plays a prominent role in security coordination, economic cooperation, and cultural exchanges under the BRI framework. Thus, the Chinese government would pay close attention to the region’s role in the construction of its Belt and Road vision (Wu, 2015).
In March 2015, the Chinese government published Vision and Actions on Jointly Building Silk Road Economic Belt and 21st-Century Maritime Silk Road, which describes plans for how the SREB would link PRC with the Persian Gulf and the Mediterranean Sea through Central Asia and West Asia and how the MSRI would connect China with Europe through the South China Sea and the Indian Ocean (National Development and Reform Commission (NDRC), People´s Republic of China, 2015). This means the Persian Gulf region would serve as a hub of the two routes, entailing many added economic benefits. Furthermore, the Gulf countries could benefit from the new Silk Road’s focus on improved transportation across Eurasia, providing an alternative route for exports to Asia that avoids the bottlenecks of the Strait of Hormuz also from greater affluence and stability in Central Asia.
The BRI has become the focus of strategic and economic engagement between PRC and countries in the Gulf region. The latter are “The countries in the Gulf region” in the new Silk Road construction in an important geographical area, difficult to bypass (Wu, 2015). The Middle East is situated at the intersection of the three continents of Asia, Africa, and Europe and bordered by the five seas: Mediterranean, Red Sea, Arabian Sea, Caspian Sea, and the Black Sea; it is adjacent to the four maritime strategic channels of Bosporus, Dardanelles, Bab el-Mandeb, and Hormuz. The Gulf countries can be referred to as the core of the region since they are the most powerful countries in the Middle East. The advantageous location, the unique endowment of natural resources, and the huge industrialization potential make the Gulf regions of supreme strategic importance to the BRI implementation (Liu & Wang, 2017).
Kuwait Vision 2035
The Kuwait vision was launched in January 2017 by the government and its name reflects the national plan for development, also known as “New Kuwait,” which is designed to make Emirate a regional leader by 2035. This plan includes, among others, “initiatives that would transform our economy, create jobs, attract foreign direct investments and facilitate knowledge transfer in the fields of renewable energy, information technology, and the services sector,” as the Minister of State for Cabinet Affairs stated in his opening remarks (New Kuwait, 2017). The KV2035 aims to extend its activities to Asia and Europe via 164 strategic development projects as well as increase foreign direct investment by 300 percent. The vision of the Emir Sheikh Sabah Al-Ahmad Al-Jaber Al-Sabah is to transform Kuwait into a financial, commercial, and service hub in the Gulf and at the international level through mega projects and a leading role in the private sector (Kuwait Times, 2017).
Kuwait’s economy is heavily dependent on petroleum export revenues, which account for 88 percent of the government’s budget revenues, 85 percent of exports, and 40 percent of Gross Domestic Product (Gulf News, 2018). As a result, the government hopes to push ahead with reforms to diversify the national economy toward reducing its dependence on oil revenues. By 2035, the Kuwaiti government would have made investments of more than US$100 billion in key economic and social sectors including oil and gas, North Zone Development, electricity and water, urban development and housing, health, education, transport and communications, tourism and media, and environment (Omar, 2018).
Kuwait and the Belt and Road Initiative
PRC’s strategic partnership with Kuwait includes five major areas for cooperation within the BRI. These areas are policy coordination, connectivity, trade and investments, energy cooperation, and people-to-people bonds (Fulton, 2017; Ye, 2015). KV2035 and China’s new Silk Road vision have converged on a joint economic development path, and the realization of the BRI would provide new momentum for Kuwait’s economic transformation.
Connectivity
According to China’s strategic partnership with Kuwait, the facilitation of connectivity is a meaningful way to integrate the KV2035 into the BRI framework. Kuwait would attempt to optimize its infrastructural connections and adapt its technical systems to other countries in the BRI framework. This would lead Beijing-Kuwait to jointly contribute to the development of international transport maritime and overland routes and the creation of an infrastructural network that could gradually connect all the regions in Asia and also specific points in Asia, Africa, and Europe.
