China and the Middle East : the quest for influence 9780761993612, 0761993614, 9788170368472, 8170368472

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GRAD DS

7 7 9 .2 7 . C48721 1999

HINA AND THE MIDDLE EAST rhe Quest for Influence

« ft* 0275fe46

Cods I-E-9937977

15 UNIVERSITY OF MICHIGAN

Edited by

P R . KliJMA R À S W A M Y

China and the Middle East

China and the Middle East The Quest for Influence

Edited by

P R Kumaraswamy

Sage Publications New Delhi/Thousand Oaks/London

C'iZ 721

im

Copyright © Centre for the Study of Developing Society, New Delhi, 1999. All Chapters except Chapter 7 © Barry Rubin, 1999. All rights reserved. No part of this book may be reproduced or utilised in any form or by any means, electronic or mechanical including photocopying, recording or by any information storage or retrieval system, without permission in writing from the publisher.

Firstpublished in 1999 by Sage Publications India Pvt Ltd M -32 Market, Greater Kailash-I New Delhi-110 048 Sage Publications Inc 2455 Teller Road Thousand Oaks, California 91320

Publications Ltd 6 Bonhill Street London EC2A 4PU

Published by Tejeshwar Singh for Sage Publications India Pvt Ltd, typeset by Siva Math Setters, Chennai and printed at Print Perfect, Mayapuri-II, Delhi.

Library of Congress Cataloging-in-Publication Data China and the Middle East: the quest for influencc/edited by P R Kumaraswamy. p. cm. (cl.) Includes bibliographical references and index. 1. China— Relations— Middle East. 2. Middle East— Relations— China. 3. China— Foreign relations— 1976-1. Kumaraswamy, P R DS779.27.C4872 303.48'251056— dc21 199999-37977 IS B N : 0-7619-9361-4 (US-HB) 81-7036-847-2 (India-HB) Sage Production Team: Payal Mehta and Santosh Rawat

UC

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2 \- n l

Dedicated to the memory of my father-in-law Professor Lin Shi Zhong

Contents

List o fAbbreviations 1.

8

Introduction P R Kumaraswamy

11

2.

China and Israel: Normalisation and After P R Kumaraswamy

20

3.

Chinese-Palestinian Relations

4.

William W Haddad and Mary Foeldi-Hardy

42

China and Iraq: A Stake in Stability John Calabrese

52

5. Sino-Turkish Relations: Preparing for the Next Century 6. 7.

Mehmet Ogutcu

68

Sino—Pakistan Relations and the Middle East Samina Yasmeen

91

Chinas Middle East Strategy Barry Rubin

108

Chinese Arms Exports to Iran Bates Gill

117

Chinese Policies on Arms Control and Proliferation in the Middle East Gerald Steinberg

142

10.

China and Proliferation: Implications for India Ashok Kapur

162

11.

Chinas Economic Relations with the Middle East: New Dimensions Yitzhak Shichor

179

8. —“ " . 9.

12. The Middle Kingdom Meets the Middle East: Challenges and Opportunities David Dewitt

200

Select Bibliography About the Editor and Contributors

215 220

Index.

223

List of Abbreviations

ABM ACDA ACRS APEC ASEAN bcf/y BWC CBMs CBW CD CEN TO CGES C ITIC CITS CNOC CNOOC C N PC CO CO M C TBT CW CWC EMIS EPCI EU GCC IAEA LAI ICBs IFTRI IMI INF IPP IRBM KFAED KPC M FN MIRV

Anti-Ballistic Missile Treaty Arms Control and Disarmament Agency (US) Arms Control and Regional Security (Middle East peace process) Asia-Pacific Economic Cooperation Association of South East Asian Nations billion cubic feet/year Biological Weapons Convention Confidence Building Measures Chemical and Biological Weapons Conference on Disarmament (Geneva) Central Treaty Organisation Centre for Global Energy Studies, London China International Trade and Investment Corporation China International Tourism Services China National Oil Company China National Offshore Oil Corporation China National Petroleum Corporation Co-ordination Committee (on Multilateral Export Control) Comprehensive Test Ban Treaty Chemical Weapon Chemical Weapons Convention Electromagnetic Isotope Separation Enhanced Proliferation Control Initiative (US) European Union Gulf Cooperation Council International Atomic Energy Agency Israel Aircraft Industries International Competitive Biddings Israel Foreign Trade Risk Insurance Corporation Israel Military Industries Intermediate-range Nuclear Force Independent Power Producer Intermediate Range Ballistic Missiles Kuwait Fund for Arab Economic Development Kuwait Petroleum Corporation Most Favoured Nation Multiple Independendy Targetable Re-entry Vehicle

List o f Abbreviations M OFTEC MOU M TCR NAFTA NATO NBC NIO C NO CIN CO NO RINCO NPT NSG NWFP OAPEC OIC ONI OPEC PIA PLO PNC PTBT SALT SEATO SINOPEC SIPRI SLBM SPNI SSBN SSM START TAW UF6 UNCTAD UNSCOM WMD WTO WTO

Ministry of Foreign Trade (China) Memorandum of Understanding Missile Technology Control Regime North American Free Trade Agreement North Atlantic Treaty Organisation Nuclear, Biological and Chemical (weapons) National Iranian Oil Company North Chemical Industries Corporation (China) North Industries Corporation (China) Nuclear Non-Proliferation Treaty Nuclear Suppliers Group North West Frontier Province (Pakistan) Organisation of Arab Petroleum Exporting Countries Organisation of Islamic Countries Office o f Naval Intelligence (US) Organisation o f Petroleum Exporting Countries Peoples Liberation Army Palestine Liberation Organisation Palestine Nation Council Partial Test Ban Treaty Strategic Arms Limitation Talks South East Asia Treaty Organisation China Petrochemical Corporation Stockholm International Peace Research Institute Submarine Launched Ballistic Missile Society for the Protect o f Nature in Israel Nuclear-powered ballistic missile submarine Surface-to-surface Missile Strategic Arms Reduction Talks/Treaty Tactical Atomic Weapons Uranium Hexaflouride United Nations Conference on Trade and Development United Nations Special Commission on Iraq Weapons of Mass Destruction Warsaw Treaty Organisation World Trade Organisation

Introduction P R Kumaraswamy

To the question, ‘What shall we do if a large and well organised army marches against us?’ the answer is: seize whatever the enemy prizes most and he will do what you wish him to do.’ Sun Zi in The Art o f War, fifth century BC l

For long the Middle East was not an important strategic arena for the People s Republic of China. Distance and limited historical ties were not the only factors that con­ tributed to thé lack of Chinese interest and involvement. Its pressing problems of national reorganisation were compounded by frequent bouts of internal violence and social upheavals. Some o f its immediate neighbours were confronted with tensions, civil war and volatility. The crises in the Korean peninsula and the protracted and violent Vietnam War brought the great powers into its immediate vicinity. For some time China managed to play one super power against another but since the early sixties it was trying to fend off both the super powers from undermining its interests. Against this background, the Middle East was a distant and far off place for China. The Middle East was also not favourably disposed towards Beijing. The vast seg­ ment of the Islamic world viewed communism with deep suspicion and distrust. The atheistic ideology was seen as foreign and non-Islamic. Even the emergence of socialist regimes did not improve Chinas fortunes in the Middle East. Although they did not tolerate the growth of communism in their own countries, these regimes perceived geographically closer, relatively stronger and financially more generous Moscow as their ally. Its identification with radical regimes and elements in the region and its occasional attempts to interfere in domestic and inter-Arab affairs only made matters worse for Beijing.2 For long therefore, Chinas primary interest in the Middle East revolved around its desire for political legitimacy. Like other parts of the world, Beijing wanted the countries o f the region to recognise it as a legitimate player in the international arena. It wanted them to accept the PRC as the real China and to withdraw their recognition and terminate relations with Taiwan. It also sought their support to secure 1 Sun Zi, The Art o f War and Sun Bin, The Art o f War ( trs Lin Wusun) (Beijing: Peoples China Publishing House, 1995), p. 55. 2 For a detailed discussion o f the Sino-Arab relations see, Hashim S.H. Behbehani, Chinas Foreign Policy in the Arab World, 1955-75: Three Case Studies (London: Kegan Paul, 1981).

12

P R Kumaraswamy

its legitimate place in the United Nations. China sought to achieve this objective by offering political, economic, ideological and even military support to the region. Its prolonged political and ideological support for the Palestinians and Arabs in their conflict with Israel was part o f this strategy. As the first non-Arab country to recognise the Palestine Liberation Organisation (PLO), China was one o f the few countries to provide military training and supplies to the Palestinian guerrillas who were fighting Israel. It sought to entice and influence countries such as Yemen through economic aid and assistance. If ideology brought Beijing closer to Baghdad ruled by the Baathists, political realism compelled China to ignore the proximity o f the Shah o f Iran with the west and seek close tics with Tehran. It won over countries such as Pakistan, partly by its ability and willingness to offer military hardware at nominal or friendly prices. In spite of its ingenious and sustained endeavours, it took Beijing more than four decades to establish its legitimacy in the Middle East and establish formal diplomatic relations with all the countries o f this important region. Even its eventual admission into the UN in October 1971 did not convince many oil rich countries to accept the PRC. Saudi Arabia, for instance, waited until July 1990 to terminate its official ties with Taipei. However, its admission to the UN and permanent membership o f the Security Council significandy altered its interests in the region. Recognition by the remain­ ing Middle Eastern countries became less important. The termination of relations between Taiwan and a number of countries of the region became an important but manageable agenda. It was only a matter of time before these countries accepted and recognised the PRC’s position in the international arena. Even though this process took almost two decades, China began to pursue other political and economic inter­ ests in the region. Its Middle East policy became an integral part of its larger desire for a regional and global rule and predominance. A host of domestic, regional and international developments and realignments have been conducive for Chinas quest for influence. China began to evolve a complex Middle East policy whereby its relations with individual countries o f the region are an integral part of its great power aspirations. While it enjoys considerable economic, political or military advantages in a number of important countries in the region, it also has tensions and differences with many of these countries. It uses the former to consolidate its ties with one country and the latter to strengthen its position vis-a-vis a third party. It avoided establishing bilateral relations with the countries o f the Middle East hostage to any particular power or issue. In short, China has effectively integrated its separate holds and strains with its partners to weave a complex Middle East strategy. Chinas belated decision to recognise and establish diplomatic relations with Israel amplifies the complexities o f its Middle East policy. After some initial interests in the early fifties, Beijing effectively played the ‘Israel card* to strengthen and consolidate its ties with the Arabs. Wh^n it decided to reverse its policy and move closer to Israel in 1992, none o f the important players in the region including the Palestinian

Introduction

13

leader Yasser Arafat registered their disapproval. Even the Islamic Republic o f Iran which otherwise criticises such moves did not respond.3 Likewise, Chinas prolonged military contacts with Israel though reported by the Arab media did not evoke any criticism or condemnation from countries hostile to Israel. If past ideological and military support silenced the Palestinians, countries such as Iran and Pakistan which otherwise criticised Israel, benefited from generous Chinese arms supplies in the eighties. Regular leaks and speculations in the Chinese, Israeli and western media further prepared the ground for normalisation. By timing its decision with the inauguration o f multilateral negotiations between Israel and the Arab countries in Moscow in late January 1992, China secured a place in the Middle East peace process. Chinas ability to participate and influence the peace process has become conditional upon its close ties with Israel. Furthermore, China sees normalisation o f relations with Israel as an important component of consolidating Beijing’s ties with Washington. Both Chinese and Israeli commentators have suggested that Chinas pro-Jewish position would strengthen the pro-Chinese forces in the US. Chinas military cooperation with Israel has significandy enhanced its position in the Middle East. Israeli help and cooperation arc contributing to its growing military capabilities and potentials. Furthermore, in the post-Cold War period Chinas ability to pursue arms exports depends primarily upon its ability to supply technologically advanced weapons and systems than in the past.* At another level, Chinas newly found relations with Israel have not inhibited it from pursuing its traditional friends and allies in the region. Its desire to be involved in the Middle East peace process has prevented it from reverting to harsh criticisms o f Israel. It has been more guarded in expressing its disapproval o f some of the Israeli actions which it perceives as being detrimental to the on-going peace process. It has not abandoned its support for the Palestinian rights and their aspirations for statehood and high profiled visits by Israeli leaders are preceded or followed by similar visits by senior Palestinian officials including Arafat. Notwithstanding the conflicts between Israel and the Palestinians, China managed to evolve a policy that enjoys the understanding and support o f both sides. The non-ideological political pragmatism ushered in following the death of Mao significantly improved Chinas fortunes and interests in the region. China not only profited from the eight-year Iran-Iraq War but was also partly responsible for the prolongation of the conflict. Both Iran and Iraq were abandoned by their erstwhile patrons. If the US was weary of the pronouncedly anti-American Islamic revolution ^ However, a few days later when India took a similar decision, some o f the regional players expressed their displeasure if not disapproval. Responding to their stand the then Foreign Secretary J.N . Dixit went on to question Arab support for India. The Week (Kottayam), 9 February 1992, p. 37. * Nazir Kamal, ‘Chinas Arms Export Policy and Response to Multilateral Restraints', Contemporary Southeast Asia, Vol. 14, No.. 2, September 15)92, p. 124; Richard A Bitzinger, Arms to Go: Chinese Arms Sales to the Third World’, International Security, Vol. 17, No. 2, Fall 1992, p. 95. There are indications that China has been indirectly transferring Israeli technology and expertise to some of its clients in the Middle East.

14

P R Kumaraswamy

in Tehran, the Soviet Union was equally unenthusiastic about strengthening Saddam Husseins quest for the domination o f the Persian Gulf. Since both the countries were dependent upon their respective benefactors for supplies, arms embargo meant an acute shortage o f military supplies. This embargo coincided with the Chinese desire to commercialise its arms exports and the oil rich Persian Gulf region became its important customer. Both Iran and Iraq looked toward China as a possible solution and very soon Chinese inventories were in action on either side of the Shatt al-Arab waterway. The war and the need for weapons enabled China not only to consolidate its close ties with Iraq but also to mend its relations with the Islamic republic o f Iran. Like many countries, China was not initially enthusiastic about the Islamic revolution that overthrew the Shah of Iran. Neither the intensity o f the conflict nor the virulent rhetoric influenced Iran or Iraq to cast aspersions on the Chinese intentions let alone reject its military supplies. In spite of large scale death and destruction, both had satisfactory and beneficial ties with Beijing. As Mohan Malik remarked: ‘it was Chinese technical and material assistance which enabled both the combatants, in their protracted war, to fire.. .missiles with extended range and heavy payload.’5 Chinese military sales to the Islamic republic led to unexpected financial as well as diplomatic dividends. When Saudi Arabia became apprehensive of Iran’s growing military power, China found a new customer and sold CSS-2 IRBMs to Riyadh. These missiles were originally designed to carry nuclear warheads and because of western concerns over non-proliferation they were modified to carry conventional warheads. When these missiles were transferred neither China nor Saudi Arabia were signa­ tories to the Nuclear Non-Proliferation Treaty (NPT). The deal estimated between $2.4—3.6 billion was concluded when Saudi Arabia maintained diplomatic relations with Taipei. Even though these missiles were not used during the Operation Desert Storm in 1991, they played an important role in Sino-Saudi normalisation that took place a few months earlier. It may be suggested that the missile deal was primarily a Saudi incentive to dissuade China from supplying offensive weapons to Iran. Pakistan is another major Chinese ally in the region. On occasions China has exploited the political and diplomatic advantages o f Pakistan to further its interest in the Middle East. For instance, the normalisation o f relations between China and the Shah oflran in 1971 was largely facilitated by Pakistani mediation. Pakistan, however, occupies a prime place in Chinas policy towards South Asia and as a counterweight to India. Driven by its political rivalry and the boundary disputes with India, China looked toward Pakistan as its principle ally and partner in South Asia. Islamabad’s adversarial relations with India presented a favourable environment for Sino-Pakistan friendship. * Mohan Malik, ‘Missile Proliferation: Chinas Role’, Current Affairs Bulletin, Vol. 67, No. 3, August 1990, p. 6. ^ For a detailed discussion see, Yitzhak Shichor, East Wind over Arabia: Origins and Implications o fthe Sino-Saudi Missile Deal, China Research Monograph Series no. 35 (Berkeley, CA: University of California, 1989).

Introduction

15

Strategie cooperation in the form of arms supplies emerged an important pillar of this relationship. Since the sixties Pakistan has been a valuable partner in Chinas arms diplomacy and during 1971-90 Pakistan was one of the top three recipients o f Chinese weapons.7 Even though they were less sophisticated than those supplied by the west, most o f the arms were sold to Pakistan at nominal or friendly prices. In the words o f a Pakistani analyst, .. .China was viewed (by Pakistan) not only as a counterpoise to India but also as a much more reliable partner than the West, especially the USA. By 1982, China not only provided Pakistan with about 75 per cent o f its tanks and about 65 per cent o f its aircraft but also substantially assisted Pakistan in the development and strengthening o f military industries including a heavy foundry, a mechanical complex and equipment for an overhaul factory at Taxila, Pakistani Ordinance Factories at Wah and (Pakistan Aeronautical Complex) at Kamra.8 In other words, China compensated the technological backwardness of its arms with reliability and price. Since the eighties China has emerged the most important partner in Pakistani strategic aspirations vis-à-vis India and the recent Pakistani advancements including the nuclear and missile tests in 1998 were the direct result o f this strategic partnership.9 In endorsing Pakistani position concerning a regional arms control arrangement, China endeavours to contain India's leadership aspirations. International diplomacy is another arena that reflects the new Chinese approach towards the Middle East. Due to its prolonged exclusion and isolation, Beijing has been weary o f inter national fora and multilateral mediation. This scepticism was more apparent in its policy towards the UN. Angered and disappointed by its exclusion, China portrayed the world body as a ‘tool o f imperialism and domination. Following its admission and especially after the death of Mao, China opted for a friendlier approach towards the UN and viewed it as an important platform for championing the cause of other developing countries. As a result since the mid-eighties, China began to perceive itself an important international player in seeking the resolution o f the vexed Arab-Israeli conflict.10 Some of the initial contacts with Israel prior to normalisation took place at the UN headquarters. China used its permanent membership in the Security Council to explain and justify political and diplomatic contacts with a country that it refused to recognise. Nevertheless, the real test for Chinese UN diplomacy came in August 1990 when Iraq invaded Kuwait. Primarily the invasion severely undermined Chinese interest in the Persian G ulf and in the larger Middle East. Not only had Iraq run over a 7 Michael Brzoska and Thomas Ohlson, Arms Transfer to the Third World 1971-1985 (Oxford: Oxford University Press, 1987), p. 84; SIPRI Yearbook, 1991, pp. 208-11. 8 Pervaiz Iqbal Cheema, Arms Procurement in Pakistan: Balancing the Needs for Quality, Self-reliance and Diversity o f Supply’, in Eric Arnett (Ed.), M ilitary Capacity and the Risk o f War: China, India, Pakistan and Iran (Oxford: Oxford University Press, 1997), p. 158. 9 Frank J. Gaffiiey, ‘China Arms the Rouges’, Middle East Quarterly, Vol. 4, No. 3, September 1997, pp. 35-36. 10 Yitzhak Shichor, ‘China and the Role of the United Nations in the Middle East: Revised Policy', Asian Survey, VoL 31, No. 3, March 1991, pp. 255-69.

16

P R Kumaraswamy

neighbouring Arab country, but it had also formally annexed Kuwait. Saudi Arabia that had established diplomatic relations with China only a few weeks earlier felt threatened by Saddam Husseins invasion of Kuwait. Before long, the Persian Gulf witnessed the largest military build-up since the end o f the Second World War. China shared the international community’s desire to restore the status quo ante in Kuwait. At the same time, China was not eager to abandon Iraq. Not only was Iraq an important ally in the Middle East, but it also presented a huge economic opportunity for China. If the Iran—Iraq ceasefire reduced Chinese arms exports to the region, the post-war reconstruction presented n£w opportunities for Chinese exports and labour contracts. The public opinion in the Arab and Islamic world was more sympathetic towards the Iraqi leader and an unequivocal endorsement o f the American plans looked ominous for Chinese interests in the region. China opted to abstain during the crucial UN Security Council vote authorising the use o f military action to expel the Iraqi forces from Kuwait. While a veto would have placed it at odds with the prevailing international position, voting in favour o f Resolution 678 would have alienated it from Iraq. In other words, its abstention sought to endorse the liberation of Kuwait without unduly damaging its ties with Baghdad. China has continued this dual strategy since the end of the Operation Desert Storm. Its new attitude towards non-proliferation compels it to demand complete Iraqi com­ pliance with the demands o f the UN weapons inspectors and the dismantling of its non-conventional weapons, capabilities and infrastructure. At the same time, China has been reluctant about an indefinite inspection regime that undermines Iraqs posi­ tion and stability. Without appearing to endorse Iraq’s aspirations for weapons of mass destruction, China has been underscoring the human dimension of the prob­ lem. Not eager to endorse continued US domination o f the Gulf, China seeks an Iraqi compliance accompanied by a time-bound withdrawal o f international sanc­ tions against Baghdad. Even though this dual policy does not please everyone in the region, it has enabled China to minimise the damages to its interests in the region. By adopting a friendlier posture towards Baghdad, Beijing has also ensured its future interest in Iraq following the eventual lifting of the UN economic sanctions. While other Third World countries including India have also adopted a similar position, they do not have the veto power in the UN Security Council to determine the fate of the sanctions. Arms trade is another area where Chinas Middle East policy attracts widespread attention and even concern. For long, Chinese arms transfers were largely gifts’ rather than ‘sales’. The prime recipients of Chinese arms, therefore, were predominantly national liberation movements, ideological states or countries such as like North Korea and Pakistan where it sought to further its strategic interests. Since the early eighties, however, Chinese arms transfer policies have been governed more by economic rather than political considerations. In spite of this shift, China is not a major player in the international arms bazaar and compared to other leading exporters, its share in the international arms trade is not substantial. Even at the height o f the Iran-Iraq War, its share was less than 10 per cent o f the global arms trade.

