40 The European Financial Review February - March 2014 China has spread its ties to the Middle East in ways that go beyond oil. Below, Abbās Varij Kāzemi and Xiangming Chen argue that the Middle East is an important region to watch to gain a sense of China’s next moves globally. A stroll through the stores in Tehran reveals the omnipresence of China-made consumer goods. State-owned China Railway Construction Corporation completed the Mecca monorail project in Saudi Arabia in November 2010, just in time to accommo- date the 2.8 million people who arrived for Hajj. The agree- ment between China and Iran to build a railway line from Tehran to the Iraqi border is part of an overall plan to link the Middle East to China through Central Asia 1 (see Map 1). Despite China’s great need to import a lot of oil from the Middle East, the latter is not generally seen as a major and familiar territory as other regions for China’s growing global presence and influence. That China has spread its ties to the Middle East beyond oil reinforces two impor- tant issues. One is that China’s global rise and power must be understood regionally and locally. The other is to see China’s distinctive footprints in the Middle East in com- parison to other regions and countries. 2 Oil is where we start. Relative to other aspects of the China-Middle East relationship, oil is more critical. This is also true of China’s strong efforts to engage with regions such as Central Asia to buy enough oil at reasonable prices. Fuelled by its sustained rapid economic growth over the past three decades, China has become the world’s largest energy consumer in less than 20 years and accounts for almost 20% of the world’s total energy consumption today. Its booming economy requires China to import more than half of the oil it needs. China’s crude oil imports rose from 4.8 million barrels per day (bbl/d or pbd) in 2010 to 5.1 million bbl/d in 2011, and to 6 million bbl/d in May 2012. Looking forward, China’s energy demand is expected to expand 75% by 2040 and double the consumption of United States (see Figure 1 on next page). According to the US Energy Information Administration (EIA), China may import about 75% of the crude oil it will consume by 2035 (Fazilov and Chen, p.38). 2 Oil Dependence Despite China’s attempt to look for alternative energy sources in different parts of the world such as Central Asia, its dependence on Middle Eastern oil has risen over time. The Middle East is currently the largest exporter of crude oil to China (see Figure 2 on next page ). The share of oil imported by China from the Middle East was 48% in 1990, 49% in 2005, and 51% in 2011. It is expected that China’s crude oil imports from the Middle East will reach 70% by 2020 and continue to grow until 2035, according to the International Energy Agency. Saudi Arabia is China’s largest energy supplier with about one million barrels per day, accounting for 20% of China’s crude oil imports. Not far behind Angola is another important Middle Eastern country, Iran, which contributes to about 10% of China’s overall oil imports. However, it is worth pointing out that given China’s somewhat reluctant support for UN sanc- tions against Iran (more on this later), its oil exports to China declined by 74% from 2009 to 2010, down from a peak of 16% of China’s oil imports in 2009, 3 when Iran was the second largest external source of oil for China. While China’s heavy dependence on Middle Eastern oil is an established fact, less is known about China’s early efforts to establish broad energy ties with the Middle East. Back in 1983, before the Chinese economy really took off, the overseas construction arm of China National Petroleum Corporation (CNPC) moved into the Kuwaiti market and later won an oil storage reconstruction project in 1995. Beijing also signed the Strategic Oil Cooperation agree- ment with Saudi Arabia in 1999, which laid the foundation Global Economy China has become the world’s largest energy consumer in less than 20 years; China’s oil con- sumption growth accounted for one-third of the world’s oil consumption growth in 2013. China and the Middle East: More han Oil By Abbās Varij Kāzemi & Xiangming Chen Special Focus