Kuwait’s natural harbors are easier to access than those of other GCC states, which has led the country to become part of a major trade route. Its geographical location connects the Persian Gulf with both maritime and overland routes so that an overland trade route running through Kuwait and continuing through Saudi territory could provide a safer and shorter route to the Suez Canal and the Red Sea than one that passes through the Bab el-Mandeb Strait, which has been facing instability ever since the outbreak of the civil war in Yemen. This also would provide the opportunity to enhance Chinese interaction with both Saudi Arabia and Kuwait (Ibrahim, 2018). Beijing also wants to work with Kuwait on infrastructure projects, including the construction of Al-Hareer (Silk City). As part of the PRC’s effort to revive the old Silk Road trading route that once connected Europe to Asia, Chinese companies are interested in building up to five uninhabited islands on Kuwait’s eastern coast and then connecting them to them the BRI (Weida, 2018).
Six years after Chinese President Xi Jinping first unveiled the BRI, the Persian Gulf region is emerging as one of the most important partners. Chinese infrastructure and construction projects in the Gulf, which were spearheaded under the BRI framework, were extended to include Oman and UAE (Chaziza, 2018a). Beijing is also holding talks to link Kuwait with a planned network of railways that would make the country a major commercial center and a base for railways, starting from China and passing through Central Asia and Gulf states (Anderson, 2018).
In Kuwait, China signed an agreement to cooperate on the Silk City project. The Silk City and the five islands would serve as a huge economic free zone that would link the Arabian Gulf to Central Asia and Europe. In Kuwait, China signed an agreement to cooperate on the Silk City project (that include the Silk City and the five islands: Failaka, Warba, Boubyan, Miskan, and Awha) that serve as a huge economic free zone that would link the Arabian Gulf to Central Asia and Europe. The Silk City and the five northern islands project are set to accommodate 700,000 residents within a designated urban area of 250 square kilometers, with the first phase expected to be completed by 2023. One of the main developments would be the Mubarak Seaport, with 24 berths, to increase trade through the Red Sea to Europe. When complete, the port would be Kuwait’s largest commercial trading hub (Times of Kuwait, 2018).
The US$100 billion Silk City mega project has been under development since 2014 when the government approved its final master plan and signed a cooperation memorandum of understanding (MoU) with the PRC for its development as a major component of China’s BRI (Toumi, 2014). The Silk City project is the cornerstone of the KV2035 and would play an important role in its diversification efforts (Bridge, 2018a). According to the Kuwaiti Ambassador to China, Samih Hayat, “There is mutual and substantial consensus between New Kuwait 2035 vision and the BRI to revive the Silk Road and establish a commercial center to serve the world” (Al Wasmi, 2018).
As part of the Silk City and islands development projects, Kuwait signed an MoU with the Huawei Company in July 2018 to implement the country’s smart cities strategy. A “smart city” is an urban area that uses different types of electronic data collection sensors to supply information to manage assets and resources efficiently. For example, the strategy includes developing apps to manage urban flows and provide real-time responses (Kuwait News Agency, 2018). In November 2018, the Kuwait National Fund for Small and Medium Enterprise Development (SMEs) signed an MoU with the Huawei company to encourage and develop small and medium enterprises and enhance companies’ advanced services in information technology and communications as part of the KV2035 (Arab Times, 2018).
In February 2019, Vice Chairman of the Chinese National Development and Reform Commission Ning Jizhe and senior government officials delegation visited Kuwait and signed an MoU to establish mechanisms to advance the development of the Silk City and Boubyan Island projects. The Chinese delegation’s visit was part of a long-running collaboration between the two nations over support for their respective mega projects (Belt & Road News, 2019).
In the end, there is some skepticism about the implementation of the Silk City and the island’s development projects. This is unexpected, given the uncertainty surrounding the Persian Gulf where ambitious leaders’ mega-project proposals can be stuck due to financial or political hurdles. There is also uncertainty regarding how many of these MoUs that were signed between Kuwait and China would be implemented. According to the International Monetary Fund, reform and project delays are major risks to Kuwait’s outlook, along with lower oil prices and regional security challenges. Kuwait’s history of stop-start reforms and tardy project development sustain concerns about the ability to push the Silk City and the island’s development projects through the bureaucracy and the legal changes necessary to ease business procedures and open up the economy (Financial Times, 2018).