Introduction

17

At regular intervals, China has faced difficulties over its growing military-related cooperation with a number o f Middle Eastern countries. Due to its military ties with China, Israel has often come into conflict with the US and in recent years Israel has been accused of illegal and unauthorised transfer of American technology to China. Likewise, its suspected collaboration in the Iranian nuclear and missile programmes places China in conflict with the west. Although this involvement is believed to marginal compared to Russia's, Israel and Jewish groups have been weary of Chinese intentions and have regularly raised the issue during high level visits and meetings. However, the Middle East policy of China feces a far more serious challenge from its newly found endorsement o f the non-proliferation regime. Very often its arms export policy has come into conflict with its declarations and commitments to non­ proliferation. Since the early nineties China has joined or adhered to a number of non-proliferation arrangements and regimes including the CTBT, the CWC, the M TCR and the NPT. This is a complete reversal o f its earlier position concern­ ing nuclear and missile proliferation. During its prolonged diplomatic isolation, China criticised non-proliferation and actively sought to promote the proliferation of weapons of mass destruction and decried the NPT as ‘monstrous fraud’ perpet­ uated by the imperial powers.11 It sought to promote its interest by undermining such arrangements which were conceived and promoted by the west and actively par­ ticipated in the non-conventional programmes of its allies. Because o f its help and assistance, countries such as North Korea have emerged as second-tier exporters o f non-conventional weapons and technology. Having secured its legitimate place in the international arena, China sought to present itself a matured and responsible power and abandoned its erstwhile policies. Non-proliferation became a cornerstone of its foreign policy and its quest for global peace and stability. As a result o f its past policies and relations, the Middle East has become the testing ground for China’s commitments to non-proliferation. At one time or another, it played a role in the non-proliferation ambitions of countries such as Algeria, Egypt, Iran, Iraq, Libya, Saudi Arabia, Pakistan and Syria.12 While conventional arms sales earned substantial foreign exchange for China, the sale of non-conventional weapons and technology offered significant political advantages.13 Any desire on the part of China to adhere to its commitment to the non-proliferation regime wcfuld significantly 11 For a detailed discussion see, D. Shyam Baku, Nuclear Non-Proliferation: Towards a Universal NPT Regime (New Delhi: Konark, 1992), pp. 119-31. 12 Malik, op. cit.y pp. 4-11; Gaffney, op. cit., pp. 33-39; Shirley A. Kan, Chinese Missile and Nuclear Proliferation: Issuesfor Congress, CRS Issue Brief(Washington, D.C., 5 May 1992); Timothy V. McCarthy, A Chronology o f PRC Missile Trade and Developments (Monterey, CA: MIIS, 1992); Hua Di, 'Chinas Case: Ballistic Missile Proliferation, in William C. Potter and Harlan W. Jencks (Eds), The InternationalMissile Bazaar: The New Suppliers' Network (Boulder, CO: Westview, 1994), pp. 163-60; and Martin Navias, Ballistic Missile Proliferation in the Third World Adelphi Papers 252 (London: International Institute for Strategic Studies, 1990). The author is grateful to Deborah Ozga for her valuable help in obtaining some of these materials. For instance, during 1990-94, China was the sixth largest arms exporter in the world and sold arms worth nearly $6 billion. S1PRI Yearbook, ¡995 (London: Oxford University Press, 1995), p. 493.

18

P R Kumaraswamy

affect its relations with countries in the Middle East with whom it seeks a strategic relationship. The wide ranging autonomy enjoyed by the military establishment in arms exports does raise questions about such assurances made by the Chinese foreign ministry. In other words, in most of the cases, ‘Chinese foreign-ministry officials can speak with authority only for the ministry, not for Poly Technologies or New Era, and not for China as a whole.'14 Its desire and ability to provide such non-conventional technologies by using North Korea as a proxy adds another dimension to the enigma. Similarly, there is a gradual shift in its economic policies towards the Middle East. For long Chinese exports to the oil rich Persian Gulf consisted of consumer goods used by the immigrant labourers. They were cheap, affordable and less complicated. Following the example of South Asia, China looked toward the region as a market for exporting unemployed surplus labourers. In between when it commercialised the process, arms became a major export item. Initially, Chinese companies entered into sub-contracting various ventures in the Gulf and they gradually moved to undertaking major projects in the region. The ongoing major railway project in Iran is an example o f its growing confidence and involvement. The Persian Gulf is gradually becoming a major source o f energy resources for the rapidly growing Chinese economy. Instead of concentrating on importing oil, Beijing is seeking long-term arrangements such as oil pipelines and is participating in oil explorations in the Middle East. The region is also becoming an important source of foreign investments in China. In the case of Israel, foreign participation is not confined to investments alone. Various Israeli companies are establishing joint factories that manufacture a host o f products ranging from consumer goods to fertilisers. Bilateral trade is merely a portion of the emerging economic relations between China and the Middle East. The economic relations between the region and Taiwan offer additional competition and incentive to China to seek alternative approaches. China, however, is not immune to the conflicts and disputes that plague the Middle East and often finds itself caught between important players who are Chinese cus­ tomers. Whether in the Iran-Iraq War, the Kuwait crisis or in the Arab-Israeli conflict, Beijing found itself in the unenviable position of having to choose between friends. Without completely identifying with either of the conflicting parties, China has man­ aged to evolve a delicate policy that satisfies important regional players. Though many would have lilced a more unambiguous policy, China has managed to pursue its vital in terests w ith o u t alien atin g th e region.

China’s international recognition and acceptance as a global power have enabled it to pursue a complex policy towards the Middle East. In a number o f areas, its relations with the Middle Eastern countries reflect its global or non-regional interests. The demise of its erstwhile patron and later rival, the USSR, has brightened the prospects of Beijing eventually emerging as a competing non-western power cenye. ^ John W. Lewis, Hua Di and Xue Litai, ‘ Beijing’s Defence Establishment: Solving the Arms-Export Enigma', International Studies, Vol. 15, No. 4, Spring 1991, pp. 93-94. See also, Robert E. Mullins, ‘The Dynamics of Chinese Missile Proliferation, The Pacific Review, Vol. 8, No. 1, 1995, p. 151.

Introduction

19

The Chinese leadership has been apprehensive o f following the Gorbachev model of political liberalism and the disintegration of the Soviet Union has only strengthened their preference for domestic political stability. The economic crisis facing Southeast Asia further underscores the need for political and economic stability in China. At the same time, even while seeking closer relations with Washington, China is unlikely to accept the US pre-eminence in the Middle East. On a number of issues concerning the region, China is at odds with the US. Its close strategic relations with Iran and Pakistan often become touchstones for its role as a responsible global player. The region invariably becomes the laboratory for testing Chinas commitments to various international and multilateral non-proliferation regimes such as the NPT and the MTCR. Moreover, its ability to continue and sustain rapid economic growth is heavily dependent upon its success in seeking and securing a guaranteed supply of energy resources from the Persian Gulf. Many countries in the Middle East view China as a global, not Asian, power. Its role as a permanent member of the Security Council and a nuclear power, broadened and consolidated the influence of China in the region. As in other parts of the world, these factors alone however, do not explain its status. This has been an arduous and laborious odyssey for Beijing and has been achieved through a careful mix of political support, military supplies and economic incentives. It has been pursuing, especially in the post-Mao era, a complex and delicate policy towards the Middle East without unduly alienating various conflicting parties. In their eagerness to ingratiate themselves to Beijing, the countries of the region have often been willing to side step, if not overlook, unfriendly actions, past or present. In understanding and explaining this complex picture, this volume examines the bilateral relations o f China with a number o f important countries and players in the Middle East. Using bilateral relations as the framework, an array o f international scholars present a detailed analysis o f political, military or economic policies of China towards this region. This work therefore is the result and outcome of their knowledge and expertise. I am grateful to all the contributors for their cooperation and partici­ pation. Recognising the importance o f the subject, they worked amidst extremely tight schedules and commitments. Some even managed to beat their deadlines amidst great personal inconvenience and in so doing, encouraged the endeavour. I remain grateful to Professor Stephen Cohen o f Brookings Institution, Dr Ian Anthony of SIPRI and Professor William Hale o f SOAS for their invaluable assistance in enlisting some of the contributors to this volume. Special mention should be made of the Harry S. Truman Research Institute for the Advancement of Peace at the Hebrew University of Jerusalem for its helpful support. Its library staff, especially its Asia hand Riccardo, extended invaluable assistance and help. All these years I have enjoyed the intellectual company of Professor Irene Eber. Ever since the idea was conceived, Tejeshwar Singh has been a great source o f inspi­ ration. The index o f this volume has been prepared by Payai Mehta. Above all, I am deeply intended to Professor Giri Deshingkar for his trust, confidence and encour­ agement. Any omissions and commissions, however, are mine.

China and Israel: Normalisation and After P R Kumaraswamy

Every Chinese person knows thac Kissinger is a Jew, and we arc very grateful to him for opening the doors (between China and the West). Chinese scholar Xu Xin1 The myth of Israels support and influence in the west in general and the US in particular, was very powerful throughout China. The Chinese view of the relation­ ship of world Jewry with Israel was similar to that of their own kinship with the Overseas Chinese, and they were profoundly impressed by the achievements and status of Jews in western societies. Israels first Ambassador to China, Zev Sufott2

The establishment o fdiplomatic relations between China and Israel in January 1992 remains an important development for both countries. It marked the successful con­ clusion of prolonged Israeli overtures towards China and its aspirations to formalise relations with all the five permanent members of the Security Council. In moving towards the Jewish state, China formally signalled its willingness to play a significant role in the Middle East peace process. Coming at the end of the Cold War, normalisa­ tion reflected the changing international environment as well as the transformation in their mutual perceptions. China was able to pursue this course without jeopardising its close ties with countries hostile to Israel or provoking any adverse response from the region. Besides seeking a greater role in the region, Chinas decision appears to have been also influenced by its desire to consolidate its relations with the US through Israel. Israel, the first Middle Eastern country to recognise the communist revolution, had to wait for over four decades to secure Beijing’s political and diplomatic recognition. The process of normalisation was unusually long, mostly one-sided and largely 1 Quoted in Liat Collins, ‘One in a Billion, TheJerusalem Post Magazine, 5 June 1998, p. 9 2 E. Zev Sufott, A China Diary: Towards the Establishment o fChina-Israel Diplomatic Relations (London: Frank Cass, 1997), p. 81.

China and Israel Normalisation and After

21

unrequited. In many ways, the pre-relations courtship remains the most fascinating aspect o f the Israeli-Chinese diplomatic odyssey. Israels initial hesitation to respond favourably to Chinas overtures proved to be a costly error of judgement. For much of this period the initiatives rested with Israel and China was essentially responding, often negatively, to Israels overtures and initiatives. The establishment of diplomatic relations, therefore, is more o f an Israeli long march to the Middle Kingdom rather than a bilateral drive towards normalisation.

PROLONGED NON-RELATIONS

The troubled Arab-Israeli conflict largely influences any comparisons between China and Israel and it is easier to draw favourable parallels between China and both sides of the Arab-Israeli dispute.3 The diverse perceptions are further complicated by the conflicts within China and its contradictory self-portrayal. The prevailing inter­ national environment and fluctuating political pragmatism compelled China to see Israel in a different light. In the early fifties while seeking diplomatic relations, it perceived the Jewish state as a friendly power and subsequently as it was courting the Arab countries, China decried Israel as an instrument and outpost o f western impe­ rialism and emerged as the most vociferous ideological critic of the latter.4 At times some of Chinas virulent portrayal o f Israel was more radical than those of the Arabs and Palestinians. As it was moving towards normalisation, China skirted erstwhile negative stereotypes and began to discover that ‘Israel has long put a high premium on relations with China; less than 100 days after the birth o f New China, Israel had already announced its recognition o f the state. International recognition and diplomatic relations remained a long, cumbersome and, at times, painfid process for both countries. Because o f political, economic or operation considerations, countries do not establish diplomatic mission with every 3 In the words of Gerald Segal: ‘Both states were new but claimed links to great and ancient civilisations. Both states were also bom with a strong dose o f ideology o f revolution.. . . Both were also strongly nationalistic’. Gerald Segal, ‘Israel and China: Pragmatic Politics*, SAIS Review, Vol. 7, No. 2, SummerFall 1987, p. 196. It is argued that like ‘Palestine and most o f the Arab world, China was invaded, attacked and humiliated by foreigners. The result in both cases was a profound sense of cultural shock. The victors armed with their new technology, came from the industrialised West’. John K. Cooley, ‘China and the Vdm in'nns, Journal o fPalestine Studies, Vol. 1, No. 2, Winter 1972, p. 20. 4 Israeli leaden were portrayed as ‘terrorists’ and parallels were drawn between Israel and anti-black Ku Klux Klan movement in the US and even Nazi practices. Among others, see commentaries in Renmin Ribao, 15 May 1979, in FBIS-CHI\ 23 May 1973, pp. 1/3—4; 31 October 1983, in FBIS-CHI, 1 November 1983, p. 1/1; 10 April 1986, in FBIS-CHI,2 8 April 1986, pp. 1/1-2. One such commentary written after the inauguration o f the Madrid Conference even spoke o f ‘classic Jewish approach (that) embodies the retaliation mentality... “a tooth for a tooth” . .. \ Renmin Ribao (Overseas Edition), 25 November 1991, in FBIS-CHI16 December 1991, pp. 4-5. 5 Hong Kong-based pro-Beijing daily T* KungPao, 23 January 1992, in FBIS-CHI, 23 January 1992, pp. 13-14. See also Beijing Radio Overseas Broadcast, 25 January 1992, in FBIS-CHl, 27 January 1992, pp. 19-20.

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other country. For Israel and China however, the absence o f diplomatic mission un­ derscored their political isolation and non-recognition. For instance, it took China over four decades to establish diplomatic relations with all the Middle Eastern coun­ tries and Israel needed a similar time frame to establish normal diplomatic relations with the major powers o f the world. In both cases strong political considerations inhibited many countries from ac­ cepting them as fellow members of the international community. The circumstances of their creation and their strong ideological foundation generated apprehension, if not fear, in the outside world. Many countries had misgivings about Israels Zionist philosophy and Chinas communist ideology. This apprehension was fuelled by the formation of international political alliances and blocs against these two countries and if the Arab and Islamic countries led the anti-Israel bloc, the US led the anti­ communist alliance.6 For long, both blocs made strenuous efforts to prolong the isolation of Israel and China. As a result both countries had to invest considerable political effort, diplomatic initiatives, economic aid and even military assistance to break their political isolation. Under normal circumstances such an organised isolation should have brought Israel and China close to one another. As will be discussed later, the numerical superiority of the anti-Israel alliance and the strong political pressure from the leader o f the anti-China alliance, prevented China and Israel respectively, from forging a closer relationship. Consequently, persistent Israeli efforts towards normalisation met with a resolute Chinese refusal to reciprocate. Israel, whose formation predates China turning towards communism, sought and obtained recognition from Nationalist China in March 1949. It is generally ignored that Nationalist China was one of the first powers to recognise the Jewish state. This, however, did not inhibit Israel from recognising the political changes in Beijing or responding to Communist Chinas request for diplomatic recognition. On 9 January 1950, just over two months after the communist take over, Israel became the seventh non-socialist power and the first Middle Eastern country to recognise the new politi­ cal situation in Beijing. Due to their shared socialist inclination and the absence o f any disputes, both countries were favourably disposed towards diplomatic relations and preliminary negotiations were held in Moscow. Nonetheless, a host o f develop­ ments, miscalculations and political short-sightedness prevented any progress on the diplomatic front/

6 One cannot, however, ignore the role and efforts o f Taiwan in prolonging Chinas political isolation. For instance, signalling the end o f apartheid, President Nelson Mandela assumed office in 1994, but it took Beijing more than four yean to establish diplomatic relations with the Republic o f South Africa. 7 The following two works by Michael Brecher, The Foreign Policy System o f Israel (London: Oxford University Press, 1972) and Israel the Korean Warand China,: Images, Decisions and Consequences (Jerusalem: Jerusalem Academic Press, 1974) still remain the most comprehensive studies on the background to Israd iChinese relations. See also, Xiaoxing Han, 'Sino-lsraeli Relations’, Journal o f Palestine Studies, Vol. 22, No. 2, Winter 1993, pp. 62-77; Yossi Melman and Ruth Sinai, ‘ Israeli-Chinese Relations and Their Future Prospects’, Asian Survey, Vol. 27, No. 4, April 1989, pp. 395-407; Yitzhak Shichor, ‘Hide and Seek: Sino-lsraeli Relations in Penpective’, IsraelAffairs, Vol. 1, No. 2, Winter 1994, pp. 188-208.

China ahd Israel: Normalisation and After

23

Though both were initially interested in normalisation, under pressure from Washington Israel adopted a cautious attitude towards diplomatic relations. By the time it recognised the political importance of forging diplomatic ties with China, the latter was firmly entrenched in the Arab camp, leading to long and protracted courtship. It may even be argued that active Chinese courting o f the Arabs inten­ sified Israels interests and overtures towards China. It is essential to remember that though it had missed an important opportunity, the omission was by no means fatal* for Israel.® The absence of formal relations and its prolonged efforts to woo China, merely highlighted Israels political isolation. The reasons for Chinese disinclination towards normalisation were similar to the policies of a number o f countries in Asia and elsewhere towards the Jewish state. During the four decades o f ‘non-relations between Israel and China (1950-92), three events— the Korean War, the Bandung Conference of 1955 and the emergence of Deng Xiaoping—are important milestones which signalled definite shifts in policies. First, the sluggishness on the part of Israel to translate its recognition into diplomatic relations received its first setback in June 1950 when the Korean War erupted. Though still professing a policy of non-identification, Israel became sensitive to the views and concerns o f Washington. The intensification of the hostility and the entry of China in October, diminished the prospects of normalisation of Sino-Israeli relations and Israel came under increasing pressure from the US to desist from moving closer to Beijing. As Israel suspended its contacts with China, the latter began to adopt a hostile position towards the Jewish state.9 The termination of hostilities in the Korean peninsula rekindled Israeli interest in normalisation. The establishment of an embassy in Myanmar the previous year gave Israel an interesting and geographically closer venue for diplomatic overtures and its Minister in Rangoon David Hacohen actively pursued relations with China.10 In June 1954 he met Prime Minister Zhou Enlai as the latter was returning from the Geneva conference on Indochina and shortly afterwards, the Chinese Premier dis­ closed that ‘contacts fare] being made with a view to establishing normal relations between China... and Israel’.11 Following January a five-member Israeli delegation left for China on a four-week official visit. Though described as a ‘trade delegation, it included senior officials from Foreign and Commerce Ministries. Upon categori­ cal instructions from the overcautious Prime Minister-cum-Foreign Minister Moshe Sharett, the delegation did not explicidy seek normalisation. When the delegation 9 Jacob Abadi, ‘Piercing the Bamboo Curtain: The Triumph of Israels China Policy’, Mediterranean Quarterly, Vol. 5, No. 3, Summer 1994, p. 62. 9 Yitzhak Shichor, ‘Early Chinese Attitudes towards the Arab-Israeli Conflict’, Asian and African Studies (Haifa), Vol. 15, No. 3, November 1981, pp. 343-61. 10 David Hacohen, 'Behind the Scenes of Negotiations between Israel and China’, New Outlook (Tel Aviv), Vol. 6, No. 9, November-December 1963, pp. 29-44. His superiors in Israel, however, were hesitant and less inclined. 11 Quoted in Yitzhak Shichor, The Middle East in China's Foreign Policy 1949-1977 (Cambridge: Cambridge University Press, 1979), p. 26.

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returned home Sharett was more concerned about a reciprocal visit from China than I^ about normalisation. Sccond, on 28 April 1955, however, Israel swiftly changed its position and expressed its desire to ‘establish full diplomatic relations with... China at the earliest convenient moment. The reason for the sudden Israeli volte-face and its first formal request for diplomatic ties should be traced directly to the Afro-Asian Conference at Bandung that took place a couple of weeks earlier. Though Israels exclusion from Bandung was on the cards for quite some time, it was only after the inauguration of the conference that Israel realised ‘its harmful implications for Sino-Israeli links and offered China diplomatic relations.13 At Bandung, Israel formally lost China to the Arabs and Beijing took full advan­ tage of its historic encounter with the Arab and Islamic countries.14 China endorsed the Bandung declaration that expressed ‘support (to the) Arab people of Palestine and called for the implementation of the UN resolutions on Palestine*. Even though the process of Sino-Arab normalisation was not smooth, China and the Arab countries discovered one another at Bandung and China began to move away from Israel. In striving to end its political isolation and admission into the United Nations, normal­ isation with the Arab world and not Israel, became more important for China. If the attitude of the US was crucial to Israel before Bandung, the views of the Arabs became more significant for China in the post-Bandung period. Days after the conference Egyptian President Gamal Abdul Nasser asked the Arab League to reverse its earlier decision and recognise the Peoples Republic of China.16 During the next two decades, both directly as well as through various western lead­ ers and diplomats, Israel unsuccessfully sought to modify China’s position but China became increasingly involved in the Arab and Islamic countries of the Middle East. In spite of Chinas willingness to adopt friendlier postures towards the Arab countries, the process of Sino-Arab normalisation was not swift as the Chinese would have liked. General apprehensions over communism and the Chinese support for radical groups ,2 On 28 March 1955 Daniel Levin, head of the Asia Department and a member of the ‘trade’ delegation to China, informed David Hacohen: ‘The Foreign Minister, before bringing the matter o f diplomatic relations to a decision, emphasises that the Chinese delegation which was invited by us must first come to Israel’. Quoted in Michael Brecher, Decisions in Israels Foreign Policy (London: Oxford University Press, 1974), p. 150.

13 Shichor, ‘Hide and Seek’, op. cit.> p. 190. For a background discussion o f Israel’s exclusion see, Michael Brecher, The New States o fAsia: A PoliticalAnalysis (London: Oxford University Press, 1963), pp. 133-34 and 210-11. The Bandung Conference underscored Israels political isolation among the Afro-Asian community. It recognised, legitimised and even institutionalised Arab veto over Israeli participation in all further regional gatherings. This exclusion o f the Jewish state proved to be a carte blanche for anti-Israeli pronouncements and resolutions in future gatherings of the developing countries. 15 For the complete text o f the final communique sec, Asian Recorder (New Delhi), 23-29 April 1956, pp. 191-92. 16 Joseph E. Khalili, Communist Chinas Interaction with theArab Nationalists since the Bandung Conference (New York: Exposition Press, 1970), p. 98.