Policy Coordination
Under PRC’s strategic partnership with Kuwait, promoting political cooperation, creating mechanisms for dialogue and consensus-building on global and regional issues, developing shared interests, deepening political trust, and reaching a new consensus on cooperation are priorities and important for integrating the KV2035 into the BRI framework, and to promote the establishment of a China-GCC free trade area at an early date (Xinhua, 2018c). China views Kuwait as a key partner for cooperation in the BRI and maintains regional peace and stability in the Gulf region. During his seventh visit to China in July 2018, Emir Sheikh Sabah Al-Ahmad Al-Jaber Al-Sabah and Chinese President Xi Jinping agreed to work together to establish a free trade area between China and the GCC. The two leaders found a consensus between KV2035 and China’s Belt and BRI to revive the old Silk Road to create a vibrant trade region and restore Kuwait to a leading role in the region’s commercial and economic fields (MFAPRC, 2018).
China planned to set up free trade zones with the GCC members, an essential part of the Belt and Road project. In that respect, as long as the Qatar–Gulf crisis continues and diplomatic and economic ties remain strained, the creation of free-trade zones seems impossible. Though Chinese investments would not be directly affected by the current GCC conflict, the region’s growing instability could still harm China’s economic cooperation and would undoubtedly impact Beijing’s regional trade prospects (Gater-Smith, 2017).
Energy Cooperation
In PRC’s strategic partnership with Kuwait, investment in energy infrastructure is considered one of the critical areas of cooperation to integrate the Emirate into the BRI framework (Lokhande, 2017). Therefore, the BRI can provide a new framework for extensive Chinese investments in the Kuwait energy industry. Beijing is Kuwait’s largest source of imports, and Kuwait is China’s fourth-largest crude oil supplier in the Arab world (CGTN, 2018). They are linked together by their common interests, in that their energy industries supplement and complement each other.
According to the US Energy Information Administration (EIA), Kuwait was the world’s 10th-largest producer of oil and other petroleum liquids in 2017. It was the fifth-largest producer of crude oil among the Organization of the Petroleum Exporting Countries (OPEC) members. Despite its relatively small geographic size (about 6,900 square miles), it trailed behind Saudi Arabia, Iraq, Iran, and the UAE in the production of oil and other petroleum liquids in 2017 (USEIA, 2018). Kuwait holds the world’s sixth-largest oil reserves (about 102 billion barrels, 6% of world reserves) and is one of the top 10 global producers and exporters of total petroleum liquids and had an estimated 63 trillion cubic feet (Tcf) of proved natural gas reserves (USEIA, 2016).
China’s dependence on crude oil imports from the Persian Gulf, a leading oil-producing region, has been increasing gradually since 1993 when it became a net importer of oil (Calabrese, 1998; Yetiv & Lu, 2017). In 2019, the value of crude oil imported into China totaled US$238.7 billion, expanding by 77.7 percent since 2015 but declining by -0.2 percent from 2018 to 2019. In 2019, 43 countries supplied crude petroleum oil to China, but close to half (44.8%) imported oil originated from just 9 Middle Eastern nations and 6 Persian Gulf states that are among the top 15 crude oil suppliers to China. Kuwait is ranked in eighth place, exporting approximately US$10.8 billion (4.5%) worth of oil to China (Workman, 2020).
The PRC is Kuwait’s largest source of imports, and Kuwait is China’s fourth-largest crude oil supplier in the Arab world (Xinhua, 2018). The Kuwaiti crude oil wealth and Beijing’s heavy dependence on crude oil are the underlying keys to the rapidly growing energy relationship between the two countries, which includes cooperation in building oil refineries and petrochemical plants, oil supplies, oil field services and exploration, and oil services and equipment in the oil-drilling sector.
In 2011, Kuwait Petroleum Corporation and China Petroleum and Chemical Corporation Limited (Sinopec) signed a US$9 billion deal to build an oil refinery and petrochemical plant, with the completion date scheduled by 2017, in the southern coastal city of Zhanjiang (Olimat, 2016). In August 2014, Kuwait concluded a new 10-year deal with China’s Sinopec Corp to nearly double its supplies by offering to ship the crude oil and sell it on a more competitive cost-and-freight basis. Under the deal, Kuwait increased the volume of its crude oil exports to China by up to 500,000 bpd in the next 3 years (Gulf News, 2014).
In recent years, China has become one of the biggest oil-drilling contractors in Kuwait. Chinese enterprises have won contracts for 64 projects in Kuwait, covering such sectors as oil field services and exploration, infrastructure, and telecommunications, with a total value of US$13.7 billion. New contracts reached US$3.01 billion in the oil-drilling sector, becoming landmark projects in China–Kuwait cooperation. Kuwait has so far bought Chinese-made rig equipment worth more than US$635 million. The Sinopec International Petroleum Service Corp (SIPSC) owns 53 drilling rigs, taking up more than 45 percent of the Kuwait market (Global Times, 2017).
In July 2018, the Chinese oil services and equipment company Kerui Petroleum won US$100 million worth of contracts for two ultra-deep well drilling rigs from Kuwait’s action real estate company (AREC). The contract follows another ultra-deep well drilling rig contract valued at US$50 million, from Kuwait National Drilling Company, which concluded earlier this year (Pipeline Oil and Gas News, 2018). In October 2018, Kuwait signed an MoU with Chinese NOC Sinopec to build a new refinery in south China in partnership with Chinese NOC Sinopec (Alsharif, 2018).
In July 2018, Kuwait Petroleum Corporation (KPC) signed a cooperation agreement with China’s ShanDong Refining and Chemical Group, one of the country’s leading oil industry bases, to market the Kuwaiti crude oil. The deal aims to expand joint investment platforms in the oil and logistics industries (Albawaba, 2018). In November 2018, PetroChina, Sinopec, and China’s Sinochem Group separately signed 2019 crude oil supply deals with Kuwait, with volumes unchanged since then (Reuters, 2018a, 2018b).
Trade and Investments
PRC’s strategic partnership with Kuwait aims to mitigate the barriers to free trade, investment, industrial cooperation, and technical and engineering services to facilitate the integration of KV2035 within the BRI framework. Both countries should take a series of measures, such as expanding free-trade zones, improving trade structures, seeking new potential areas for trade and improving the trade balance, and devising new initiatives to promote conventional forms of trade.
Although Beijing’s rapidly increasing energy demand, especially for petroleum and other liquid fuels, has made Kuwait an important business partner, the cooperation goes well beyond oil and gas. Chinese companies are also investing in building infrastructure and construction projects under the BRI framework, which becomes a central theme of bilateral relations and could create new partnerships in promising sectors between the Chinese companies and Kuwait (The Economist Intelligence Unit, 2017).
Since the establishment of diplomatic relations between the two countries, bilateral economic and trade exchanges have become more frequent, and bilateral trade volume has increased; today, China is one of Kuwait’s key trade partners (KUNA, 2017). According to China Customs Statistics, China’s trade volume with Kuwait decreased from US$18.3 billion in 2018 to about US$17.2 billion in 2019 (The Hong Kong Trade Development Council, 2020). More than 40 Chinese companies operating in Kuwait have about 80 projects in progress in oil, infrastructure, communications, and banking (Xinhua, 2018a).
According to the China Global Investment Tracker, China’s investments and construction in Kuwait reached US$7.9 billion from 2013 to 2019. Most of the Chinese investments are in the sectors of energy (US$3.8 billion), transport (US$1.3 billion), and real estate (US$1 billion) (China Global Investment Tracker, 2019). In July 2018, a Chinese firm signed a US$709 million contract with the Kuwaiti government to build infrastructure and roads for a new 18,000-unit housing project in South Al-Matlaa, located west of the Kuwait City. Chinese technology and smartphone giant Huawei would execute the second phase of a fiber optics project after signing a US$72 million contract (Xinhua, 2018). Since the Kuwaiti government needs foreign investment to diversify its economy, it has urged Chinese companies to increase their investments (Xinhua, 2018).
The high-level contacts and bilateral visits reflect the state of economic relations between the two countries, and during these visits, several bilateral economic, trade, oil, and gas agreements were signed to boost bilateral trade and mutual investment. For instance, during the state visit of the Kuwaiti ruler to Beijing, several agreements and MoUs were signed, aimed at boosting bilateral ties (Middle East Confidential, 2018). Although it is unclear how many of these agreements/MoUs represent entirely new projects and how many mark incremental progress of deals struck over the past 2 years, one thing is clear: the test of these agreements/MoUs would be in their implementation and the promotion of follow-up transactions.
People-to-people Bonds
According to China’s strategic partnership with Kuwait, enabling the people of the two countries to bond along the Silk Road is vital to integrating the KV2035 within the BRI framework. This bond can be forged by promoting extensive cultural and academic exchanges to win public support for deepening bilateral and multilateral cooperation, as well as providing scholarships, holding cultural years, increasing cooperation in science and technology, and establishing joint laboratory or research centers and international technology transfer centers.