25

China and Israel Normalisation and After Table 1 Diplomatic Relations between China and the Middle East

Country Algeria Bahrain Djibouti Egypt Iran Iraq Israel Jordan Kuwait Lebanon Libya Mauritania Morocco Oman PLO Qatar Saudi Arabia Somalia Sudan Syria Tunisia Turkey United Arab Emirates Yemen, Arab Republic Yemen, Peoples Democratic Republic

Establishment o f Ties July 1962 April 1989 January 1979 May 1956 August 1971 August 1958 January 1992 April 1977 March 1971 November 1971 August 1978 July 1965 November 1958 May 1978 January 1965 July 1988 July 1990 December 1960 December 1958 August 1956 October 1971 August 1971 November 1984 September 1956 January 1968

Source: Directory o f Chinese Officials and Organisations: A Reference Aid (Springfield, VA: Directorate of Intelligence), July 1989 and May 1991.

in the region generated fears and suspicions in the Middle East, especially among the pro-western monarchies. Furthermore, Chinese tendency to interfere in inter-Arab and intra-Arab differences, the Sino-Soviet rivalry and frequent occurrence of domes­ tic crises and turmoil in China gready undermined the process o f normalisation.17 While as many as seven countries established diplomatic relations with Beijing within a couple o f years after the Bandung Conference, five more moved closer to China following its admission into the UN in 1971. It was only after Maos death that the remaining Arab countries established diplomatic relations with China18 (Table 1). China was quick to realise the utility o f the ‘Israel card’ in its relations with the Arab world and began to adopt a hostile and unfriendly posture vis-à-vis Israel. Not only 17 P.R. Kumaraswamy, Israel's China Odyssey DelhiPapersNo. 2 (New Delhi: Institute for Defence Studies and Analysis, 1994), pp. 27-30. 18 For a background discussion on Beijing’s relations with the Arab world see, Hashim Behbehani, Chinas Policy in the Arab World, 1955-1975 (London: Kegin Paul International, 1981).

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did it reject various Israeli overtures but also described the Jewish state in extremely unfriendly terms.19 Coming in the midst of the internal turmoil especially during the Cultural Revolution, Israel was castigated as an expansionist*, aggressor’, ‘artificial creation’, ‘imperialist dagger thrust into the heart of the Arab People’, ‘puppet of Imperialism’, ‘Western beachhead’, and ‘running dog o f US imperialism*. China declared that ‘the Palestinian people’s right to liberate their homeland is a natural extension of self-defence and self-determination’.20 In January 1965 China became the first non-Arab power to recognise the newly established Palestine Liberation Organisation (PLO) and to host a quasi-diplomatic mission in Beijing. Since then various Palestinian leaders including Yasser Arafat have regularly visited China and have received Chinese support for their armed struggle against Israel. ‘To reinforce this policy’, observed Yitzhak Shichor, ‘Beijing provided the Palestinians not only with political backing and ideological indoctrination, but also with weapons and military training’.21

PRELUDE TO NORMALISATION

The death o f Mao in September 1976 and the emergence of a reformist leadership under Deng Xiaoping committed to modernisation and economic development, was the third important milestone in Sino-Israeli relations. Though the impact was nei­ ther immediate nor perceptible, it marked the beginning of a new era. The end o f prolonged internal conflict and its acceptance by the international community significandy mellowed down China’s view of the outside world. Apart from its newly found ‘open door’ policy towards the west, a couple o f developments signalled a gradual modification of the Chinese position vis-à-vis Israel. Itr campaign against Vietnam exposed the shortcomings and deficiencies of the People’s Liberation Army and China began to look to Israel as a partner ih defence modernisation. Israel’s willingness to pursue military contracts despite the absence o f political contacts, encouraged the process. As discussed elsewhere, the military path facilitated diplomatic relations. The conclusion of the Israeli-Egyptian Camp David peace agreements painted a new political landscape in the Middle East. Though many Arab countries were opposed 19 In a bizarre incident a congratulatory telegram sent by Israeli Foreign Minister Abba Eban in 1971 following Chinas admission into the UN was seized by the Chinese postal authorities and was returned undelivered. 20 Among others see, Behbehani, op. cit., pp. 46, 50 and 57; Xiaoxing, op. cit., pp. 65-66. 21 Shichor, ‘Hide and Seek’, op. cit., p. 192. See also, Lillian Craig Harris, ‘China’s Relations with the PLO ’, Journal o f Palestine Studies, Vol. 7, No. 1, Autumn 1977, pp. 123-54; Raphael Israeli, ‘The Peoples Republic of China and the PLO: From Honeymoon to Conjugal Routine', in Augustus Richard Norton and Martin H. Greenberg (Eds), The InternationalRelations o fthe Palestine Liberation Organisation (Carbondale and Edwardsville: Southern Illinois University Press, 1989), pp. 138-65; John Calabrese, 'From Flyswatters to Silkworm: The Evolution o f Chinas Role in West Asia', Asian Survey, Vol. 30, No. 9, September 1990, pp. 862-76.

China and Israel Normalisation and After

27

to President Anwar Sadats ‘betrayal’ and his separate peace with Israel, it signalled an Arab willingness to seek a political and negotiated settlement to the Arab-Israeli conflict. China was not indifferent to these changes. For the first time in two decades China began to dilute its virulent view o f Israel and slowly began to revert to its pre-Bandung position. In a slow, gradual and piecemeal process, China began to indicate its willingness to accept Israel’s existence as a state. In tune with its people-to-people contacts, it began to distinguish between the Israeli peo­ ple and the Israeli government. Under certain conditions China indicated its willing­ ness to establish relations with the Jewish state and they included: (a) a complete Israeli withdrawal to the pre-June 1967 position; (b) the restoration of the Palestinian rights, including their right to establish an independent Palestinian state; and (f) an Israeli pledge to end what China considers a policy of aggression and expansion’.22 Endors­ ing the prevailing Arab position, it also demanded an international conference t o 4dis­ cuss and settle the Palestinian question’.23 Though such a conditional normalisation was not acceptable to Israel, it marked a shift in the Chinese position vis-à-vis Israel. Responding to the new Chinese overtures, in 1985 or shortly after the AngloChinese agreement over the future o f the colony, Israel reopened its Consulate in Hong Kong. It is widely believed that by reactivating its mission after a gap o f ten years, Israel was seeking a back door entry to Beijing. It hoped to create facts on the ground and when the colony reverted to the Chinese rule in 1997, the Consulate would become a de facto mission in China.24 The posting of veteran diplomat and intelligence official Reuven Merhav to open the mission with the personal rank of ambassador, underscored the importance of the Israeli decision. As he subsequently admitted, i concluded that if we work right, and with patience we can, in two to three years, have contact with the Chinese and in five years have representation there’.25 The presence o f various Chinese institutions, companies, financial institutions and semi-official representations in Hong Kong provided an excellent opportunity and diplomatic cover for Israel. Aimed at the larger Chinese audience and market, a host o f official, semi-official and private Israeli firms set up their offices and other representations in Hong Kong. Before long the colony became a conduit for political as well as military contacts between Israel and China. Meanwhile since the mid-eighties the United Nations and especially the annual General Assembly meetings became a major forum for Israeli-Chinese diplomatic contacts. In late March 1987 Avraham Tamir, Director-General o f the Israeli Foreign 22 Yitzhak Shichor, 'Small Cracks in the Great Wall: The Prospects For Si no-Israeli Relations', Institute o fJewish Affairs Research Report (London), No. 5, August 1987, p. 9. See also Yitzhak Shichor, ‘In Search of Alternatives: Chinas Middle East Policy after Sadat', The Australian Journal o f Chinese Affairs, No. 8, 1982, pp. 101-10. 23 Beijing Review, 14 May 1984, p. 9. 24 Israel operated a Consulate in Hong Kong during 1973-75 but closed down the mission due to budgetary problems and lack o f progress in cultivating China. Abraham Rabinovich, ‘The Long Trek to Beijing, TheJerusalem Post* 29 November 1991. 25 TheJerusalem fast, 29 November 1991. After he completed his tenure in Hong Kong, in 1988 Merhav was appointed Director-General o f the Foreign Ministry and played an even more active role in promoting Israeli-Chinese relations.

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Ministry, met Li Luye, Chinas permanent representative to the UN. A few months later Foreign Minister Shimon Peres met the Chinese Deputy Prime Minister at a UNCTAD conference in Geneva.26 Following a second meeting between Tamir and Li, on 30 September 1987 Shimon Peres met his Chinese counterpart Wu Xueqian at the UN headquarters. This was the first known ministerial level meeting since the formation of Israel and both leaders agreed to institutionalise bilateral contacts through their UN representatives. Since then the foreign ministers of the two countries have met regularly during the UN General Assembly sessions. There were signs of improvement when Beijing allowed Israeli delegates to partici­ pate in international conferences hosted by China. Israel began to pursue 'scientific contacts’ to woo China and the Israel Academy o f Social Sciences played an impor­ tant role in this endeavour. The ‘tourist team* consisting o f two scientists and a career diplomat at the Foreign Ministry’s China desk went to China in May 1989. In November,Israeli representatives visited Beijing to establish a permanent mission that would function within an academic framework. On 15 June 1990 the Israeli Academic Centre was set up in Beijing. Formally headed by Prof Yossi Shalhevet, former scienti­ fic adviser to the Ministry o f Agriculture, the Centre was run by a Foreign Ministry official. As a reciprocal gesture China opened an office of the China International Travel Services (CITS) in Tel Aviv in late 1989. Both sides went out o f their way to dispel any notions that these two offices were diplomatic missions. For example, Qian Qichen declared: ‘These two offices handle matters relating to tourism and exchange of scientific and technological experts, but they are not government offices’.27 Gradually both the academy and the ‘tourism office1were granted tacit diplomatic status and Israeli officials came to China as ‘guests’ o f the academy and Chinese officials visited Israel as ‘guests of the CITS. In early 1991 just before Operation Desert Storm China agreed to the Israeli request ‘to post’ veteran diplomat and former ambassador to the Netherlands, Zev Sufott to the academy. In Mirch Merhav visited China and breaking from the past secrecy, for the first time the Chinese authorities officially acknowledged the visit.28 Meanwhile the Tourism Office in Tel Aviv expanded its cooperation with Israeli travel agents and the absence of direct flights did not inhibit the flow o f Israeli tourists to China. One such ‘tourist’ was Defence Minister Moshe Arens whose photograph along the Great Wall appeared in Israeli media in November 1991.29 The follow­ ing month, Chinese Vice-Foreign Minister Yang Fuchang visited Israel and held a wide range of discussions with Israeli officials. In an unusual gesture signalling 26 Hadashot, 7 July 1987, in FBIS-CHI, 13 July 1987, p. F /l. 27 Al-Hayat (London), 28 September 1991, in FBIS-CHI\ 3 October 1991, pp. 14-16. Likewise, the head of the Israeli Centre in Beijing maintained, ‘We don’t represent the (Israeli) government... (but only) people-to-people contacts’. Quoted in Israeli Foreign Affairs* July 1990, p. 6. 28 Leaks in the Israeli media prior to Merhav s visit partly influenced Chinese behaviour. Discussions of Merhav s visit can be found in Sufott, op. c it , pp. 7-22. 29 Because of personal differences with Foreign Minister David Levy, Prime Minister Yitzhak Shamir often used Defence Minister Arens for sensitive missions. For a discussion o f Arens’ ‘secret’ visit to China see, Israeli Foreign Affairs, 16 December 1991, pp. 7-9.

China and Israel Normalisation and After

29

party-to-party contacts, the Chinese leader met opposition leader Shimon Peres at a Labour Party convention. During this visit both countries agreed to establish diplo­ matic relations prior to the inauguration of the Moscow meeting of the multilateral track o f the Middle East peace process. The relations were formalised when Foreign Minister David Levy visited China in January 1992 and both countries signed a formal agreement on 24 January. As part of the agreement Israel unreservedly recognised Chinese claims over Taiwan while China bestowed its recognition upon the once demonised Jewish state.

BILATERAL RELATIONS

The end of the Cold War* Arab willingness to seek a political and negotiated settle­ ment with Israel and Chinese desire to be involved in the Middle East peace process influenced and enabled the Chinese reappraisal o f its policies towards Israel. However, in some ways the normalisation appears to be an integral part of Chinas attempts to improve and consolidate its ties with the US. Having been hostile and indifferent for long, China has re-discovered Israel and its regional and international influences. Writing about the motives behind Chinese overtures Moshe Zak, veteran Israeli jour­ nalist remarked: the Chinese may have been addressing Israel, but they were really talking to the Jewish people... it is more convenient for the Chinese to act friendly towards Israel as the surrogate of the Jewish people. They thus hope to pave the way for large Jewish capital investments in developing China, and are even hoping for Jewish assistance in mobilising good will in Washington.50 One can find similar views in the Chinese media. For instance, months after nor­ malisation one Chinese commentator remarked: ‘As Israel is closely linked to the international market and there are Jews in all parts of the world, most of whom are tycoons and leaders of large financial groups, we can expand our exports through Israel’.31 30 Moshe Zak, ‘Chinas Path to “Jewish Power"’, The Jerusalem Post, 15 October 1993. According to Sufbtt, a 1986 internal policy paper argued that ‘China’s interests in the United States would be served by establishing contacts with Israel*. Sufbtt, op. cit.t p. 80. 31 Ling Hua, ‘Vigorously Push Forward Sino-Isradi Trade Ties, Guoji Shangbao (Beijing), 7 June 1992, in FBIS-NES, 6 July 1992, p. 18. Likewise, a Hong Kong-based daily remarked: Israel enjoys a special relationship with the United States. The Jewish people in the United States have always supported Israel and are very influential in the US political, economic and media circles. It is not possible for Israel s establishment o f diplomatic relations with China not to have some effect on Sino-US relations. ‘China, Israel Establish Diplomatic Relations, Wen Wet Po, Editorial, 25 January 1992, in FB/S-NES, 27 January 1992, p. 19. On the eve o f normalisation, Chinese Foreign Ministry spokesman Wu Jianmin told Israeli correspondents: ‘When I lived in the United States, many professors told me that the most successful students in US universities are Chinese and Jewish. There is nothing unusual about that, seeing that our

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At the political level, since normalisation Sino-Israeli relations have grown consi­ derably and there were numerous official visits and exchanges. Following the spate o f Israeli visitors to China, Foreign Minister Peres asked the Prime Minister to 'restrain the flow of ministers travelling to China’.32 However, Chinese officials did not reciprocate these visits. For quite sometime especially since the election o f Benjamin Netanyahu a number of visits have been cancelled or postponed. Lamenting on the absence o f reciprocity, Israel s first ambassador in Beijing Zev Sufott remarked: . .. no Israeli leader or dignitary has foregone the experience o f a visit to China, which had been in its entirety a Forbidden City for Israelis over the decades. How­ ever, their successors in office must now await reciprocal visits from their Chinese Colleagues. One Chinese Vice Premier and a Foreign Minister have visited Israel, as have a number of other ministers. But Jerusalem still awaits a Chinese Presiden­ tial or Prime Ministerial reciprocal visit. Indeed, it is no secret that Israel’s current President (Ezer Weizman) wishes to visit China and is counselled that he should patiently await a visit of China’s President, following the Israeli Presidential visit to China at the end of 1992. Even Israel’s Foreign Minister is inhibited by the fact of two visits of Israeli Foreign Ministers to China having been reciprocated by only one such visit from China, as of the end o f 1996. Israeli leaders, however, do not seem to mind the absence o f Chinese ‘reciprocity’. On the contrary highly visible political contacts between the two countries often on Chinese soil, have enabled Israeli leaders to establish a personal connection with their Chinese counterparts.34 Since 1992 there were one Presidential visit (Chaim Herzog in December 1992), two Prime Ministerial visits (Yitzhak Rabin in October 1993 and Benjamin Netanyahu in May 1998; the latter also made a brief stopover in Beijing in August 1997 during his state visit to the Far East), three visits by Foreign Ministers (David Levy in January 1992 and February 1997 and Shimon Peres in May 1993). Anticipating a domestic turmoil over the peace process, President Weizman postponed his scheduled visit to two nations have many things in common. We are both courageous, intelligent and hard-working’. Yedi’ot Aharonot, 24 January 1992, in FBIS-NES, 29 January 1992, p. 17. Sec also Xu Xins statements in Collins* op. cit., pp. 8-10. 32 A cartoon in TheJerusalem Post aptly summed up the mood. Standing in front o f the Forbidden City Prime Minister Yitzhak Rabin was telling his cabinet colleagues: ‘Since you all like to travel so much, I thought we could hold our cabinet meeting here today. TheJerusalem Post, 11 January 1994. 33 Sufbn, op. cit., p. 143. However, it is possible to make similar statements about Israels relations with various other countries, the number of state visits undertaken by Israeli leaders to the west is far less than the visits from these countries. Moreover, on an average Israeli Prime Minister makes four annual visits to Washington to attend various official, semi-official, private or community functions. ** One can compare the Sino-Israeli situation with Indo-Israeli relations. Though it followed the Chinese example in normalisation of relations with Israel, India had little high level contacts with Israel. Other than a brief meeting between Prime Minister Deve Gowda and his Israeli counterpan Benjamin Netanyahu during the Davos Economic Summit in early 1997, the visit o f Israeli President Ezer Weizman in December 1996 remains the only high level political contact between India and Israel. Though various Israeli leaders including late Prime Minister Yitzhak Rabin were eager, India was not enthusiastic about high profiled visits from Israel.

China and Israel Normalisation and After

31

China in December 1997.5* Reacting to the May visit of Prime Minister Netanyahu, an editorial in Haaretz commented: ‘In Israels wobbly diplomatic condition it should be considered an achievement that the government of China, for its part, did not request a deferment o f the visit and did not, as far as we know, change the programme prepared for Netanyahus three-day stay in the country’.5 The highly publicised visit o f Vice Premier Li Lanqing in February 1997 was, however, overshadowed by Dengs death and Li had to cut short his trip and return home.57 Coinciding with the handover o f Hong Kong, on 30 June 1997 Israel and China signed a mutual visa exemption agreement between Hong Kong and Israel. Under this agreement Hong Kong residents visiting Israel and Israelis visiting the former colony would not require visas. In an unusual move Israel decided to retain its mission in Hong Kong and having opened a Consulate in Shanghai shortly after normalisation, Israel presently has three diplomatic missions in China.58 The Com­ munist Party has also maintained relations with the Israeli Labour Party, for instance, in March 1997, a Communist Party delegation led by Li Shuzheng, alternate mem­ ber o f the Central Committee, was in Israel as a guest of the Labour Party and met Peres. While ideology drew the Communist Party towards the Labour Party, it was not indifferent towards the ruling Likud coalition and met its leaders. In May, China throtded an attempt by some Arab countries to prevent Israels participation in the Asian anti-desertification conference being held in Beijing and facilitated Agricultural Minister Rafael Eitans participation. Concerning the Middle East peace process, China has expressed its support for peaceful resolution o f the conflict and reiterated the importance of the land-for-peace formula. Unlike other great powers, it does not seek any direct role in Israels negoti­ ations with the Arabs but is content with ‘active participation in various multilateral working groups.59 However, like many countries, the Chinese perception of Israel appears to have been influenced by the internal developments in Israel and their impact upon the peace 35 The death of Deng led to the postponement o f the trip initially slated for March 1997. The cancellation came under severe criticism from the Israeli Foreign Ministry as well as the Prime Ministers Office and both saw Wetzman's move ‘very harmful* to Sino-Isradi relations. ID F Radio, 17 October 1997, in FBISNES, 20 October 1997. The visit is slated for July 1998. Xinhua, 19 February 1998, in FBIS-CH1, 26 February 1998. 36 ‘The Importance of China', Haaretz* Editorial, 26 May 1998. 37 Likewise Foreign Minister Levy visited China during Dengs mourning period and received little media attention. Earlier, Chinese Vice Premier Zou Jiahua had visited Israel in October 1994. 38 This is rather unusual because due to budgetary considerations a number of Israeli missions including its embassy in Kathmandu were slated for closure. Following protest from these countries, the Foreign Ministry however, reversed the decision in June 1998. Liat Collins, 'Foreign Ministry Decides not to Close 15 Consulates, Embassies', The Jerusalem Postt 17 June 1998. Furthermore, while allowing three Israeli missions on its soil, China has not sought any reciprocal moves. There were suggestions that while it allowed an Israeli consulate in Shanghai, Beijing sought a second mission to be located in Jerusalem (more likely to be in the eastern pan) which was not viewed favourably by Israel. 39 A detailed discussion o f Chinese policy towards the Middle East peace process can be found in the interview o f Wu Sike, Chinese Foreign Ministry official responsible for the Middle East, to Wen Wei (Hong Kong), 4 January 1997, in FBIS-CHI, 97-010 (electronic edition).

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process. For example, a few months after Netanyahu was elected Prime Minister in May 1996, one Israeli analyst lamented: ‘At the moment, the Chinese establishment s attitude is disparaging towards Israel. Former Prime Ministers Shimon Peres and Yitzhak Rabin remain popular, while Prime Minister Benjamin Netanyahu is heat­ edly criticised as threatening the peace process in the same terms heard throughout the West’.*0 In April 1998 Peres was in China at the invitation of the Chinese People s As­ sociation for Friendship with Foreign Countries and his visit received widespread me­ dia coverage in China. Apart from meeting senior leaders including Jiang Zemin and Qian Qichen, he also addressed the students at the Foreign Affairs College in Beijing.41 During his Middle East trip in January 1998 Qichen visited Israel (his second visit since normalisation) and reiterating Chinese support to the peace process, he remarked that the Netanyahu government should enforce promises made and agree­ ments reached by its predecessors.42 A few months later the crisis in the Persian Gulf and President Clintons tough position vis-à-vis Iraq rekindled a pro-Arab stance in the Chinese media and it accused the US of practising ‘double standards’ concerning violation of UN resolutions. In the words o f one commentator, ‘imposing pressure on Israel once again will not only be restrained by the Congress controlled by the Republican Party, but it will also be opposed by the ultra-Rightists forces among the American Jews’. ^ At the economic level, even five years after normalisation the total trade turnover between Israel and China stands at less than $300 million and is much smaller than Israels trade with Taiwan. This meagre trade can be attributed to ‘Chinas relative poverty, fewer attractive exports, and bureaucratic difficulties in completing deals.*4 While bilateral trade is not large, progress has been impressive in other areas of eco­ nomic relations such as investments and joint ventures. The low cost o f produc­ tion, the availability of skilled labour and the vast domestic market have attracted a number of Israeli companies including Elbit> Israel Chemicals (ICL), Rada Elec­ tronic Industries, Eleo Holdings, electronics manufacturer Vishay Intertechnology, Dead Sea Works and Sano to establish joint ventures in China. These joint ventures cover such diverse products as detergents, potash manufacturing, mining, refining and production of tantalum capacitors, air conditioners, oil manufacturing, vegetable 40 Barry Rubin, 'Rethinking the China-Israel Relationship’, TheJerusalem Post, 17 November 1996. See also, Qi Deliang et al., ‘Repeated Internal Crises; Bleak Peace Prospects: A Look Back at Israel in 1997’, Xinhua, 4 January 1998, in FBIS-NES, 11 January 1998. 41 Among others See, Xinhua, 6 April 1998, in FBIS-CHI, 7 April 1998. It is not accidental that Peres was named ‘Honorary President’ of the Council for the Promotion o f Israel-China Relations. 42 Xinhua, 10 January 1998, in FBIS-CHI, 13 January 1998. This formulation implies the tacit un­ derstanding reached between Israel and Syria over the Golan during the tenure o f Rabin, a position the current Israeli government is unwilling to accept. Keeping in tune with the practice o f numerous foreign dignitaries, Qian met Yitzhak Rabins widow Leah. 43 Li Yunfei, ‘International Forum’, Kenmin Ribao, 27 January 1998, in FBIS-CHI, 4 February 1998. See also, ‘Diplomatic Solution Preferred to Gulf Crisis*, Xinhua, 10 Febniaty 1998, in FBIS-CHI, 11 February 1998; Lieu Shun, ‘The Gulf Cries for Our Peaceful Solution t Xinhua, 9 February 1998, in FBIS-CHI, 11 February 1998. 44 Rubin, op. cit.