In recent years, tourism and cultural cooperation have become another important aspect of the China–Kuwait strategic partnership, and both nations have outlined their intention to expand the collaboration. As Chinese Ambassador to Kuwait Li Minggang said: “People-to-people exchanges is a key factor to consolidate the foundation of relations between the two countries and the two governments have been actively engaging in visa issues to facilitate personnel exchanges”(Xinhua, 2019).
China’s links with the GCC states have strengthened due to the introduction of additional and direct airline routes, the Chinese economy’s steady growth, and Chinese tourists’ increasing disposable income. According to data from Colliers International published ahead of Arabian Travel Market (ATM) 2019, the number of Chinese tourists traveling to the GCC is expected to increase by 81 percent from 1.6 million in 2018 to 2.9 million in 2022, and Kuwait would steadily increase the Chinese visitor arrivals with a growth of 7 percent. The GCC countries currently attract just 1 percent of China’s total outbound market, but positive trends are expected over the coming years, to as many as 400 million tourists (Bridge, 2018b).
Cultural cooperation has become another important aspect of the China–Kuwait strategic partnership, and both nations have outlined their intention to expand the collaboration in this area in the coming years. In March 2018, Kuwait opened a Chinese center in Kuwait City, to promote cultural exchanges and deepen economic and trade cooperation. According to the director of the Chinese Center, Yao Jian, tea art, traditional Chinese medicine, and Chinese food are famous in Kuwait. The hope that more Kuwaitis and people from neighboring countries would enjoy the rich and colorful Chinese culture in this center (Xinhua, 2018).
Conclusion
Economic relations between Gulf countries and China have rapidly expanded, and the region’s strategic importance to Beijing’s infrastructure and energy-driven Belt and Road vision is evident. However, the Gulf region is not classified as a critical corridor in the new Silk Road architecture. This suggests China’s determination to avoid being sucked into the region’s multiple conflicts, with Beijing preferring to take a non-intervention position, remain neutral in most inter-regional disputes, and take advantage of the strategic and economic opportunities available. China is also switching its focus on energy in the region, which accounts for half of its imported oil, to more investments in trade and infrastructure construction projects that have risen substantially.
In the last five decades, Kuwait and China have developed dense and multifaceted relations. Trade and economic relations have been foundational in developing these ties, with energy playing an important role. Increasingly, commercial relations are becoming more diverse and formalized, with foreign direct investment, and infrastructure and construction projects featuring heavily. Since China announced the BRI in 2013, Kuwait has regarded it as an engine to enhance bilateral cooperation.
The establishment of synergies between the BRI and the KV2035 show that the strategic partnership between Kuwait and China is contributing to the development of trade relations that have become diversified beyond the energy industry, and the two sides have economic interests that are increasingly complementary. Policy coordination, connectivity, trade and investments, energy cooperation, and people-to-people bonds are all areas where commercial relations have strengthened in recent years. The BRI complements KV2035and could help the Kuwait government to achieve its national development strategy.
Nevertheless, despite these potential economic opportunities, there are quite a few internal obstacles and external challenges. First, regional turbulence and political rivalry among major powers add to the challenges and uncertainties of cooperation between China and Kuwait. Second, some economic risks and barriers include susceptibility to the USA and European influence, the high barrier of market access, bureaucratic corruption and royal monopoly, fierce competition with other countries, bottlenecks in project funding, and local labor and commercial disputes.
Although state-owned companies remain the dominant investors in BRI projects, mainly in energy and transport, the Chinese private sector is still less enthusiastic about investing in its vast trade and infrastructure strategy. Beijing is also becoming warier of throwing money at the new Silk Road project as it comes under pressure from the trade war; the decline in its foreign exchange reserves has further complicated its efforts to finance the BRI (Zhou, 2018). Finally, as the new Silk Road vision proceeds, there is a possibility that extremist groups and criminals might hijack or attack Chinese citizens and assets, as has happened elsewhere in the region (Weilie, 2011).
Footnotes
Declaration of Conflicting Interests
The author declared no potential conflicts of interest with respect to the research, authorship and/or publication of this article.
Funding
The author received no financial support for the research, authorship and/or publication of this article.