China and Israel: Normalisation and After

33

drying factories, packaging, sewing machines, aircraft maintenance, telephone net­ works and the construction and maintenance of toll roads. Israel is setting up a joint potash fertiliser factory with a production capacity of 80 0 ,0 0 0 tons of potassium chloride in Northwest Qinghai Province. In September 1995 the Eisenberg firm United Development Incorporation (UDI) entered into a deal with a Chinese consortium for the construction o f two 350 megawatt power units at Rizhao, on the coast o f Shandong Province. The $625 million project would be financed through private investment without any bank guarantees.^ The UDI is also collaborating in setting up a diamond trading centre in Shanghai. In May 1998 the Eisenberg group signed a $ 450 million contract for the construction of a potash plant in Western China.4** Responding to these needs, in April 1995 Israeli Finance Minister Avraham Shohat visited China and signed a double taxation avoidance treaty and an investment pro­ tection treaty. O f the two treaties, the latter is of greater significance as more and more Israeli companies are making investments or establishing factories in China. For in­ stance, in 1995 Israel Foreign Trade Risk Insurance Corporation (IFTRIC) approved a $150 million line o f credit to Israeli companies investing in China.47 In September 1995 Israel and China agreed to establish a joint technological park in Tianjin aimed at expanding the production o f Israeli technological goods using Chinese workforce and productivity. In February 1996 Israel despatched two tons of medicines following an earthquake in Lijiang region. Any discussion of Sino-Israeli relations would be incomplete without a reference to the military dimension. The prolonged Chinese indifference towards Israeli political overtures was complemented by active participation in the military-security field. While political relations with Israel posed certain problems to Chinese interests in the region, military cooperation, if wrapped in secrecy, was an attractive proposition. Chinas need for western technology for its defence modernisation programme was complemented by the specialised nature o f Israeli expertise. Even while publicly condemning Israels policies and its leadership, China found it prudent to interact and collaborate with the Israeli military establishment. A detailed discussion of the nature o f the relations is beyond the scope of this paper, but it is essential to comment on certainsalient features and theirimportance to the overall bilateral relationship. It iswidely recognised thatmilitary exports and cooperation predated and even facilitated political relations between China and Israel.48 However, there is lack of consensus among scholars on the nature and depth * * TheJerusalem Post; 15 September 1995. ^ TheJerusalem Report, 8 June 1998, p. 44. 47 TheJerusalem Post, 6 and 11 April 1995. ** For background studies see P.R. Kumaraswamy, ‘The Star and the Dragon: An Overview of IsraeliPRC Military Relations*, Issues and Studies (Taipei), Vol. 30, No. 4, April 1994, pp. 36-55; ‘The Military Dimension of Israel-Oiina Relations’, China Report, Vol. 31, No. 2, April 1995, pp. 235-49; Bates Gill and Taeho Kim, China’s Arms Acquisition from Abroad: A Questfor 'Superb and Secret Weapons* (Oxford: Oxford University Press, 1995), pp. 81-86. See also, Gerald Segal, ‘Israeli Arms for China: Wishful Thinking?' SovietJewish A ffairs,\o\. 11, No. 2, 1981.

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of the relations and their importance to third parties. Political compulsions and diversity of interests present conflicting assessments. Though there were speculations since the late seventies, for long the issue was treated as unimportant and doubts were raised about the veracity of various claims and reports.*9 Most of the literature on the subject is unanimous on certain salient features o f this relationship. Concerted interaction in the sensitive arena even in the absence o f formal relations ensured a degree of trust and cooperation between the two countries and their political leadership. Likud Prime Minister Menachem Begin and his Defence Minister Ezer Weizman were credited with supporting the suggestion by Israeli business tycoon Shoul Eisenberg to explore the Chinese intentions through the non-conventional military route. Eisenbergs offer could not have come at a better time. In the face of its pro­ longed failure to influence the Chinese government through diplomatic means, Israel had little choice and Eisenberg was granted the monopoly for dealings with China. Though success was not guaranteed, Israeli expertise in upgrading Soviet inventories and the battled tested nature of its weapons, seemed more lucrative than what Israel could offer politically. For entirely different reasons, the Chinese were also inclined to pursue this approach. Ushering in the post-Mao era, Deng Xiaoping unveiled his four modernisations programme and the military reversals at the hand o f Vietnam underscored the need to upgrade the aging PLA arsenal. Through a series o f direct and indirect contacts primarily through Hong Kong with Eisenberg functioning as the key player, Israel and China conducted military transactions and technological cooperation. In the initial phase especially during the Cold War years when the US was preoc­ cupied with the Soviet Union, Israeli arms deals with China appeared to have enjoyed tacit American backing and endorsement. Depending upon Washingtons political support and economic largesse it would otherwise have been difficult for Israel to pursue China through military exports. Beijing’s sensitivities towards the Arab and Islamic countries with whom it was seeking closer relations and Israels security con­ siderations compelled both countries to conduct their military transactions under wrap. They rarely responded to media speculations and even when they did, they vehemently denied any military transactions. Within this broad parameter, there were however differences over the quantum, quality and implications o f Israeli exports. In the early eighties western estimates put

49 For instance, sec, Yitzhak Shichor, 'The Middle East’, in Gerald Segal and William T. Tow, Chinese

Defence Policy (London: Macmillan 1984), p. 272. *° Until his death in March 1997 Eisenberg remained an important figure in Israel and a Knesset (Israeli parliament) law named after him ‘exempts Israelis involved in International trade from Israeli income taxes and foreign exchange regulations’. TheJerusalem Report, 24 September 1992, p. 32. The clout he enjoyed with the Israeli establishment was demonstrated during the first state visit to Beijing in December 1992. Instead of travelling by the national carrier E l A l, President Chaim Herzog travelled to China in a private plane belonging to Eisenberg and aroused strong condemnation in the media. Middle East International* 5 February 1993, p. 22.

China and Israel Normalisation and After

35

the Sino-Israeli military deals at $3 billion, a figure that has multiplied ever since.51 To achieve such high volumes Israel would have exported substantial quantity of hardware; there is consensus among analysts that Sino-Israeli relations mainly revolve around technology, avionics and software.52 At the same time, reports of meagre estimates o f Israeli exports should be taken with caution. According to the Israeli Defence Ministry estimates submitted to the US State Department, during 1990-94 Israel exported only $31.5 million worth of arms to China.53 Low estimates o f Israels arms exports are often mentioned as another reason for dismissing media reports and intelligence assessment as exaggerated’ claims. How­ ever, in dealing with the export data provided by the Arms Control and Disarmament Agency (ACDA) and the Stockholm International Peace Research Institute (SIPRI) as­ sessments, it is essential to note that both these sources include only certain categories of exports. They exclude areas such as upgrading and modernisation, the key compo­ nents o f Israeli arms trade. For example, the SIPRI admits that its arms trade data only . .. cover five categories o f major weapons or systems: aircraft, armour and artillery, guidance and radar systems, missiles and warships. Statistics presented refer to the value o f the trade in these five categories only. The registers and statistics do not include trade in small arms, artillery under 100-mm calibre, ammunition, sup­ port items, services and components or component technology, except for specific items---. . . . Transport aircraft and VIP transports are included if they bear military insignia or are otherwise confirmed as military registered. Micro-light aircraft, remotely piloted vehicles and drones are not included although these systems are increasingly finding military applications.54 In short, a vast category o f Israeli exports does not fall under the purview of the SIPRI data. Since the late eighties the exports o f Israel Aircraft Industries, the flagship of Israel’s arms industry, alone stand at over $ 1 billion, a figure much higher than the estimates given by the ACDA and SIPRI.55 Reasons for the conflicting assessment and recent Israeli determination to underplay the quantum of exports can be traced to growing American concern about SinoIsraeli arms transactions. Since the end of the Cold War Israel ceased to be an American proxy’ to China and its military dealings with China appear to be conducted over and above American objections. The emerging US dominated post-Cold War 51 Larry Englemann, ‘Dragons Teeth: China and the International Arms Bazaar’, China StratrgicReview (Washington, DC), Vol. 1, No. 9, December 1996, pp. 19-23. 52 Shichor, ‘The Middle East’, op. cit.t p. 272; Segal, ‘China and Israel*, op. cit.%p. 207. 53 Quoted in Yitzhak Shichor, ‘Israel’s Military Transfers to China and Taiwan', Survival, Vol. 40, No. 1, Spring 1998, p. 77. 54 ‘Sources and Methods*, in SIPRI Yearbook 1997 (Oxford: Oxford University Press, 1997), pp. 341-42. Besides the data also do not include unguided artillery rockets, portable anti-armour rockets and small patrol craft with a displacement o f less than 100 tons. 55 According to another estimate, Israeli arms exports crossed the $1.2 billion mark in 1980 and have grown since then. Aharon Klieman and Reuven Pedatzur, ‘Rearming Israel: Defence Procurement Through the 1990s’, TheJerusalem Post, 1991, p. 79.

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international environment, strong commercial considerations and apprehensions of transfer of sensitive technology have led to a new American approach towards SinoIsraeli military relations. Ownership of Israeli inventories and exports to China have come under greater scrutiny and criticism. Often senior U6 administration officials including those friendly to the Jewish state, have accused Israel of indulging in illegal and unauthorised transfer of American technology to China. Likewise, there are conflicting assessments o f the Chinese reverse engineering and re-exporting Israeli technology to the Middle East. The commercialisation o f arms exports has enhanced the importance of the Middle East market for China and Israeli leaders have often expressed concern about Beijing's involvement in non-conventional programmes of countries such as Iran and Iraq. Though earlier Chinese assurances were received with scepticism, of late, Israeli officials have given a clear bill o f health to China over this issue.57 Because of the commercialisation o f its arms exports, it would be difficult for China not to incorporate Israeli technology in its exports to the Middle East and thereby maximise profits. China may discard this approach if Israel were to offer more attractive incentives in terms of advanced technology hitherto not available to Beijing. On the whole, however, military transactions such as arms exports, technology transfers and upgrading of Soviet supplied inventories played an important role in the formation and consolidation of Sino-Israeli relations. In recent years, however, Russian mistrust has given way to willingness to export modern weapons and plat­ forms to China, some of which include joint production and technology Transfer arrangements.58 Though certain industries would benefit from this new develop­ ment, the entry of Russia would affect and possibly modify the long-term direction of Sino-Israeli military cooperation. Not only is Israel keen to promote military ties with China, but it is also seeking the cooperation and participation of third parties. 56 O f late, concerns about Israeli impropriety have been taken up by the mainstream American media and are voiced by leading figures in the US administration and academic. For a detailed discussion see Duncan Clarke, ‘Israel’s Unauthorised Arms Transfers’, Foreign Policy, No. 99, Summer 1995, pp. 89-109. Sec also P.R. Kumaraswamy, ‘Israel, China and the United States: The Patriot Controversy’, Israel Affairs (London), Vol. 3, No. 2, Winter 1996, pp. 12-33. 57 According to Yitzhak Shichor, \ .. an investigation by the Ministry o f Defence concluded that, despite Washingtons claims, no Israeli or Israeli-related technology had been transferred by China to a hostile government over the last 15 years’. Shichor, Israel’s Military Transfers to China and Taiwan', op. cit., p. 85. This position contradicts past assessments; among others see, Haaretz (Tel Aviv), 5 August 1983, in FBIS-M EJÜ3-157, 12 August 1983, pp. 1/3-4; Segal, ‘China and Israel’, op. cit., p. 208; Shichor, ‘Hide and Seek’, op. cit., p. 205. For a critical evaluation of Chinese ‘assurances’ see, Roger W. Sullivan, ‘Discarding the China Card’, Foreign Policy, No. 86, Spring 1992, pp. 3-23. 58 For a detailed and recent discussion sec, Alexander A. Sergounin and Sergey V. Subbotin, ‘SinoRussian Military-Technical Cooperation: A Russian View’, in Ian Anthony (Ed.), Russia and theArms Trade (Oxford: Oxford University Press, 1998), pp. 194-216. In the words o f Paul H.B. Godwin: ’Although tics with some Western arms manufacturers are slowly being resuscitated, including Chinas cooperation with Israel s military industries, Russia now plays the central role in China’s military modernisation pro­ gramme’. Godwin, ‘Military Technology and Doctrine in Chinese Military Planning: Compensating for Obsolescence’, in Eric Arnett (Ed.), M ilitary Capacity and the Risk o f War: China, India, Pakistan and Iran (Oxford: Oxford University Press, 1997), p. 44.

China and Israel Normalisation and After

37

During his official visit to Moscow in March 1997, Prime Minister Netanyahu per­ suaded Russian President Boris Yeltsin to supply IL-76 early warning aircraft to Beijing so that Israel could export Phalcon radar systems to Beijing.59 Since late 1994 it has been reported that Israel is assisting China in the development of an advanced jet at a plant in Chengdu in Sichuan Province. Comparable to the American F-16, the Chinese jet would be based on Israels Lavi project and would exten­ sively incorporate technology and avionics developed during that phase. Since much o f the Lavi technology was supplied or funded by the US, Israeli cooperation in the de­ velopment o f the jet designated as F-10 would remain controversial and problematic.

AREAS OF CONCERNS

On the negative side, Israel has been extremely concerned about Chinas suspected involvement in the nuclear and missile programmes of countries hostile to the Jewish state. Repeated Chinese assurances o f non-involvement are often accompanied by new revelations of China pursuing these financially lucrative projects either directly or through proxies such as North Korea.**1 Partly because o f its own military ties with Beijing, Israel has so far avoided launching a campaign against China similar to the one being launched against the suspected Russian involvement in the Iranian nuclear and missile programmes. Israel often justifies its military cooperation with China as a means of influencing the Chinese arms exports to the Middle East. Besides financial incentives, the military sales to China are seen as a form of insurance for Israel’ in seeking to influence the Chinese exports of weapons and technology to Syria, Iraq and other Arab countries. The issue o f Chinese arms sales to the Middle East figures prominently in Sino-Israeli dialogues. During the visit o f Foreign Minister Peres in May 1993, the Chinese leaders assured him they had decided to stop sales of missiles to Iran and Syria.® Subsequendy, however, Israel feared that while keeping this undertaking, China had pursued such deals through North Korea, an issue that figured prominently during Rabins visit a few months later.64 Defence News, 10 March 1997, p. 28. This comes amidst repeated Israeli concern over Moscow’s suspected involvement in the Iranian nuclear programme. 60 TheJerusalem Post\ 29 December 1994 and 5 January 19%. 61 For a recent and critical review o f Chinese arms sales to the region see, Frank J. Gaffney, ‘China Arms the Rogues’, Middle East Quarterly, Vol. 4, No. 3, September 1997, pp. 33-39. For a Chinese perspective on this issue see, Guang Pan, ‘Chinas Success in the Middle East’, Middle East Quarterly, Vol. 4, No. 4, December 1997, pp. 38-39. 62 See also, Gerald Steinberg, ‘The China Syndrome in US-Israel Relations’, The Jerusalem Post, 20 December 1996. Months before normalisation, Don Shamron, Chairman of the Israel Military Industries (IMI) and Israeli Chief of Staff during the Kuwaiti crisis, saw military deals with China as a deliberate move to interfere with Chinas arms sales to Arab governments’. Israeli Foreign Affairs, 16 December 1991, p. 8. 63 Kollsraely 20 May 1993, in FBIS-NES, 20 May 1993, p. 10. 64 David Makovsky, ‘Rabin may Visit Moslem Country after China’, TheJerusalem Post, 5 October 1993. See also, Michal Yudelman, ‘Rabin, Zvilli to Chinese: Stop Arming Iran*, TheJerusalem Post, 8 August 1993.

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During Netanyahu) brief stop-over in Beijing in August 1997, Deputy Prime Minister for Foreign Trade Li Lan Chin assured him that China would not help Iran build a nuclear weapon capability. Israeli leaders have been bending over backwards to ameliorate criticisms of Chinese arms sales to the region and shortly after the formal declaration of normalisation, David Levy remarked: 4. .. it would be unfair to say that... (arms race) pertains to China alone; the same can be said about the superpowers and about countries friendly to Israel which have made similar deals\6* The issue of arms exports figured again during Netanyahus state visit in May 1998. Even though Israel has been accommodative towards Beijing, China has remained indifferent towards Israeli sensitivities regarding Jerusalem. Jerusalem Mayor Ehud Olmert decided to boycott the Fifth World Conference of Historical City scheduled to be held in Xi’an in September 1996 because the PLO official Faisal Husseini was also invited as a representative of the city.66 For its part, Beijing appears to be sensitive about issues such as Taiwan and Tibet. The former has been a complicated dimension of Israels China policy. If political and strategic calculations, especially following its admission into the United Nations, made China important, economic considerations made Taiwan an equally attractive propo­ sition. Therefore, Israel sought a constructive ambiguity whereby it could woo Beijing while seeking lucrative economic advantages from its ties with Taipei. At the political level, Israel was unwilling to antagonise mainland China and consciously avoided be­ stowing recognition upon Taipei.67 Unlike some of the Arab countries, Israel neither recognised nor established diplomatic relations with the island republic. For long Israels vague one China policy* suited both the rivals across the Formosa Straits. At the economic level, Taiwan has been an attractive proposition for Israel and its defence related hi tech industries. Though there are no definite estimates, Taipei remained a principal market for Israel's defence exports.68 A number o f developments and regional and international political situation enabled Israel to pursue Beijing with­ out jeopardising its ties with Taipei and vice versa. Apart from economic incentives, Taiwan also offered certain political incentives: the prolonged refusal by Beijing to reciprocate Israeli overtures, Beijings political and financial support to radical antiIsrael states and groups in the Middle East and the American desire to strengthen Taiwan through reliable proxies.69 Furthermore, faced with growing isolation, espe­ cially since the late seventies, Israel and Taiwan (together with South Africa) shared a common view o f security threats.70 Without alienating Beijing, Israel has been able to explain and justify its relations and commercial and military ties with Taipei. 65 Kol Israel* 24 January 1992, in FBIS-NES* 24 January 1992, p. 6. 66 TheJerusalem Post* 28 August 1996. See also Sufbtt, op. cit.* p. 144. 67 Israeli non-recognition o f Taipei became an important issue in its diplomatic manoeuvres. See, for example, Walter Eytan’s memorandum submitted to G.S. Bajpai, dated 1 March 1952, Israel Sute Archives, Jerusalem, Foreign Office File 2554/12. 68 P.R. Kumaraswamy, ‘The Star and the Dragon, op. at.* pp. 51-54; and Shichor, ‘Israels Military Transfers to China and Taiwan’, op. at.* pp. 72-73. 69 Yaacov Shimoni, ‘Israel and the People’s Republic of China’, in Michael Curtis and Susan A Gitelson (Eds), Israel in the Third World (New Brunswick, NJ: Transaction Books, 1976), pp. 215-16. 70 Aharon S. Klieman, Israels GlobalReach: ArmsSales as Diplomacy (Washington: Pergamoo, 1985), p. 25.

China and Israel Normalisation and After

39

The normalisation o f Sino-lsracli relations in January 1992 significantly reduced Israels diplomatic manoeuvres. Without having to terminate any political relations with Taipei, Israel declared that it recognises ‘the Government o f the Peoples Republic of China is the sole legal government representing the whole of China, and that Taiwan is an inalienable part o f the territory of the Peoples Republic of China 7 1 Even though Israel set up a commercial office in Taiwan shortly afterwards, a number o f developments indicate that Israel has been extremely careful not to antagonise Beijing and jeopardise its hard earned normalisation. Shortly after Israel established relations with Beijing, Taipei expressed a desire to acquire 40 Kfir fighter/bomber aircraft from Israel. For the recession hit Israeli military industry, the deal was too tempting and was estimated to be between $400 million and $ 1 billion.72 Though there were some doubts about the seriousness of Taiwanese intentions, Israel sought and obtained permission from Washington for the export of this US-powered fighter. Israels security establishment including the Defcncc Ministry was in favour exporting Kfirs to Taiwan. Some even argued that since Beijing had been insensitive to Israel's security concerns, the latter should proceed with the sale despite Beijing's objections/^ The Foreign Ministry, however, perceived the issue differendy and argued that it would endanger hard earned normalisation and may even limit Israel’s ability to influence Beijing’s arms sales policy to the region, Israel’s ambassador to China flew home to successfully lobby against the deal.74 A diplomatic row erupted in early 1995 when the newly installed Taiwanese President Lee Tenghui wanted to visit the Holy Land as part of his Middle East tour. Coming on eve of the controversies surrounding his forthcoming visit to New York to receive an honorary doctorate at Cornell University, Israel was rather apprehensive.75 A number o f Arab countries having close ties with Beijing including Jordan and the United Arab Emirates hosted President Lee. Israel, however, was unwilling to test the Chinese waters and turned down Lee's suggestion to visit Christian holy sites as a private' individual. According to Sufott, the official handling of the request was an opportunity for Israel ‘to demonstrate her commitment to One China policy'.7** Both in private and in public Chinese officials have underscored their basic position on the Taiwan question: while not objecting to economic relations, any political moves towards Taipei would be viewed differently. Speaking at a meeting in Tel Aviv in January 1997 organised by the Council for the Promotion of Israel-China Relations to celebrate the fifth anniversary o f normalisation, the Chairman o f the 71 For the complete tact o f official communique see, Xinhua Domestic Service (Beijing), 24 January 1992, in FBIS-CHI-92-016,24 January 1992, p. 6. 72 TheJerusalem Post, 17 April and 4 August 1992; Janes Defence Weekly, 18 July 1992, p. 6; Supplement to Israeli Foreign Affairs (Sacramento), 5 September 1992, pp. 27-28. 73 Supplement to Israeli Foreign Affairs, 5 September 1992, p. 28. 74 P.R. Kumaraswamy, 'Rift in Israel over Sale of Jets to Taiwan’, The Hindu, 9 August 1992; and Asher Wallfish, ‘IAI Presses Rabin on Kfir Sales to Taiwan’, TheJerusalem Post* 4 August 1992. 75 David Makovsky, Taiwanese President may not be Welcomed Here’, The Jerusalem Post, 27 March 1995. 76 Sufott, op. cit.9p. 144.

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Chinese Peoples Association for Friendship with Foreign Countries hoped that Israel will not enter into official relations with Taiwan’. Such pressures and controversies have not affected the steady growth o f Israels bilateral trade with Taiwan and the annual trade turnover between the two countries is much higher than its trade with C h in a/8 Second, the visit of the Dalai Lama in March 1994 caused serious concern among Israeli officials. The Nobel Laureate was visiting Israel as a guest of the Society for the Protection o f Nature in Israel (SPNI) and was participating in its fortieth anniversary celebrations in Eilat at a site overlooking Israel, Jordan, Saudi Arabia and Egypt. Though he was honoured by the Hebrew University and visited the Yad Vashem holocaust museum in Jerusalem, the visit was described as a private pilgrimage and Israeli officials tried to underplay the importance of the crip. While seeking political ties with China, Israel has studiously avoided taking any position on Chinas human rights record. Not only was its response mild and muted, but Israel has also been credited with China breaking the western sanctions following the Tiananmen crackdown.80 An official Israeli delegation was in Beijing during the crisis and the delegates had to walk through the crowd o f demonstrating students at the Tiananmen Square to meet their Chinese hosts.81 In recent years, however, Israeli cooperation has come under criticism from the western critics o f Chinas human rights record. In August 1995, following his release by the Chinese authorities, human rights activist Harry Wu urged Israel to stop ‘dealing with evil’. In an interview with the Israeli Radio, Wu remarked that if Israelis are really concerned about concentration camps, concerned about the Nazi fascists, they have to apply the same principle to China.82 In an unusual and unprecedented move, in May 1997 Israeli Trade Minister Sharansky warned visiting Chinese State Planning Commission Minister Chen Jinuha that furthering of economic cooperation between China and Israel would depend upon improvement in Chinas human rights record. It is still unclear whether Israel would be able to forego the economic incentives o f the Chinese economy over issues such as human rights.

77 The Council incidentally was founded and funded by businessman Eisenberg. 78 At regular intervals Israeli media carries reports about negotiations and agreements between Taiwan and Israels hi>tech defence related companies and Israel has expressed an interest in launching Taiwan’s first satellite abroad its Amos satellite. TheJerusalem Post, 28 January 1994. 79 Batsheva Tsur, ‘Officials Snub Dalai Lama, Fear Harming Relations with China*, TheJerusalem Post, 21 March 1994. Aware of the Chinese sensitivities, discussions on Sino-Israeli relations often ignore the visit and its impact. Only Environment Minister Yossi Sarid (in his capacity as a leader o f the Meretz party) met the Tibetan spiritual leader. 80 Among others see, Xiaoxing, ‘Sino-Israeli Relations', op. cit., p. 73; Janes Defence Weekly, 31 January 1996, pp. 49-51. 81 Abraham Rabinovich, ‘Science Path to Heavenly Kingdom’, TheJerusalem Post, 7 February 1992. 82 Israel, however, rejected suggestions that it was Chinas principal supporter and that the Chinese regime would crumple if it withdrew its support*. TheJerusalem Post, 28 August 1995; and Arieh O ’Sullivan, ‘Harry Wu Assails Israel-Chii^ Tics’, The Times o fIndia (New Delhi), 28 August 1995.

China ajid Israel Normalisation and After

41

CONCLUSION

By establishing formal diplomatic relations with Israel, China ended an anomalous situation that existed since Israel recognised the communist rule. Normalisation marked the end of Israels political isolation and signalled Chinas desire to play an active role in the Middle East. Since 1992, political contacts and dialogue between the two countries have grown considerably. Significant sections of the Chinese leadership view this relationship as a stepping stone to the US, while Israel sees it as a means of influencing Chinas security related cooperation with countries hostile to it. Israel even used China as a conduit for a dialogue with North Korea until this was scutded by the US. However, Chinese military exports to hostile countries have been a major Israeli concern. At the economic level, Israel is yet to benefit from Chinas economic miracle and bilateral trade between the two countries remains meagre and marginal. Direct Israeli investment in China, however, has been growing and the largest Middle East invest­ ment in China has come from Israel. Because o f its late entry, China remains a marginal player in the Middle East peace process. While reiterating its known proArab position, its criticisms of Israel have increased since the election o f Netanyahu-led right wing government in Israel. Though it is not seeking an active role in the peace process, its defence related ties both with Israel as well as its adversaries provide China with the necessary political influence and leverage for a more active role in the future.

Chinese-Palestinian Relations W illiam W H ad d ad an d M ary Foeld i-H ardy

Historically, China has wielded little political influence in the Middle East. Whereas other nations that aspire to be world powers have traditionally been involved in Middle East affairs, Chinas role has been peripheral. One can, without much effort, identify a place for Britain, France and the US, however, the same cannot be said for Beijing. As will be seen, China has had little impact on the Arab world or the Palestinian struggle. Though Chinese influence in the Middle East has been minimal, this should not be interpreted as a lack o f Chinese interest in the region. As early as 1941, a leading member of the CPC, Li Weihan, addressed the issue of Palestine. In his remarks, Li attributed the instability there to British imperialism.1 By extension, if that imperial power could be removed, the issue o f Palestine could be resolved peacefully between the Arabs and Jews. Since 1949 and the triumph of the communist revolution, successive governments in the Peoples Republic of China (PRC) have evinced a keen interest in the events occurring far from their borders in the Middle East. Expanding on Li s earlier position, China ordinarily interpreted these episodes in three ways: as a struggle for the natural resources of the area, as the last battleground for influence by western imperialists, and finally as the likely location of any war that might occur between the two super powers, the US and the Soviet Union. Each of these scenarios caused great concern to Beijing because of its fear of being outmanoeuvred on the world’s stage and even worse— a victory in the Middle East by one of its enemies could result in a threat to the existence of communist China. Thus, though rhetorically the PRC supported one or more Arab nations in the Middle East, Chinas primary foreign policy goal in the area was to minimise the influence of its adversaries, the Soviet Union and the US. In the Chinese view, the US was a relative newcomer to imperialism. Traditionally, England had been the dominant imperial power in the Middle East and since the Second World War, America had begun to replace Britain in this oil rich region. In the fifties, the PRC writers warned that though the Americans might appear more appealing in the Arab world than the British, the colonised people should be under no illusions about Americas will to dominate.2 * Yitzhak Shichor, ‘Early Chinese Attitudes towards the Arab-lsraeli Conflict’, Asian andAfrican Studies, Vol. 15, No. 3, November 1981, pp. 344-45. 2 Ren Min Ri Bao (Beijing), 22 October 1951, quoted in Summary o f World Broadcast, The Far East (London: BBC), 30 October 1951.

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This perception of the Middle East, that it was a place where powers hostile to China engaged in questionable tactics, carried over to their interpretation o f the ArabIsraeli conflict. Chinese writings on the Arab-Israeli conflict in the fifties attributed its prolongation to outside interference, mainly by Britain and to a lesser extent by America. The Chinese writers asserted that the roots of the Arab-Israeli conflict could be found in the contradictory promises made by Great Britain to the various sides during the First World War. They argued that if only the belligerents were left alone, they would be able to find a common ground and end their animosity. This relative even handedness in approaching the Arab-Israeli conflict reflected Chinese attitudes from the founding of the Republic until the mid-fifties. Some fifty years after the fact, we may be forgiven for forgetting that the west dominated the entire Middle East, from Turkey to Yemen. Also, except for Lebanon, Israel was the only Middle Eastern country with a legal communist party. The PRC found it difficult to befriend any Arab government, preferring to support the two communist parties that were permitted to be active in the Arab world and Israel. Israel had an active communist party in the fifties, interestingly, in the pre-state days called the Palestine Communist Party. And Israel was the first, before any other Middle Eastern country, to recognise the new communist regime in Beijing. On January 6, 1950.. .Israel became the first Middle Eastern government to announce formal recognition of Peking. At the time, non-alignment was still official Israeli policy and Washington itself was still hesitating between recognition of Peking and trying to overthrow the new Communist regime. But Peking did not respond to the Israeli overture.3 Adding to this complicated mix, most of the Arab world followed the lead of Britain and the US by continuing to recognise the nationalist government on Taiwan, and refusing to legitimate the communists on the mainland. That there were no really good choices for the PRC in the Middle East became more apparent to Beijing when Israel sided with the US in the Korean War. Though the USSR had voted for partition, and the creation o f a Jewish state, because of a belief that it would be socialist, Israels increasing identification with the capitalist democracies had, by 1952, led the USSR to cease supporting Israel. Beijing followed that lead. What had been a somewhat evenhanded policy toward the Middle East conflict, became increasingly hostile toward Israel in the mid-fifties.

THE PRC TURNS TOWARD THE PALESTINIANS

Communist Chinas turn toward the Arab world, and eventually the Palestinians, came five years later than the Soviet move in the same direction. Historians generally agreed that the event that precipitated Chinas tilt toward the Arab world occurred at the Bandung Conference in Indonesia in 1955. It was the PRCs official position 3 John Cooley, 'China and the Palestinians’,Journalo fPalestine Studies, Vol. 1, No. 2, Winter 1972, p. 21.

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that if outside interference was eliminated from the Arab-Israeli conflict, and if the two sides negotiated instead o f fighting, then a settlement could be reached along the lines envisioned in the various UN resolutions o f 1947 and 1948. Though the common interpretations o f the events that occurred at the first Afro-Asian conference are certainly overstated, they do need to be mentioned. The common interpretation is that Gamal Abdul Nasser and Zhou Enlai became especially enamoured o f each other at the conference. It is further asserted that as a result o f their mutual bonding Zhou Enlai intervened on behalf of the Egyptians with the Soviets, and this led to the first sale o f Soviet arms (the Czech arms deal) in the Arab world. Whatever their initial reaction to each other was, there is no doubt that it led very rapidly to an opening for the PRC in the Middle East. Within a year, Beijing had established diplomatic relations with Cairo and Damascus. This was followed shortly by the opening o f two other embassies, one in Yemen and the other in Morocco. The 1956 Israeli invasion of Egypt accelerated the pace at which the PRC supported Arab causes.4 Initially, the PRC was not noticeably interested in the Palestinian cause and even at the Bandung Conference, Zhou Enlai had mentioned the Palestinian issue only in passing, and had addressed it solely as a refugee issue. Furthermore, the Chinese did not preclude having diplomatic relations with Israel. Even with Israel s invasion o f Egypt in 1956, the PRC was more interested in the activity of the great powers than it was in Israels attack. However, perhaps for the first time during this war, Israel was called a ‘tool* of the west. This attitude toward the Palestinian cause changed in the sixties. From the Chinese point o f view, the Soviet Union, Britain and France were consistently hobbling com­ munist China in its dealings with the Arabs. Especially galling were Egypt’s turn toward Moscow, and the imperialists’ continued penetration into the Middle East; this time West Germany’s opening to Israel in the form o f diplomatic relations and military aid. Ever on the outlook for new allies to counter these setbacks, the PRC evinced an increasing interest in the Palestinians during the sixties. The founding of the Palestine Liberation Organisation (PLO) in 1964 considerably heightened Chinas curiosity in the Middle East. The possibility that the founding of the PLO might actually lead to a genuine war o f national liberation in the Middle East was seductive for the survivors of the Long March. When the first president o f the PLO, Ahmed Shuqeiri, arrived in Beijing in March 1965, he and his delegation were given a recep­ tion usually reserved for heads of state. The Palestinians were accorded audiences with Mao Zedong, Zhou Enlai and Liu Shaochi. At one meeting, Mao told the visiting delegation: You are not only two million Palestinians facing Israel, but 100 million Arabs. You must act and think along this basis. When you discuss Israel keep the map o f the entire Arab world before your eyes----[Do not be afraid if your people are killed] in liberation wars, for they shall have peaceful times during which they may * For a discussion of Chinese-Israeli relations, and the role of the 1956 war in turning China toward the Palestinians, see Mordehai Nahum is 'China and Israel*, New Outlook, Vol. 9, No. 6, August 1966, pp. 4 0 -4 8 .

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multiply. China lost 20 million people in the struggle for liberation. Today, China is tackling the problem o f an increase in population---Do not tell me that you have read this or that opinion in my books. You have your war, and we have ours. You must create the principles and ideology on which your war stands. Books obstruct the view if piled up before the eyes. What is important is to begin action with faith. Faith in victory is the first element o f victory— in fact, it may mean victory itself. We were only 70 persons when we started the [Chinese] Communist Party. Only I and another person [sic] are now left----Just the same, we achieved victory. And we are confident that we shall achieve victory in all the battles we are now fighting, especially in Vietnam.5 With the founding o f the PLO, and the possibility o f future guerrilla warfare in the Middle East, something with which the Chinese communists could identify, relations between the two grew closer. Since 1965 the PRC began to annually celebrate ‘Palestine Solidarity Day. When the Arab states were routed in the June 1967 war* Mao and the Chinese leadership became even more convinced, that only guerrilla warfare could carry the day in the Arab-Israeli conflict. The Chinese, who ranked the possibilities of popular uprisings throughout the world, considered Palestine to be an ‘excellent* prospect for a successful revolution. In the aftermath o f the 1967 war, virtually air Arab governments lost legitimacy. As a result, even in the Arab world, it was widely believed that only sustained guerrilla warfare could reverse the losses of the Six-Day War. Literally thousands o f young men flocked to the ranks o f the guerrilla groups associated with the PLO. The guerrillas were reported to have received from China anti-tank rockets and launchers and anti­ vehicle artillery. The rise in popularity of the guerrilla movement corresponded in time to the Cultural Revolution in China. Perhaps, it was only natural that the PRC and the Palestinians would grow closer and in 1968, the PRC encouraged Fatah to take over the PLO, and a western journalist disclosed that crucial meetings, in which Fatah plotted to take over the PLO, were held in the home o f the Chinese ambassador in Cairo.6 At the PNC session held in July 1968, representatives of the PRC were the only non-Arab delegates invited. At this same meeting, the Palestine national charter was amended and armed struggle was declared ft) be the only way to liberate Palestine and not surprisingly, the Chinese began to refer to the Palestinians not as refugees but as members of a national liberation movement.

FAILURE OF CHINESE-PALESTINIAN RAPPROCHEMENT

The period during which the Chinese tried to ally themselves with the Palestinians, ending about 1970, led to a bitter failure. There were simply too many impediments * Al-Anwar (Beirut), 6 April 1965 as quoted in John Cooley, op. cit.%p. 25. ^ Helena Cobban, The Palestinian Liberation Organization: People, Power and Politics (Cambridge: Cambridge University Press, 1984), p. 218.

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to any successful relationship. The Chinese were envious o f Soviet penetration into the Middle East and their envy turned into anger when Moscow and Washington attempted to repair their relationship in the seventies. Beijing blamed the US and the USSR for the Arab defeat in 1967. Communist solidarity was broken as the relationship between Moscow and Beijing became acrimonious. Furthermore, no Arab government appreciated Chinese support that was stronger for the PLO than it was for national governments. Egyptian President Nasser, especially, was critical of Chinas approach to the Middle East. He and his spokesman, Mohammed Heikal, engaged in loud debates with the Chinese and other Arabs about the efficacy of guerrilla warfare in a desert region. Heikal argued in a numbers of articles in the newspaper that he edited, al-Ahram (the Pyramids), that those who supported guerrilla warfare in the Sinai, did not know what they were advocating: [Guerrilla warfare] achieved miracles in its place, but is not, by nature, particularly applicable to the Egyptian front. This is because the land occupied by the enemy in Sinai has a population o f not more than 20,000, most of whom are nomadic tribes in the desert. The largest concentration o f population in all of Sinai is in the city o f al-Arisb where the population is not more than 5,000. Popular war is not possible without people in addition to the fact that [where it would be fought] is open desert.7 On another occasion, Mao sent Nasser a military plan of action which called for breaking up the Egyptian army into small units that would meld with the population and conduct a guerrilla war. Nasser was forced to reply that the Sinai was completely arid and you can see for thirty and forty miles. The independent brigades would stand no chance’.8 Their relations became so acrimonious, that at one point, Cairo refused to extradite a Chinese defector to Beijing. When a popular guerrilla movement could not score military successes in the late sixties, the traditional Arab governments were overjoyed. Though pro-Palestinian journalists were fond of citing the Chinese example of successive setbacks before final victory, the analogy did not elicit much sympathy. Furthermore, when the Palestinian movement turned increasingly to hijacking aeroplanes, the Chinese found their position untenable, unable to support the Palestinians. Unchecked Chinese support o f national liberation movements often had unforeseen results. If a guer­ rilla group grew in size and support as a result of Chinese backing, the Soviets would often increase their support of, and influence over, the same group which they may have neglected earlier. Also, the backing o f guerrilla warfare or insur­ gent groups often meant attacking governments that were impeding the penetra­ tion o f American and Soviet influence into the Middle East and hence according 7 Mohammed H. Heikal, The Cairo Documents: The Inside Story o f Nasser and His Relationship with World Leaders, Rebels and Statesmen (Gardcncity, NY: Doubleday, 1972), p. 283. 8 Al-Ahram (Cairo), 10 November 1967. 9 See, for example, al-Anwar (Beirut), 9 July 1967 and al-Muharrir (Beirut), 10 July 1967.

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47

to some Chinese Middle Eastern specialists, the PRCs policy was counterproduc­ tive. The relative success that the traditional Arab governments and their armies enjoyed in the 1973 war allowed Beijing to revert to supporting the traditional Arab governments. In deciding to revert to its traditional approach to the Middle East, the PRC was admitting failure in its attempt to penetrate the Arab world. Confining its activities to the traditional diplomatic channels meant that others, especially Moscow, would dominate the Middle Eastern agenda. As a result, since 1973 the Peoples Republic of China has not been a major player in the Middle East.

FOREIGN POLICY BY SPEECH, NOT ACTION

Between 1973 and 1981, Chinas foreign policy towards the Arab-Israeli conflict was virtually confined to oral support. This may have been in part a result o f domestic tur­ bulence and struggles within the CPC between Deng Xiaoping and Hua Guofeng. As a result China consciously withdrew from active support o f the Palestinians and limited itself to expressions of support for the Palestinian cause. For example, Hua Guofeng as premier o f the State Council of the Peoples Republic o f China sent the follow­ ing message on the occasion o f the convocation of the thirteenth Palestine National Council: On the occasion of the convocation o f the 13th conference of the Palestine National Council, 1 wish to extend, on behalf o f the Chinese government and people, our warm congratulations and five militant salute to the conference and the heroic people and aimed forces of Palestine. The Palestinian people are a great and dauntless people with an anti-imperialists revolutionary tradition. Since they fired their first shot in tfteir armed struggle on 1 January 1965, the Palestinian people have, upon the leadership o f the Palestine Liberation Organisation, upheld unity, persisted in struggle, defied brute force, and advanced wave upon wave___ Your struggle is a just one; it is not only bound up with the cause o f liberation of the entire Arab people, but also closely linked with the struggle of the people of the Third World against imperialism and hegemonism.. . . Determined to follow the behest o f their great leader and teacher, Chairman Mao, the Chinese government and people will unswervingly implement his revolutionary line in foreign affairs and firmly support, as they have always done, the just struggle of the Palestinian and other Arab peoples___10 Likewise, a few years later when the Knesset, Israels parliament, passed a bill in July 1980 proclaiming Jerusalem to be the eternal and indivisible capital’ the Chinese responded: 10 Xinhua Overseas News Service (Beijing), 13 March 1977.

48

William W Haddad and Mary Foeldi-Hardy This unbridled move by the Israeli authorities, so soon after the UN general assembly adopted.. .its emergency resolutions on the Palestine question, is an extreme instance o f contempt for the international community and a gross vio­ lation o f the UN charter and the relevant UN resolutions___ We fully understand the feelings o f the Arab and Islamic countries and peoples toward Jerusalem and sympathise with them on this point. We are firmly opposed to the Israeli authorities’ illegal act to change the dty’s status.. . . Israel must withdraw from all the Arab territories it has occupied since 1967, including Jerusalem.

By the end of 1981, Deng Xiaoping was firmly in control o f the Communist apparatus in Beijing and this rehabilitation, his third, represented his final victory over Mao’s chosen successors. Dengs climb back had begun in 1976 when the ‘Gang o f Four* was purged. In March 1981, a long-time Deng loyalist, Geng Biao, was appointed Defence Minister and Maos chosen successor for the CPC chairman, Hua Guofeng, was supplanted by another Deng supporter, Hu Yaobang. Another Deng supporter, Zhao Ziyang, became premier o f the State Council in the same year. With his position assured, one might have expected some modification in the PRC s policy toward the Arab-Israeli conflict but none was forthcoming. Beijing continued to extend only verbal support to the Palestinians ahd the Arabs. There were, however, small changes in nuance. Yasser Arafat became a regular visitor to the People’s Republic o f China in the eighties. On 31 December 1988, weeks after the Algiers Declaration where the Palestinians proclaimed statehood, the Chinese Foreign Ministry notified the political department o f the Palestine Liberation Organisation that the PRC had agreed to allow the PLO office in Beijing to be renamed the embassy of the state of Palestine. Since then the PRC began to address Yasser Arafat as president, not as chairman. In the last decade, however, there have been significant changes in Chinas approach to the Arab-Israeli conflict. As early as 1982, Zhao Ziyang tended to soften official policy when he recognised, in a speech in Cairo, Israels right to exist. Even though the PRC continued to insist that there was no question of establishing diplomatic relations with Israel, the recognition of the Jewish states right to exist was seen as a major change in Beijings approach to the Middle East.12 Perhaps, the most important change in its attitude toward the Arab-Israeli conflict has been Beijing’s economic glasnost. Eager for hard currency and influence, China began to export arms to the Middle East. A news story emanating from Pakistan estimated that China was exporting $2 billion worth of weaponry every year to the Muslim world.13 11 Xinhua, 6 August 1980. 12 When Israeli Communist Party leader, Meir Wilner, visited Beijing in 1987, he was told that until Israel changed its aggressive and imperialist foreign policy, there was no chance of diplomatic relations with China. 13 Mushahid Hussain, ‘China: Selling Arms, Winning Friends in the Moslem World’, Inter Press Service, Islamabad, 28 March 1989.

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Though it is unclear if any Chinese weaponry reached the Palestinians, Yasser Arafat and the Chinese leadership continued to support each other. In a state visit to Beijing in October 1989, Chinese president Yang Shangkun praised Arafat and congratulated him on the fact that the state o f Palestine had gained diplomatic recognition from more than 100 countries. In response, Arafat expressed pride in Palestinian-Chinese relations and warming to the occasion, Arafat gave his interpretation o f the govern­ ment crackdown in Tiananmen Square in June 1989: *We felt anxious when turmoil occurred in Beijing and were glad when China quelled the anti-government riot and controlled the situation.’ 14 Though Arafat was pleased with the PRC’s actions against the democracy protesters, Washington was not as pleased. The US immediately stopped all military sale$ to China, and in a curious turn of events Israel became the PRC’s most important foreign supplier of advanced military technology’.15 To facilitate the transfer o f military technology to China, in 1990 Israel set up an office of the Israeli Academy o f Sciences in Beijing. ‘The Chinese probably see Israel as a back door to US technology that the US won’t sell them.’16 Though China had historically portrayed itself as a firm supporter of the Palestinian cause, the advanced military technology that Israel could offer to the PRC was changing the latter’s approach to the Arab-Israeli conflict. An inkling o f this change was apparent in 1984 at a military parade in Beijing celebrating the thirty-fifth anniversary o f the Communist victory over Chang Kai-shek’s nationalists. ‘Surprised foreign military attaches in Beijing spotted self-propelled 105-mm guns and cannons o f Israeli design mounted on China’s T-59 tanks.’17 A further indication of the warming o f Sino-Israeli relations was the opening in 1988 of a Chinese travel office in Tel Aviv. Following the inauguration o f the Madrid Middle East Peace Conference in October 1991, the PRC apparently no longer felt bound by its traditional pro-Arab stance. The Chinese expressed an interest in participating in the multilateral Arab-Israeli peace talks scheduled to be held in Moscow in late January 1992. However, Israel had categorically stated on numerous occasions that no nation could participate in any talks dealing with Israel if that country did not have diplomatic relations with the Jewish state. .TheNew York Times noted that establishing diplomatic relations was not as problematic as it might have been ten years earlier, because of the decade-long his­ tory of Sino-Israeli arms and technology trading.18 Both countries had ample reason to want to open the diplomatic channels. Historically, Israel had been branded an outcast and establishing diplomatic relations with the world’s most populous nation would advance Israel’s sense of legitimacy. On the other hand, China could emerge from its international isolation after its violent suppression o f the pro-democracy protesters at Tiananmen Square in June 1989. 14 Xinhua, 4 October 1989. ^ Los Angeles Times, 13 June 1990. 16 Ibid.

17 Ibid 18 New York Times, 9 January 1992.

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The gradual warming of relations between China and Israel reached a climax in January 1992 when the PRC became the last of the five permanent members of the United Nations Security Council to recognise the Jewish state. The establishment of diplomatic relations apparendy had the approval of Arafat. The previous December the head of the PLO had visited Beijing and had asked the Chinese to participate in the upcoming peace talks. Since Arafat was aware of Israels position, that no country could participate in peace talks without recognising the Jewish state, one must assume that Arafat had tacitly endorsed the establishment of diplomatic relations. Within a year of establishing its embassy in Beijing, Israel received permission to open a consulate in Shanghai. One Washington newspaper reported that the PRC had no choice but to recognise Israel: In the view of many Chinese foreign policy experts, Beijing is worried that the collapse of the former Soviet Union will give too much influence to the United States. ‘We admit that the United States should play an important role in inter­ national affairs as a big military, technological and economic power,* according to a recent analysis in an internally circulated Chinese publication. ‘But the United States should not dominate everything.*19 A Hong Kong publication viewed these events in terms o f economic interests: [The Chinese] would happily supply either need—weapons of war or paraphernalia o f peace— for Arafat and other Middle Eastern clients now that the PLO-Israel agreement has given Peking a new chance to raise its profile in the region. When Middle East tensions were at their height in the 1970s and 1980s, Soviet, rathe* than Chinese, influence dominated the Arab camp. And during the long post-Cold War Middle East peace negotiations, it was the US that appeared to call the shots right up to the PLO-Israeli breakthrough and last month’s signing ceremony in Washington. If peace really does replace hostility in the Middle East, and confidence revives enough to spark a building and trade boom, Peking hopes to bid for a substantial share o f the contracts---- China seems keen to emphasise commercial rather than military ties with the Middle East as a whole___[In September 1992, an official Chinese journal published] a summary of Chinas rapidly expanding US $2.3 billion trade with the Middle East and its ambitions to cash in on the lucrative construction markets there. ‘It’s no coincidence that Arafat chose China for his first visit outside the Arab world since signing the [Oslo] accord’, a European diplomat said. ‘Now that the PLO looks to be on its way to having an actual state to run, it will need a patron. China is well positioned for the role.’ 19 The Washington Post, 25 January 1992. 20 Far East Economic Review (ftong Kong), 7 October 1993.

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51 CONCLUSION

The Palestinians and the Chinese have nominally had a relationship that goes back fifty years. Though broad in time, it has never been deep. While paying lip service to the notion of a Palestinian revolution, the PRC extended little credible support to the guerrilla movements fighting Israeli occupation. The Palestinians, in their turn, have historically seemed unaware of the struggle between the Chinese communists and the Kuomintang. The Chinese support for the Palestinians, and vice versa, has been minimal and where existed it has been mutually supportive. After Beijing replaced Taipei in the United Nations, the Palestinians could count on the verbal support of the PRC. Likewise, the communists could rely on Arafats support for communist domestic policy, for example, the crackdown on the Tiananmen Square demonstrators. In the nineties, with the signing of the Oslo peace accords between Israel and the PLO, relations between the Chinese and Palestinians took a new turn. No longer obliged to solely back the Palestinians politically, Beijing became interested in becoming a business partner to all of the parties in the Middle East.

China and Iraq: A Stake in Stability Jo h n C a la b re se

Chinas leaders have long acknowledged the strategic importance o f the Persian Gulf. Historically, they have regarded the Gulf as a focal point of great power rivalry, and have considered the regions vast energy resources to be a major source of this contention. Accordingly, they have traditionally opposed efforts by any foreign power, especially one hostile to China, to dominate the Gulf. This remains an important underlying objective o f Chinas policy towards the Gulf. In recent years, China has also developed economic interests in the Gulf. Increased economic involvement in the Gulf has heightened Chinas exposure to the regions problems and deepened its experience in dealingwith them. Coupled with the changes brought about by the end of the Cold War and the collapse o f the Soviet Union, this has led China to follow an approach towards the Gulf that is more nuanced and carefully managed than is commonly appreciated. This policy is partly motivated by the aim o f checking the exercise of unrivalled US power. Yet, what is seldom mentioned and perhaps little understood, is that Beijing’s policy towards the Gulf is also driven by Chinas need to shoulder responsibility as a rising world power and to fulfil its requirements for modernisation. China has a growing stake in the stability of the Gulf, and its policy towards Iraq reflects its struggle to ensure that this stake is protected.

LESSONS OF EXPERIENCE

Prior to the eighties, Sino-Iraqi relations were neither strong nor deep. China had few interests and very limited involvement in Iraq. China’s leaders viewed developments in Iraq, as elsewhere in the Gulf and the greater Middle East, primarily in global strategic terms: initially, as a part of the struggle against western 'imperialism’ and later, as a pan of the battle against Soviet ‘hegemonism’. Generally, China’s expectations were higher than its investment in Iraq, but those expectations were nonetheless frustrated. The most promising period in Sino-Iraqi relations occurred immediately after the July 1958 Revolution in Iraq. Chinese officials defined the revolution in terms of

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its international significance, and interpreted it as a blow to the west.1 They were encouraged by the fact that Iraqi communists had played a decisive role in the rev­ olution, and that, upon assuming power, Qasim had proclaimed a policy o f Arab solidarity and neutralism. China quickly extended recognition to the new govern­ ment in Baghdad. Thus began a sudden and enthusiastic’ friendship between China and Iraq, but one o f shallow depth and short-lived intensity. China’s support for Qasim was based mainly on the neutralist position he espoused. China had no significant economic interest in Iraq at the time. Iraq’s oil was signifi­ cant to China only insofar as foreign control over it constituted a residual form of western colonial domination.2 Similarly, China’s support to Iraqi communists was not substantial. Iraq’s Communist Party belonged to the international communist movement, but it was neither Chinas invention nor its tool. There is no evidence that China created or exacerbated the internal divisions that bedevilled the party. The friendship between China and Iraq wilted on the vine. The period of com­ munist ascendancy in Iraq was brief. Discredited by their excesses and weakened by factionalism, Iraqi communists initially came under attack from pan-Arabists and later from Qasim, who brutally suppressed them.3 If these political developments in Iraq contributed to China’s disillusionment, differences over foreign policy further strained relations. China welcomed Iraq’s formal withdrawal from the Baghdad Pact in 1959, but was displeased that Iraq did not completely dissociate itself from the west.4 Iraq, meanwhile, was dissatisfied with some o f the positions China took on regional issues. In 1961, i-fter some initial hesitation, China became the first commu­ nist country to extend recognition to Kuwait, which had declared its independence from Great Britain. Chinas endorsement o f Kuwait’s independence diverged from the position taken by Qasim (who insisted on Kuwait’s incorporation into Iraq), though it corresponded with the positions o f the other Arab League members.^ During the course of the 1960s, the Sino-Soviet rift became public and intensified. During this time, Iraq looked to the Soviet Union for arms, as well as for economic and technical assistance so as to limit western influence over its oil industry. This enabled the Soviet Union, which sought a progressive partner’ in the Gulf, to develop a more extensive relationship with Iraq than did China, a relationship that culminated in the signing o f the Soviet-Iraqi Treaty of Friendship and Cooperation in 1972.6 As Majid Khadduri observes, Iraq never became a Soviet ‘satellite’ and the leadership in Baghdad was determined to retain Iraq’s independence in foreign policy. Their 1 Yitzhak Shichor, The Middle East in Chinas Foreign Policy, 1949-1977 (Cambridge: Cambridge University Press, 1979), p. 86. 2 Ibid., p. 103. * Majid Khadduri, Republican Iraq: A Study in Iraqi Politics since the Revolution o f1958 (Oxford: Oxford University Press, 1969), pp. 114-32 and 141-44. 4 Ibid., p. 29. 5 Hashim Behbehani, Chinas Foreign Policy in theArab World, 1955-1975 (London: Kegan Paul, 1981), pp. 189-216. 6 See Galia Golan, Soviet Policies in the Middle East: From World War II to Gorbachev (Cambridge: Cambridge University Press, 1990), pp. 157-75.

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ability to fulfil this objective was enhanced by Iraqs increasing oil revenues.7 However, Chinese officials tended to view the Soviet-Iraqi relationship differently and they regarded Iraq as a possible outlet and outpost for Soviet penetration into the Persian GulP.8 This concern prompted China to focus its attention on Iran— an important player in OPEC and the Third World, and a bulwark against possible expansion of Soviet influence. Beginning with the establishment of diplomatic relations in 1971, Sino-Iranian relations improved and its trade with Iran steadily increased, outstripping that with Iraq.9 The eighties were marked by Chinas enmeshment in the global economy. Under the leadership o f Deng Xiaoping, Chinas foreign policy was propelled in new direc­ tions. One of the most striking changes was the emphasis Deng placed on developing a foreign policy that would complement his domestic economic reform programme. Another was his determination to craft a policy distinct from that o f the US and the Soviet Union. The hallmarks of this ‘independent’ foreign policy were China’s willingness to conduct normal relations with regimes o f all types and to place busi­ ness interests ahead of politics. China’s foreign policy pragmatism was evident in its approach to the oil rich countries of the Persian Gulf, whose rulers were an eclectic group: emirs, kings, Shi’a mullahs and a Ba’athist dictator. Whereas the eighties was a period of steady, if not perfecdy smooth, transitions in Chinas foreign policy, it was marked by political turmoil and military hostilities in the Gulf. The Iranian Revolution and the Iran-Iraq War put China’s pragmatism to the test. Following the Shah’s demise, China extended recognition to the postrevolutionary government of the Islamic Republic of Iran. In the context o f the Soviet occupation of Afghanistan and Soviet activity elsewhere in the Third World, China preferred a stable Iran to chaos, regardless of the nature o f the regime. This is not to suggest, however, that China endorsed, or even approved of, Iran’s subversive activities in the Gulf. On the contrary, China was concerned that Tehran’s Islamic revolutionary message might lead to discontent among its own Muslim population. If anything, these concerns reinforced the desire to set relations with the new regime in Tehran on a stable footing. The outbreak of war between Iran and Iraq posed a dilemma for China, which considered both countries its ‘friends’. China sought to resolve this dilemma by declaring neutrality and urging a negotiated settlement and the Chinese officials frequendy reiterated this position. They also expressed concern that the instability and conflict in the Gulf might lead to intervention by one or both of the super powers and these worries intensified towards the latter part of the war, when the US naval vessels entered the Gulf ostensibly to protect Kuwaiti oil tankers. Throughout the Iran-Iraq War, Chinese officials called for reconciliation and blamed the Soviet Union as well as the United States for contributing to the stale­ mate in the conflict. However, Chinese officials refrained from taking any initiative 7 Majid Khadduri, Socialist Iraq: A Study in Iraqi Politics since 1968 (Washington, D O The Middle Hast Institute, 1978), pp. 143-47. 8 Shichor, op. cit., pp. 174-75. 9 Ibid , pp. 33-34.

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55

to try to bring the war to an end. Meanwhile, Chinas economic relations with the Gulf countries, including Iraq, thrived. Chinas arms sales to Iran and Iraq were its most lucrative business in the Gulf. According to some estimates, Chinese arms sales to Iraq, concentrated in the first half o f the decade, totalled around $3 billion. However, Chinas economic activities in the region encompassed the civilian sector as well. Chinas engineering and labour contracts in Iraq were also significant. Midway through the war, as many as 20,000 Chinese labourers were working on dozens of infrastructure projects in Iraq.^ Two things are striking about Chinas policy towards the Gulf during the eighties, and specifically about its approach to the Iran-Iraq War. One, while actively pursuing business opportunities in Iraq and Iran, China was decidedly passive on the diplomatic front. Two, in order to protect its strategic and nascent economic interests in the Gulf, China attempted to remain strictly impartial in regional disputes. Beijing's approach towards the Iran-Iraq War— a bizarre concoction of principled neutrality’ and commercial opportunism— worked well for China. For all of its complaints about the positions taken by the two super powers towards the conflict, China indirecdy profited from their restraint. For, to the extent that the super powers contributed to containing the war, China benefited from their actions. Chinas own conduct during the war appeared to generate more controversy in Washington than in the Gulf itself and as the war drew to a close, China had managed to maintain its relationship with Iraq, while consolidating its relationship with Iran. During the nineties, China has remained a reluctant and cautious player in Middle East politics, and has continued to aggressively promote its economic interests in the area. The Persian Gulf has been the primary arena o f Chinas Middle East economic activity and diplomacy. This is partly a reflection o f the stakes for China, for its strategic and growing commercial interests in the region lie primarily in the Gulf. It is also a reflection of developments in the Gulf, which have made it increasingly difficult for China to remain an interested bystander. At the centre of these developments has been Iraq, whose August 1990 invasion o f Kuwait is directly responsible for having posed an unprecedented series of challenges and opportunities for China. The case of Iraq thus furnishes the clearest example of the extent to which China has managed to capitalise on, and avoid the hazards of, deeper involvement in the region. China’s policy towards Iraq has two interlocking dimensions. The first is concerned with addressing Iraq’s aggression against Kuwait and the problems related thereto, and is shaped within a multilateral framework. The second, which is concerned mainly with securing China’s long-term economic interests, is pursued within a bilateral framework. In the following discussion, these two aspects o f Chinas policy towards Iraq are treated separately, mainly for the sake of convenience, though in practice they are closely entwined. Bilateral relations between China and Iraq have been circumscribed by the multi­ faceted sanctions regime imposed by the UN Security Council upon Iraq following 10 See Lillian Craig Harris, China Considers the Middle East (London: I B Tauris, 1993)» pp. 186-88; and John Calabrese, Chinas Changing Relations with the Middle East (London: Pinter, 1990), pp. 144—45.

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the end of the Kuwait War. The basic parameters for dealing with Iraq are laid out in a scries of Security Council resolutions that have the force o f international law. Therefore, China, like the other permanent members o f the Council, shares respon­ sibility both for creating this system of restraints and for abiding by them. Yet, this is not to imply that Chinas interests in Iraq are identical to those o f the other Security Council members, or that its positions regarding Iraq are in perfect harmony with them. Instead, China has followed a self-proclaimed ‘independent* policy towards Iraq that refleas its attempt to balance competing interests. The substance and limits of this independent policy will be explored in the following.

THE MULTILATERAL FRAMEWORK: THE GEOPOLITICAL DIMENSION

When the United States introduced the ‘Iraq problem* into the UN Security Council in the fall of 1990, the Cold War had all but ended, the Soviet Union was on the verge of collapse, and the Chinese leadership was attempting to restore its international reputation (which had been severely tarnished by the 4 June 1989 Tiananmen Square massacre). In the immediate aftermath of the invasion, the extent of Saddams military ambitions were unknown. The foremost concern of Saudi Arabia and the other Gulf Cooperation Council (GCC) states, then and thereafter, was to effect Iraq’s withdrawal from Kuwait and avert the threat of further Iraqi aggression. Under these circumstances, it would have been naive or foolhardy for China to have acted other than the way it did: by condemning the invasion, acceding to sanctions, and urging a diplomatic solution. Nevertheless, saying all the right things did not prevent China from sustaining nearly $2 billion in lost contracts and remittances during the ensuing crisis.11 More awkward moments for China were yet to come. The first real test for China occurred during the Security Council deliberations over the use of force which China, in principle, strongly opposed. China resolved this dilemma by casting an abstention on UN Security Council Resolution 678— arguably the boldest display to date of its dissenting views. Yet, this rankled leaders of the moderate Arab coalition, not to mention Kuwaiti officials, whilst failing to satisfy fully the Iraqi leadership.12 The Gulf War divided the Arab world, and thus placed China in the awkward position of trying to maintain at least the pretence o f impartiality and when the Gulf War began, China urged a quick end to the hostilities. China (and the Soviet Union) quietly applied pressure on the United States in the Security Council, and might have influenced the US decision to suspend the ground campaign and negotiate a cease-fire with Iraq when it did. Meanwhile, Chinese officials manoeuvred behind the scenes to ensure that their objections to the use o f force did not irreparably damage relations with Saudi Arabia, the exiled Kuwaiti leadership, or other Arab states. Compounding 11 Craig Harris, ik id %p. 246. 12 Ibid.

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Chinas difficulties were the sizeable tangible interests it had at stake in Iraq. China was ultimately less successful in protecung these, than in preserving or restoring its political relations with the Arab states. The years since the end o f the Kuwait War have been the most complicated and re­ vealing in the history of Chinas relations with the Gulf countries. China’s commitment to the multilateral approach signifies its acceptance o f a trade-off between acceding to limitations on dealings with Iraq and enjoying leverage both in defining these limi­ tations and in conducting relations with the United States. The Security Council resolutions governing relations with Iraq have, on the one hand, constrained China, and on the other hand, have levelled the playing field for China. Although acceding to the collective authority o f the Security Council is dearly a suboptiinal choice for China, as it is for the Councils other permanent members, it offers China the only realistic possibility of checking the exercise of unrivalled US power. Chinas behind-the-scenes manoeuvring in the Security Council on the Iraq issue is pan o f the overall pattern of its cooperation and contention with the United States. China is prepared to surrender the initiative to Russia and France, and to align its position with theirs, in order to pressure the United States. For the same reason, China is determined to ensure, if possible, that the Security Council retains exclusive authority for evaluating, deliberating and responding to Iraq’s conduct. DIALOGUE WITH THE IRAQI REGIME

China has scrupulously avoided personalising the Iraq problem, and has maintained a dialogue with the Iraqi regime. Chinese statements critical o f Iraq have focused on specific behaviour, rather than on Saddam Hussein or members of his inner circle. Senior Chinese and Iraqi officials have exchanged frequent visits. Predictably, some o f these have occurred during crisis periods, initiated either by Iraq (to win Chinas suppon for its positions) or by China (to explore ways to counsel restraint and defuse tension). Yet, even during periods of non-crisis, the issues of Iraq's compliance with UN resolutions and the UN sanctions regime have dominated the agenda. Meetings between Chinese and Iraqi officials have nonetheless included discus­ sions on other subjects, especially bilateral economic cooperation. In August 1996, Shi Weisan, Director-General o f the Africa and West Asia Department o f the Ministry o f Foreign Trade (Moftec) led a Chinese business delegation to Iraq.13 Shi mentioned that Chinese firms were eager to help meet Iraq’s needs for machinery, building ma­ terials, telecommunications equipment and labour.14 In December 1996, shortly after the Security Council approved the United Nations Security Council Resolution 986 oil-for-fdbd arrangements’, China’s Assistant Foreign Minister Ji Peiding led a commercial delegation to Baghdad.1^ Six months later, another Chinese delegation 13 China Daily, in Foreign Broadcast Information Service Daily Reports, China (hereafter FBIS-CH1), 24 August 1996. The Independent, 12 November 1996. 15 See Foreign BroadcastInformation Service Daily Reports, Near East and South Asia (hereafter FBIS-NES), 11 December 1996; and BBC Daily Summary ofWorld Broadcasts, Middle East (hereafter BBC-SWB-ME), 11 and 17 December 1996.

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arrived in Baghdad to survey and discuss the possibility o f participating in the eventual reconstruction of Iraq’s industrial installations and infrastructure.16 It is important to mention that Chinese officials have refrained from catering obsequiously to the Iraqi regime in the interest o f securing an economic or politi­ cal foothold in the country. In fact, the initiative often appears to have come from Baghdad, which has lobbied China to wield its influence in the Security Council on Iraq’s behalf This was the primary purpose, for example, of Iraqi Foreign Minister Mohammad Sahhaf s August 1994 and March 1995 missions to Beijing. It is also important to point out that Chinese officials have sought to avoid identifying too closely with the Iraqi regime. They have carefully chosen their words in an effort to draw a distinction between being willing to engage the Iraqi leadership and seeming to approve of the regimes behaviour. Illustratively, Foreign Minister Qian Qichens words, in his public remarks, expressed ‘sympathy, ‘support’, and ‘friendship’ with ‘the Iraqi People (emphasis added). Thus, it is clear that China is committed to working with the current leadership in Iraq, albeit within the strictures of the UN-mandated sanctions regime. From the Chinese vantage point, neither personal mistrust of Saddam Hussein nor the question of the legitimacy of his rule is fundamentally at stake and the nature of the Iraqi leadership has not been the major constraint on Chinas dealings with Iraq. The main impediment is Iraqi behaviour and its attitude to the UN-mandated sanctions regime— over whose interpretation China has differed with its fellow Security Council members, yet to which China has nonetheless strictly adhered. OBJECTION TO THE USE OF FORCE

China has consistently objected to the use of force against Iraq. As previously men­ tioned, in the 1990 Security Council vote mandating military action to effect Iraq’s withdrawal from Kuwait, China dissented by casting an abstention. Since the end of the GulfWar, when periodic crises have erupted, China has counselled against military action. In November 1997, for example, Chinas Foreign Ministry spokesman, Shen Guofang, spoke out strongly in favour of continued reliance on diplomacy.18 Dur­ ing a visit by Gulf dignitaries to Beijing, President Jiang Zemin underlined China’s opposition to force in a public statement, saying: ‘China appreciates and supports diplomatic efforts made to ease tensions and seek a peaceful solution to the crisis, and it does not favour the use of force’.19 Chinese officials have objected most strenuously to the use of force in instances where they have judged the United States to have exceeded the U N mandate. For example, official statements, as well as commentaries in the Chinese press, denounced the August-September 1996 US missile attacks against Iraq as ‘unilateral act(s)’ that flouted international norms and risked making the situation in the Gulf more 16 FBIS-NES, 30 May 1997. 17 See Xinhua, in FBIS-CH1\ 25 August 1994 and 3 March 1995. ia Hong KongAgence France Presse\ in FBIS-CH1, 13 November 1997. 19 Hong KongAgence France Presse, in FBIS-CHI, 17 February 1998.

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unstable*20 Over time, international opposition to further military strikes against Iraq, both in the Arab world and in the UN Security Council, has grown. China has welcomed this development as a much needed restraint on US ‘power politics* and ‘hegemonic p ractices.1 APPROVAL AND OBSERVANCE OF ECONOMIC .SANCTIONS

China has approved and strictly abided by the sanctions regime imposed upon Iraq, but clearly has had reservations about its scope and duration. These misgivings stem not only from Chinas commercial self-interest (as will be seen later), but also from political, pragmatic and humanitarian considerations. Chinese officials are generally uneasy about sanctions, in pan because they view sanctions as coercive tools upon which the United States has increasingly relied to press its own agenda. To some extent, these sentiments are a reflection o f Chinas experiences as a target of sanctions. Chinese officials also have reservations about sanctions on practical grounds: they are sceptical that a sanctions-dominated approach will resolve the differences between the Security Council and Iraq, or between Iraq and its neighbours.22 Furthermore, China shares the concern of others about the adverse impact of sanctions on Iraqs population and on its long-term development prospects. The Chinese position on economic sanctions against Iraq boils down to significant, albeit subde, distinctions regarding when, and under what circumstances, they should be lifted. On these issues, Chinas preferences and judgements roughly correspond with those o f Russia and France, but diverge from those of the United States and the United Kingdom. China, like Russia and France, has appeared willing to settle for something less than Iraqi compliance with all of the relevant UN resolutions. Similarly, China, along with Russia and France, has called for the ‘early lifting’ o f sanctions. Nevertheless, China has been unwilling to stake out a bold position of its own regarding the removal of sanctions, at least not in public. When pressed by Iraq to announce a specific timetable for the removal o f sanctions, Chinese officials have been non-committal.24 During Foreign Minister Mohammad SahhaTs March 1995 visit to Beijing, Vice-Premier Rong Yiren pledged China’s support for the lifting o f sanctions at an ‘early but unspecified date. During the same visit, Qian Qichen indicated that China would help to ensure that sanctions were lifted ‘as soon as possible’.25 Whereas genuinely sympathetic to the plight of the Iraqi people and determined to preserve a working relationship with the Iraqi regime, Chinese officials are above all concerned 20 See Xinhua commentary, in FBIS-CHI, 4 September 1996; and Wen Pei Po editorial, in FBIS-CHI, 4 September 1996. 21 See, for example, Wang Xianyun, ‘United States has Suffered Successive Setbacks in the Middle East’, Liaowang, in FBIS-CHI\ 7 October 1996. 22 Xinhua, in FBIS-CHI, 16 November 1997. 25 See, for example, remarks by Foreign Ministry spokesman Shen Gao fang in BB C-SWB-ME, 8 May 1997. 24 See remarks by Chinese ambassador to Iraq, Di Gao, in AgenceFrance Prase, 10 February 1996. 25 Xinhua, in FBIS-CHI, 2 March 1995.

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about keeping the Sino-US relations on an even keel and going no farther in concili­ ating Iraq than the latters Arab neighbours. They are prepared to let others— Russia and France—take the lead in openly challenging the US position on Iraq and indeed, Chinese officials have stated explicitly that they support efforts by others (emphasis added) to work through the problems with Iraq.26 Nevertheless, China has firmly opposed the idea o f adding new elements to the existing sanctions regime. During the November 1997 showdown between Iraqi authorities and the United Nations Special Commission on Iraq (UNSCO M ), the United States introduced a resolution in the Security Council proposing a travel ban on Iraqi officials who block UN weapons inspections and a suspension of reviews o f oil sanctions. Although eventually voting in favour of the resolution, Chinas UN delega­ tion, in conjunction with its Russian counterpart, worked to dilute its final content.27 QUALIFIED SUPPORT FOR THE WEAPONS INSPECTIONS REGIME

Chinese officials have consistently supported the weapons inspection regime, though over time their misgivings about the scope of UNSCO M s mandate and aspects of its performance have grown. Chinas support for the formation o f the UNSCO M , and subsequently for its work, was largely attributable to the fresh memory o f Iraq’s aggression against Kuwait and the documented use of chemical weapons. This gave China little manoeuvring room to lobby for leniency on Iraq’s behalf on the weapons issue. In addition, U N SCO M ’s initial activities in Iraq uncovered weapons o f mass destruction (WMD) that were far more advanced and inventories that were far more substantial than anyone had previously believed. These revelations added to the pressure on China to see the process of dismantling Iraq’s W MD capability through to completion. Yet, from the Chinese perspective, the UNSCO M has always trod on sensitive ground. The weapons inspection process is the most extensive and intrusive aspect of the UN-mandated sanctions regime. However legally or otherwise justifiable, it constitutes a major infringement o f Iraqi sovereignty and thus has an inherent political dimension. This fact coupled with the inspection regime establishing a precedent concerned China. Over time, the UNSCO M operations in Iraq have become the main battlefront for determining when sanctions will be removed. From the time they first arrived in Iraq, the UNSCOM inspectors had to contend with Iraqi obstruction and obfusca­ tion. This persisted throughout the first stage o f the U N SCO M operation, which was chiefly devoted to disclosing and destroying Iraq’s W MD inventories and facilities. During the operation’s second stage— which began in 1994 and aims at institut­ ing a permanent WMD monitoring and verification system— the routine stand-offs between the UNSCOM and Iraqi officials have escalated into intermittent crises. 26 See remarks by Foreign Minister Qian Qichen, Xinhua, in FBIS-CH1, 24 August 1994. 27 See comments by Chinese Foreign Ministry spokesman, Shen Guofcng, Hong Kong Agence France Prenc, in FBIS-CHI, 13 November 1997.

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The cumulative impact of these crises has changed the dynamics of the UNSCOM inspection process and, among other things, the burden of proof has seemed to shift from Iraq to the UNSCOM . Although China has not been responsible for creating these new dynamics, it has moved cautiously and pragmatically to adapt to them. Over time, Chinese officials have shown greater sympathy for Iraq’s position and have echoed the complaints of the Iraqi regime that the UNSCO M has become politicised and that some o f its methods o f conducting inspections are provocative. They have referred obliquely to a US bias against the Iraqi regime, and have suggested that this impedes a final disposition of Gulf War related problems. For example, Jiang Zemin stated, other parties should objectively assess the progress made in nuclear inspections so as to create conditions for solving as soon as possible the problems left over by the Gulf war’.^8 During the February-March 1998 crisis, China sided with Iraq in calling for greater diversity in the composition o f weapons inspection teams. China has walked a tightrope between showing sympathy for Iraq’s position and avoiding giving the impression of pandering to the Iraqi regime. Foreign Ministry spokesman Shen Guofang conveyed China’s attempt to balance its interests in a policy statement which said, ‘the legitimate concerns o f Iraq as a sovereign state should be respected and the work of the special committee should be improved’.29 Chinese officials have frequently urged Iraq to earnestly’ and ‘comprehensively’ implement the relevant Security Council resolutions.30 In meetings with US Ambassador to the United Nations Bill Richardson during the February-March 1998 crisis, Qian Qichen reportedly expressed confidence in the UNSCO M and a desire to get the inspections back on track.31 China even voted in favour of establishing an importexport monitoring system to ensure that Iraq does not re-acquire a WMD capability once sanctions are lifted.32 Nevertheless, China seems willing to settle for a lower threshold of compliance by Iraq than the United States is prepared to accept. As a condition for setting a timetable for lifting economic sanctions, China appears to favour some sort of compromise with Iraq on the weapons inspections, rather than Iraq’s strict or absolute compliance. To some extent, this position reflects China’s growing frustration— one widely shared in the region and by some other Security Council members— with an inspection process that has no clear end in sight. Coupled with this frustration is the Chinese officials awareness that with every new crisis there is a possibility o f a renewed military confrontation. This would not only pose an acute dilemma for China, but would also yield consequences which may further destabilise the region. This last point is important, for what is frequently overlooked in reporting about China’s positions on these issues is its growing stake in the stability of the Gulf. 28 President Jiang Zemin, Xinhua, in FBIS-CH1’>2 December 1997. 29 Xinhua, FBIS-CHI, 11 January 1998. 30 See interview with Wu Sike, Director of the Foreign Ministry s West Asian and North African Affairs Department, Hong Kong Wen Pei Pot in FBIS-CH1\ 4 January 1997. 31 Xinhua, FBIS-CH1, 14 February 1998. 32 Reuters News Service, 28 March 1996.

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John Calabrese THE BILATERAL FRAMEWORK: THE ENERGY DIMENSION

Chinas economic stakes in the Gulf—particularly in the energy sector—are already significant and are growing. Chinas interest in the stability of the Gulf stems primarily from this fact. In evolving its policy towards the Gulf, China has looked to the first half of the next century, when the G ulfs energy resources are expected to become vitally important both to Chinas economy and to those o f its Asian neighbours. In order to understand fully the substance and significance of the Sino-Iraqi bilateral relationship—one of whose central components is cooperation in the energy sector— it is important to set the relationship in this broader context. THE ASIA-GULF ENERGY NEXUS

The energy outlook for the first half of the next century reveals three trends which, viewed in combination, help to explain the motivations and significance of Sino-Iraqi energy ties. First, Asian demand for oil and gas is rising, and is expected to continue to do so over the long term. This growth in demand, moreover, has not been, and is unlikely to be, matched by supply increases from within the region. As this gap has widened, Asian import dependence, especially on the Persian Gulf suppliers, has risen. In short, the Persian Gulf has become the common focal point of Asia-Pacific countries strategies to satisfy their future energy demand. Second, in recent years North American and European countries— the G u lf s tradi­ tional energy customers— have secured an increasingly large share of their energy imports from Atlantic Basin suppliers. In conjunction with the rising Asian demand for Gulf energy resources, this trend indicates that Asia is rapidly becoming the largest energy market for Gulf producers. Third, collectively, the countries of the Persian Gulf have an abundance o f energy resources— sufficient in amount and convenient enough in proximity to Asian coun­ tries to justify their attention and commitment, as well as their concern. Together, Gulf producers possess about 60 per cent o f the world s recoverable crude oil reserves and produce nearly 25 per cent of global oil supplies. As capacity expansion projects in the Gulf are implemented and as reserves of non-Gulf countries are depleted, Gulf producers' output level and share of global supply will soar. CHINA-GULF ENERGY TIES

That Asian countries— including Chinas historical rivals— are converging on the Gulf to secure their future energy supplies provides sufficient reason for Beijing to be attentive to developments in the Gulf. Accentuating the importance o f these developments is the fact that Chinas own energy future is tied to access to Gulf energy supplies. Over the past decade, Chinas oil consumption has increased substantially. In 1994, as a result of this growth in demand, China emerged as a net oil importer.

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Although China is not yet a major oil importing country, there is every indication that it will soon become one. With the continued expansion of Chinas economy, its oil demand is expected to climb from 3.8 million barrels per day (bpd) to as much as 7 million bpd by the year 2005. Chinese authorities remain committed to raising domestic production in order to keep pace with demand growth, but they have had to revise downward their own original estimates. According to some projections, Chinas crude oil imports may reach 1 million bpd by the year 2000.34 Chinese authorities regard Gulf producers as ‘key sources’ of crude oil.3^ Currently, about 60 per cent o f China’s oil imports come from the Gulf.36 Some analysts estimate that Chinas purchases o f oil from Gulf producers will exceed 90 per cent o f its total oil imports.37 China’s rapidly rising energy demand and increasing reliance on supplies from the G ulf to meet its energy requirements is, therefore, a major component of the overall growth o f Gulf-Asia energy interdependence. China’s growing relianceon energy imports has necessitated adjustment of its energy policy. In order to expand crude oil production and refining capacities, China has permitted greater foreign participation in its energy sector. China has also adopted a more creative and aggressive approach to securing a strategic foothold in overseas energy markets. Although China has cast a wide net, the establishment of long­ term energy relationships with the Gulf countries is central to its energy strategy. Accordingly, Chinas principal oil enterprises (for example, the China National Oil Company, CN O C) have negotiated long-term oil supply and production sharing agreements with G ulf producers, and are competing for contracts to undertake down­ stream projects in the G ulf countries. Meanwhile, Gulf based oil firms such as Saudi Aramco, the National Iranian Oil Company (NIOC) and the Kuwait Petroleum Company (KPC) are actively engaged in downstream projects in China.38

CHINA-IRAQ ENERGY COOPERATION

As the preceding discussion has shown, recent breakthroughs in Sino-Iraq energy rela­ tions should be viewed against the backdrop o f growing Asia-Gulf energy ties, of which the inter penetration of the Chinese and Gulf energy markets is an integral part. The following discussion will demonstrate that Sino-Iraq energy cooperation, though con­ sistent with these broader trends, is nonetheless distinctive. Iraq’s energy profile is ba­ sically compatible with that o f China: Iraq’s vast oil resources complement China’s oil deficiencies. Iraq has the world’s second largest proven oil reserves, after Saudi Arabia. Many of Iraq’s largest discovered fields have not yet been developed. In addition, Iraq 33 Middle East Economic Digest, 31 October 1997, p. 3, citing figures provided by the Centre for Global Energy Studies (CGES), London. 34 Middle East Economic Survey, 16 June 1997, p. A3. 35 See, for example, Xinhua, in FBIS-CHI, 28 October 1994. 36 O il and GasJournal, 28 August 1995.

* Ibid M For details, see John Calabrese, ‘China and the Persian Gulf: Energy and Security*, The Middle East

Journal, Vol. 52, No. 3, Summer 1998, pp. 351-66.

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has a n im pressive record o f oil field d e v e lo p m en t, th a t is, a h ig h e x p lo ra tio n success

rate.39 There is, however, no history of energy cooperation between China and Iraq to speak of. During the eighties, the most lucrative economic links that China forged with Iraq in the civilian sphere were labour and engineering contracts for infrastructure projects. There was comparatively little trade in oil between the two countries; also, China was not engaged to any significant degree in Iraqs energy industry. The period of rapid growth in Chinas oil imports has coincided with the period during which international sanctions have been imposed on Iraq. Paradoxically, these sanctions have severely constrained and indirectly facilitated the development of Sino-Iraq energy cooperation. Sanctions have stifled Iraq’s oil export trade and foreign participation in its energy industry. They have produced a very narrow, albeit level playing field. In recent years, China and Iraq have entered this playing field with a similar goal, albeit different primary motivations. As will be shown, China and Iraq have pursued and cemented a long-term energy relationship. However, whilst China’s principal motivation for doing so is economic, Iraq’s* is mainly political. In June 1997, China and Iraq signed a contract to joindy develop the Al-Ahdab field in Wasit Governorate, 250 km southeast of Baghdad. The agreement also called for setting up oil production and collection, gas and water treatment, electricity generating and services installations, and supply communications, control and civil work equipment.40 Under the terms of the contract, a Chinese consortium led by the China National Petroleum Corporation (CNPC) and Norinco will supply techno­ logy, equipment and management personnel. Development costs for the project are estimated at $ 1.2 billion and operating expenses at $600 million, over a development period of twenty-six years and a production period o f twenty-two years.41 The Iraqi leaderships efforts to conclude energy cooperation agreements with Chinese and other foreign firms has two political objectives: in the short term, the weakening of support for sanctions; and in the longer term, the preservation o f Iraq’s foreign policy independence through control over its energy assets. Iraq’s parcelling out o f oil development contracts to Chinese (as well as Russian and French) compa­ nies is a strategy both for undermining the political consensus which keep sanctions in force and for diversifying its foreign relations. During fall 1996, when Baghdad’s oil diplomacy intensified, Iraqi officials stated bluntly that they considered the possible signing o f preliminary oil contracts with foreign firms to be a step towards breaking the embargo.42 Reacting to the Al-Ahdab deal, Iraq’s Deputy Prime Minister Tariq Aziz declared boldly: ‘The strengthening of relations between Iraq and China will heip restore a balance o f power on the international scene, in the face o f the policy of hegemony’.43 Iraqi authorities made no pretence to conceal the fact that contracts were apportioned among Security Council 39 Issam Al-Chalabi, 'Prospects for Iraq’s Oil Industry’, in John Calabrese (Ed.), The Future o f Iraq (Washington, DC: The Middle East Institute), p. 51. 40 BBC-SWB-ME, 26 November 1996; and Xinhua, 5 June 1997. 41 FBIS-NEA, 5 June 1997. 42 BBC-SWB-ME, 26 November 1996. 43 Quoted in Asia Times, 6 June 1997.

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members which were sympathetic to Iraq. Lt-General Amir Muhammad Rashid, Iraq’s Minister of Oil, explicitly stated that the distribution of oil contracts was based on the show o f support for Iraq in the UN Security Council.44 Although there is no definitive evidence of a quidpro quo, perhaps not coincidentally, Qian Qichen arrived in Baghdad five days in advance of the announcement of the Al-Ahdab deal, offering assurances that China favours early lifting of sanctions.45 One should neither minimise nor exaggerate the significance of the Al-Ahdab agreement. This arrangement signifies Chinas successful penetration of the Iraqi energy market. In addition, the project is a multifaceted, long-term undertaking that demonstrates Chinas willingness to make a major financial commitment and take even higher risks than in the past. It is important, however, to put the Al-Ahdab agreement in perspective. Iraq’s ‘choice* oil concessions have gone to firms in Russia and France: countries with which Iraq has traditionally had stronger relations than with China, and countries which have played leading roles in the Security Council in arguing for more flexible and lenient treatment o f Iraq. The Al-Ahdab oil field is of relatively modest size, with a production capacity o f only about 80,000 bpd.46 Other fields that Iraq offered for joint development to foreign companies have much larger capacities. For example, the Majnoon, Nahr Umr, West Qurna and Halfaya fields have a total estimated capacity of 2 million bpd. Iraqi authorities reserved the Majnoon and Nahr Umr fields for the French firms Elf and Total. The second phase o f West Qurna was assigned to a Russian consortium. Although Chinese and Iraqi officials have reportedly discussed jointly developing the Halfaya field (whose production capacity is estimated to be about 250,000 bpd), it is not clear that Iraq is prepared to offer this field to China. Whilst Iraq has many suitors, China has other energy partners in the Gulf. In fact, the basic thrust o f Chinas oil policy is to diversify its foreign sources of supply to the extent possible. China already buys significant quantities of oil from Gulf producers other than Iraq, and over the past several years has signed contracts with them to substantially increase the volume of supplies from them. In 1995, China signed a contract with Oman to boost purchases from less than 20,000 bpd to 100,000 bpd the next year. In 1997, China announced that it had agreed to increase Iranian oil imports from 70,000 bpd to 100,000 bpd in 1998 and to double the latter figure by the year 2000.4^ Chinese firms are also vigorously pursuing long-term supply contracts with non-Gulf producers. In fact, the deal to develop the Al-Ahdab field in Iraq was signed the same day that the China National Petroleum Corporation (CNPC) and Kazakhstan announced plans to joindy develop the Kazak Aktyubinsk field.48 Just as Iraq is determined to distribute oil contracts among foreign firms in a manner that maximises its foreign policy independence, China is committed to diversifying its foreign sources o f oil to ensure its energy security. 44 BBC-SWB-ME; 3 June 1997; and FBIS-NES. 30 May 1997. 45 The Washington Post. 24 May 1997. 46 Oil and GasJournal, 21 October 1006, p. 2. 47 Agmce France Presse, 11 June 1997; and Middle East Economic Survey, 16 June 1997, p. A3. 48 Asia Ttmes, 6 June 1997.

John Calabrese

66 CONCLUSION

Chinas policy towards Iraq, which is subsumed under its approach towards the Gulf and the greater Middle East, reflects its overall foreign policy objectives. In gen­ eral, Chinas foreign policy is intended to serve two overarching purposes: foster­ ing the trend towards global multipolarity and fulfilling the country’s modernisation requirements. The Persian Gulf is a region where Chinas geopolitical and economic interests intersect. It is the region where the United States, by projecting its unrivalled military power, has affirmed its global paramountcy. It is also the region where China’s eco­ nomic interests have grown, and will continue to do so. China is pan o f an emerging global energy equation that is marked by increasing energy ties between the G ulf and Asia-Pacific regions. The possible strategic and economic implications o f this trend for the Asia-Pacific region is itself a major factor shaping China’s policy towards the Gulf. Yet, China too is becoming dependent on Gulf energy supplies. This represents a qualitative change in China’s stakes in the Gulf. In an effort to promote and protect its interests in the Gulf, China has attempted to formulate a policy that satisfies two criteria: ‘independence’ and ‘impartiality’. The criterion o f‘independence’ is intended both to distinguish China’s policy from that of the United States and to blunt the effect of unchallenged US power in the region. The criterion o f ‘impartiality’ is intended to enable China to avoid being drawn too deeply into conflicts between Gulf rivals, and thus protect its long-term economic interests. These concerns and tendencies are graphically illustrated in China’s policy towards Iraq. This policy is conducted through both multilateral and bilateral channels. In the multilateral context, China has accepted the trade-off of limiting its dealings with Iraq in exchange for having some bargaining leverage over the United States. China has maintained at least the appearance o f ‘strict objectivity’ in interpreting and applying the terms of the relevant Security Council resolutions. In practice, this ‘objectivity’ represents China’s efforts to balance its competing interests. China has adopted a ‘principled’ position in consistently objecting to the use of force against Iraq, but has refrained from using its veto power to oppose it. Taking careful readings o f the barometer of Gulf Arab and world opinion, China has ad­ justed its position on economic sanctions, calling for their early’ removal, but with­ out offering a specific timetable or a clear indication o f its expectations regarding Iraqi behaviour. Similarly, China has referred, albeit obliquely, to a US ‘bias’ against Iraq, whilst urging Iraqi leaders to cooperate fully with the United Nations. China has supported diplomatic efforts made by other Security Council members and UN Secretary-General Kofi Annan, yet has chosen not to launch any initiatives o f its own. In the bilateral context, China has followed the practice o f business-as-usual de­ spite the extraordinarily unusual circumstances. Chinese officials have maintained a working relationship with the Iraqi regime. The issues o f UN sanctions and Iraqi compliance with UN resolutions have been unavoidable, but have not monopolised the Sino-Iraqi agenda. Although Iraqi officials have intensely lobbied their Chinese

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counterparts, the latter have not caved into the formers demands. The political sup­ port China has extended to Iraq has more than paid for itself in the form of a share in the development o f Iraq’s energy sector and possible future participation in the reconstruction of Iraq's severely damaged infrastructure. Chinas policy towards the Gulf in recent years, exemplified by its policy towards Iraq, is largely a continuation of the approach it followed during the eighties. This policy is aimed primarily at placing politics in the service o f commerce. This policy consists o f passive Chinese diplomacy and aggressive promotion o f Chinese economic interests. It is a policy marked by Chinas heightened confidence in its role as an emerg­ ing world power, and by Chinas increasing willingness to accept the responsibility that accompanies it.

Sino-Turkish Relations: Preparing for the Next Century Mehmet Ogutcu

Over thepast two decades, China has transformed itself from a dormant» introspective giant into a dynamic powerhouse of major significance to the world economy. Its eco­ nomy is the only major, rapidly growing one in an otherwise recession-hit world. West­ ern exporters, multinationals and emerging market investors are looking at China as if it were a new El Dorado. Largely due to the slowpace of the liberalisation process, with economic policy oscillating between socialist conservatism and capitalist half mea­ sures, China has so far been spared the direct consequences o f the Asian monetary and financial crisis. The strategic centre o f gravity is also shifting toward China and other dynamic Asia-Pacific nations, bringing about fundamental changes in the traditional balance o f power equations. In next twenty years, Asia, currently home to more than half the worlds populace, will most likely have five o f the worlds six largest national economies, the US being the other. China has emerged as the rising star of the entire region, economically and politically. In ancient times, China was so powerful that its people became accustomed to thinking of their country as the Middle Kingdom, the centre around which all else revolved. O f late, similar thinking seems to be in vogue. Turkey and China, both situated at the opposite ends o f Asia, but linked by the vast Eurasian space, strive for the creation of a twentieth century version of the ancient Silk Road that linked China to the Middle East and Europe by way o f Central Asia. Both are great powers, setting out ambitious goals for their regions in the next century. The Turco-Sino relationship has been based on a strategic assessment o f their respective positions in the modem world. To better assess the future prospects of the Turco-Sino relations to move forward beyond 2000, one must first comprehend the enormous changes that are taking place in East Asia and particularly in China, with profound impact on the world economy and the geopolitical landscape. This paper traces the roots of the long history o f relations between the two countries and examines the prospects for energy diplomacy initiadves in the Middle East and Central Asia upon which both countries are becoming increasingly dependent for their future energy supplies. The final section proposes a number of future policy options aimed at ensuring a greater Turkish engagement with China in the early years o f the twentyfirst century.

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A POWERHOUSE FOR GLOBAL ECONOMY

China would certainly qualify as a super power if for no other reason than its popula­ tion: one out o f six persons in the world lives in China. With foreign funds flowing into China at the rate of nearly $44 billion (1997) per annum, China ranks second only to the US as a destination for capital. A large part of foreign direct investment comes from overseas Chinese located mainly in Hong Kong and Southeast Asia. The most tangible economic manifestation o f Chinas open door’ policy can be observed in its trade performance. In 1997 Chinas foreign trade totalled $325 billion, with exports increasing to $182.7 billion and imports to $142.3 billion, representing 21 per cent and 3 per cent growth respectively over 1996. This gives a trade surplus of $40.4 billion, an increase o f $28.2 billion over the previous year. China has become a major force in the world economy, with its total trade exceeding 40 per cent o f its GDP, higher than that o f the US and Japan. Yet, the other side of the coin tells a different story. A sizeable proportion of Chinas 1.2 billion population is currently living below the poverty line—a situation that is causing concern in the rest of the world that, with the very rapid growth of recent years and the reform of the state-owned enterprises, the gap in living standards will increase and may lead to potentially dangerous social consequences. While Chinas economy is performing well with inflation continuing to be moderate, economic growth on target, and foreign exchange reserves rising sharply, the economic performance varies widely among Chinas disparate regions with the northeast industrial heartland severely depressed and unemployment on the rise as economic reforms take hold. China is already divided economically between the prosperous southern provinces and the relatively poor northern and western provinces. Per capita incomes arc only about half the level o f those in Brazil, for example, with large, unfulfilled needs and serious inequalities. The World Bank estimates that 350 million people still live below the poverty line ($1 per day). Labour productivity is among the lowest in the world, only slighdy ahead o f India’s and only 10 per cent of that of the US. This tendency to confuse performance with prosperity, or total size with individual incomes, is evident in the debate over whether or not China should be classified as a developing nation for purposes o f membership in the World Trade Organisation (WTO). How can it be ‘developing*, one might ask, when it is expected to be the biggest economy in the world in the initial years o f the next century? But in reality, how can it be classified as ‘developed* when the average income is around $600 a year. The Chinese economy is likely to become one o f the most important locomotives for the world’s economic growth; but, China would equally be a potentially de-stabilising factor, should its economic growth falter. It is, therefore, considered important to involve China in all important international and regional issues so that it can learn to play by global rules and will have a vested interest in the maintenance o f the international order. The World Bank has also cited evidence which explains why China will emerge as the worlds largest economy by the year 2010 or, if one includes the Greater Chinese Economic Area (comprising China, Taiwan and Hong Kong), by the year 2002. China’s present reform plan, building what it calls a socialist market

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economy, depends heavily on the expansion o f the market economy and private investment, but gives government planners a pre-eminent role in orchestrating overall development and one party political rule. Chinas increasing presence as a powerful competitor both as a buyer and as a supplier of goods and services affects the global market. Chinas population accounts for one-fifth of the world s total population and is still growing strongly in absolute terms. China has the world’s third largest territory, and it is already the second largest consumer in the world energy economy. China is also the world’s third largest energy producer after the US and Russia. It is the worlds second largest coal producer and consumer, sixth in terms of world production of oil, and the world s largest producer of electricity power. Its rapid development has been possible at a heavy environmental cost, domestically and globally as China is the worlds second largest producer of carbon dioxide emissions and is projected to be the largest over the next few decades. Economic historians estimate that Chinas economy was the largest in the world until the late nineteenth century. By 1949, it had been overtaken by the US, the UK and the USSR. However, it was not fully integrated in the world economy— even though it then accounted for 35 per cent o f the worlds population, compared with about 20 per cent today. China is now a major trading power and a strong competitor in the global economy and as it grows, so will its influence in the global system. But it will also become increasingly dependent on the rest o f the world. Because of its huge population, nearly five times that of the US, China does not have to be a rich country to have the world s largest economy. By 2030, Chinas economy is expected to be the largest in the world, according to the China Academy of Social Sciences. World Bank economists, using the purchasing power parity measure, believe that the real value of the yuan is closer to four times the official value. In spite o f the many problems in opening up its economy, there is a demonstrable commitment on the pan o f the Chinese government to continue the reform process. This reform process appears irrevocable and is expected to continue inespective o f changes in the political leadership. The Five-Year Plan for 1996-2000 reaffirmed the importance of Chinas economic expansion by calling for 8 to 9 per cent annual GDP growth through 2000 and a further doubling o f GDP during 2000-10. Evaluation of the implications of Chinas rapid development depends largely on whether or not the current scale and pace o f economic transformation is sustainable. A series of determining parameters include the effectiveness o f continued regulatory reform, trends in infrastructure development, rates of industry restructuring and reform of state-owned enterprises. Alternative approaches to addressing these challenges are likely to generate different long run outcomes, both for Chinas growth path and for global product and commodity markets. Since 1979, foreign investment has played a critical role in internationalising Chinas economy and trade, introducing capital, technology and management and marketing skills, and instigating microeconomic reform. In addition to large in­ vestors, thousands of small and medium sized companies, particularly involving over­ seas Chinese have invested in China over the last decades, making a major contribution to output, employment and export growth. Hong Kong alone provided 60 per cent o f the $167 billion in foreign direct investment accumulated till the end o f 1995,

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although between $25 billion and 30 billion o f this should be deducted to account for ‘round-tripping, that is, Chinese capital going offshore and re-entering as foreign investment to benefit from incentives. Foreign direct investment is growing most rapidly along Chinas eastern seaboard. However, companies are increasingly looking inland for lower costs, less intense competition, proximity to raw material inputs and attractive incentives. As infrastructure improves, foreign direct investment in regional China could expand rapidly. The rate o f growth of investment is likely to slow down but still remain at relatively high levels. Chinas success in the long term in continuing to attract and retain foreign funds will depend largely on its ability to address major issues related to the business operating environment and to its response to investment liberalisation moves throughout the Asian region. The low level o f market capitalisation (equivalent to 15 per cent of GDP in 1996) and the manner in which the Chinese financial markets operate have severely reduced the impact o f the Asian crisis and stock market upheavals on China. While the Chinese economy may have been spared the direct effects of the Asian crisis, the devaluation o f its neighbours' currencies are bound to have an impact on its external trade, in which price competitiveness is its principal advantage. For decades following the Second World War, Chinas economy remained isolated and essentially dormant, at least as far as trade was concerned, while the region around it developed rapidly— first Japan, then Hong Kong, Korea, Singapore and Taiwan, and finally, the relative late boomers like Thailand, Malaysia, Indonesia and the Philippines. Today, China is engaged in a similar process of rapid development, but on an unprecedented scale that dwarfs its neighbours. In the process, China is acquiring a new and powerful leverage over most o f its Asian neighbours. Even Asian governments, critical o f Chinas authoritarianism and human rights record or fearful of its ambitions, see their future economic performance tied to that of China and its 1.2 billion consumers. So, while East Asian governments may wish for the containment o f Chinas regional influence, they wish equally for the robust economic growth that is fuelling Chinas rising power. If Chinas economy were to crash, every economy in Asia would feel the shock waves at least initially. It is the Asian countries, in large part, that have invested in Chinas growth. Over the past four years, foreign companies have poured more than $340 billion into China to build factories, buy properties and start business ventures. Over 70 per cent o f these funds have come from Asian companies. Exports from other Asian countries to China and Hong Kong, where many goods pass through on their way to China, have jumped from $18 billion in 1984 to $120 billion in 1994. However, Beijing has become vulnerable to declining foreign investment and increased competition for its exports. Asian investors, in particular, are expected to shy away from investing additional money into China. Foreign investment, after reaching $44 billion in 1997 as a number o f contracts signed in previous years came to fruition, is expected to decline. Exports are expected to continue to grow, but at a slower rate. It is almost as is China were operating in a different hemisphere from that o f its Asian neighbours who are now engulfed by a financial crisis. While the world has been closely watching Chinas emergence as a major player in international trade— now among the worlds top ten traders— and also as an absorber

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of international capital— second only to the United States, Chinas enterprises have been quiedy increasing in importance as a source o f international capital. China has foreign direct investment in virtually every country around the world and across the whole spectrum of economic activities, from merchant banking to fish processing and mining exploration. According to the International Monetary Fund, China ranks as the eighth most important supplier of capital on world markets, accounting for 2 per cent of the total global flow. Developing countries are usually perceived as being short of capital and consequently, after due allowance for political risk, being able to offer rates of return sufficient to attract inflows of foreign capital. In this scenario, as a developing country, China would be expected to be an importer o f capital and not exporting capital abroad. The Chinese economy, however, has a gritty underside: an industry left over from the old days of state planning, tens of millions of underemployed workers and insolvent banks trying to wean Chinese companies from an irrational system o f ‘loans’ that are still effectively state handouts. All these factors make China’s economic performance in 1998 somewhat unpredictable. In a sense, the Asian financial crisis could not have come at a worse time for China. Planned sell-off of the state run sector, leading to a large number of layoffs, with the aim of essentially restructuring China’s system of ownership within three years. Ironically, some commentators believe that China may have sown the seeds of its own misery—following its competitive devaluation o f the Yuan by about one-third in 1994, China may have set into motion the devaluation that now plagues much of East Asia. Any move to further devalue currencies in Asia in order to make local exports more competitive is likely to trigger another, even more dangerous round of capital flight. Attention is now focussed on China, which may be considering a new move to ‘catch up’ with its neighbouring competitors. If China devalues the Yuan again, in troubling parallel with international economic impulses of the thirties, it will lead to a collapse o f the fragile Asian financial stability upon which longer term policies must be built. All Asian countries, especially China, have been cautioned by the international community not to refuel the currency fires. The Chinese leaders have deferred banking reform for years, but the Asian meltdown has startled them into action by demonstrating the dangers of loose financial supervision and crony-style business. China announced a radical overhaul of its banking sector in January 1998 to streamline the country’s over-staffed commercial banks and write off billions of dollars of bad debt.

GEOPOLITICAL REALIGNMENT

After a long period of international isolation and economic poverty, China has re­ gained self-confidence in its foreign relations particularly with the neighbouring countries. It can now openly challenge the US and strike geostrategic deals with Moscow. Japan has to be careful in its handling o f China so as to maintain good

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terms with Beijing. The European Union has mapped out a long-term strategy, call­ ing upon the member countries to make up the time lost in competition with the US and Japan for the Chinese market. The Chinese amply demonstrated that they can master a skilful economic/trade diplomacy to wrestle political concessions from the competing western nations in return for commercial deals. In the post-Cold War context, Chinese foreign policy perspectives are increasingly being shaped by the demands of economic development and the shifting balance of power in Asia. Chinas foreign relations, whether with western countries or develop­ ing countries, are clearly directed by an economic imperative: the need to acquire expertise and experience in such areas as technology transfer, vocational training, re­ form of industrial management, access to international capital, foreign markets and investments. It would not be an overstatement to argue that Chinas foreign policy in the nineties and beyond will continue to be largely, though no exclusively, determined by the country’s economic development needs. Historically, whenever a country of Chinas potential emerges into great power status, a period of adjustment follows— both on the part of the emerging power and on the part o f other countries, particularly those in the same region. For this reason, successful engagement is a genuine two-way process. It must be anchored in the constructive pursuit o f common interests and a strong commitment to enhanced cooperation. As China adjusts increasingly to the region in which it exists, and the Asia-Pacific engages China more extensively in the regions affairs, bilateral and regional relationships based on shared interests and mutual respect will remain the only sure foundation of sustained prosperity and stability. The relatively successful Hong Kong handover and the warming of Sino-US ties have encouraged increased assertiveness. So have the recent economic problems afflicting the Asian tigers. From Beijings post-Cold War perspective, Asia is seen as the centre of Chinese power and influence, the nucleus o f ever expanding circles radiating outwards in all directions. Chinas perception o f international affairs is no longer dependent on political and ideological considerations. Its strategic objective in foreign and security policy is designed to serve national interests. In this regard, it may be noted that economic and social development have clearly become the most important issue on Chinas agenda. Under its present leadership, China has continued to make efforts to resolve conflicts with its neighbours, agreeing on reductions in troop deployment along borders and other confidence-building measures with Russia and its Central Asian neighbours. China has adopted a less confrontational and even conciliatory stand in resolving its territorial disputes with India and Japan. Its relations in the South China Sea, however, while peaceful, continue to be uneasy. China seems to have been driven by a desire to be treated as a major power commensurate with its growing economic and military clout. Yet, in many ways China appears to be a reluctant participant in the international system, unwilling or slow to accept the responsibilities that are commensurate with being a regional or global power. If China wants to influence international norms, it must participate actively and responsibly in their formulation and in their observance. As crude imports become critically important for the Chinese economy, one thing becomes clear that China will be as robust as other oil dependent countries in securing

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its access to oil supplies in other regions. To meet its needs, China may look not only toward the Middle East, but also toward Central Asia, Siberia, Africa or, to a lesser degree, Southeast Asia. There are concerns that it could trade arms for oil with the Middle East or could use force to secure oil from Southeast Asia, especially from the South China Sea. This growing need for oil, according to some analysts, may explain Chinas assertion of its sovereignty over the Spratly Islands and other specks in the South China Sea. These islands, which are claimed in whole or in part by China, Vietnam, Taiwan, Malaysia, the Philippines and Brunei, reportedly lie atop substantial undersea oil and gas resources. The question is whether China would risk upsetting its Southeast Asian neighbours over the South China Sea disputes when it is at the same time trying to reassure its neighbours, attract investment from, and secure markets in, the region. The answer to that question may be determined in part by the continued stability of the power structure in post-Deng China and also by Chinas need for foreign investment and technology. Security of shipping routes in East Asia is of paramount importance to China as almost all of the incremental Chinese oil demand will have to be imported from the Persian Gulf and other areas to the west. As is true, most o f its future oil imports will be required to pass through the strategic Malacca Straits and into the South China Sea. The energy potential and geopolitical importance o f the South China Sea region as a maritime route has resulted in jockeying between surrounding nations to claim the sea and its resources for themselves. Apart from their direct impact on oil and gas development rights in the region, these competing claims also have the potential to affect maritime trade in the South China Sea. As in the case of Korea, Hong Kong, Singapore, Taiwan and Japan, China is heavily dependent on international sea and air links for trade, including fuel and industrial raw materials. Aware of Chinas emergence as a regional super power, the Asian states are exploring ways to deal with their big neighbour. But each country sees different opportunities and perils. Many nations in Southeast Asia are either insular, peninsular or have extended coastlines. Since land transport infrastructure is not well developed, most of the trade is carried out by the sea route. Along the crude export route out of the Gulf and toward Asia, the congestion in Southeast Asian shipping lanes has been a matter of serious concern, particularly as a result t>f increased oil flows to China and other Asian oil importers (Japan, Korea and Taiwan). China must accord priority to providing its booming cconomy with the adequate energy it requires. Until the early nineties this was not a problem since the country was well placed to meet its energy needs from domestic production. With time, however, the situation has changed so that the country is now forced to import energy, particularly oil. In the years to come, one of the top priorities o f the Chinese government will be to guarantee this supply stability o f energy. In order to continue to meet its energy requirements, the Chinese government is pursuing two strategies: (a) promoting the development o f new oil and gas reserves in the country— both within China itself and in the seas around China; and (b) expanding political and economic relations with regions such as the Middle East, Russia, Central Asia and Africa through trade and direct investments in the petroleum upstream sector.

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To establish its long distance pipeline from the Xinjiang region to the demand areas o f the eastern seaboard, China has every reason to increase the scale o f Tarim s proven oil and gas reserves. So far, the limited success in exploration has not convinced the government to approve the proposed long distance pipeline development plan. In this context, Chinas approach to secure Central Asian and East Siberian oil and gas resources can be readily understood. Besides these projects for East Siberian and Central Asian oil and gas exports to China, there is a strong possibility o f Sakhalin offshore oil and gas exports to Heilongjiang, Jilin and Liaoning Provinces in Northeast China. It is very difficult to predict exactly when the import of Russian and Central Asian oil and gas will begin, but the earliest date that can be projected is between 2005 and 2007, assuming early completion of the trans-boundary pipeline. In short, importing Russian and Central Asian oil and gas through pipeline development (and linking the Kazakh and Turkmen pipelines with those in Xinjiang) is the choice China has to make to achieve a long-term energy supply balance and security. A closer look at these two approaches reveals that China attaches more importance to security policy considerations at times than to economic considerations when it comes to ensuring the provision of energy. First, with regard to point (b), China is currendy in the process of consolidating economic cooperation with supplier countries. The far more interesting point in this respect, however, centres on the efforts being made by China to become self-sufficient in terms of energy provision, by developing new oil and gas reserves within its own frontiers. A settlement between China and the Southeast Asian claimants over the Sprady and Paracel Islands could move the South China Sea disputes off the geopolitical stage and with them the opportunity for involving foreign outside powers. However, for a real setdement to be stable and equitable, it must be based on multilateral arrangements for the joint development of the potential oil and gas resources in the Sprady archipelago, which satisfy most of the central concerns o f the claimant states. Such arrangements must take into account the interests and the conflicting sovereignty claims as well as the need to acknowledge Chinas pre-eminent position as the leading regional power and also accommodate the interests o f extra-regional maritime powers such as Japan and the United States.

TURKEY AND CHINA: A PARTNERSHIP FROM THE PAST TOWARDS THE FUTURE

In the light o f the foregoing assessment and the ongoing standstill in Turkeys relations with the European Union, it is critically important for the Turkish strategists to follow closely the rapidly evolving China phenomenon and formulate a long-term policy vis-à-vis China. Tremendous market opportunities in China for Turkish businesses; enhanced strategic importance in the Eurasian and the world affairs; historical links and cultural affinities with Turkey, similar problems o f development; advantages of networking with Asia-Pacific's powerful overseas Chinese communities; and nearly

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five decades of zigzag progress in its troubled relations with the west— all make a strong Turkish commitment to China imperative. In retrospect, Turkey and China share a long past, cemented by the turning of centuries, and have influenced each other throughout history. The Turkish forefathers had intense relations with the Chinese, whether in war or in peace. Numerous inter-marriages, cultural, political and economic exchanges have taken place between the Turkic and Chinese civilisations throughout the course of their common history spanning more than 3,000 years. Though the official Chinese history text books may deny it, legend has it that the famous 6,000 km long Great Wall buttressed ancient China against the advancing Turkish warriors. The Turks once lived under the Chinese rule as a minority nation because of the endless internal bickering among rival Turkic tribes. More importantly, China is the next door neighbour of Central Asian Turkic republics and home to more than 10 million Turkic minorities, mostly living in the northwestern Xinjiang-Uygur Autonomous Region. The historic Silk Road goes all the way from Xian to Istanbul. Anatolia served as a gateway for exchanges between China, Europe and the Middle East during that period. A rich variety of porcelains and other precious ornaments gifted by the Chinese dynasties to the Ottoman Sultans (now in the Topkapi Palace Museum) bear witness to this historic relationship. It is, however, ironic that after migrating to Anatolia from the Central Asian steppes the Turks never looked back to where they originally came from. Both the Ottoman and the modern Turks have always turned their face toward Europe and, perhaps to a lesser degree, toward the Middle East. In their eyes, China never occupied a position of great importance, except for political rhetoric. According to some Turcologists, the true history o f the ancient Turks is yet to be written because there are thousands of Turkish graveyards and archaeological findings which await to be excavated in the Xinjiang-Uygur Autonomous Region.

CLOSER RELATIONS IN THE OFFING

Disillusioned by its relations with the European Union (EU), particularly at the post-December 1997 Luxembourg Summit, Turkey has been seeking new horizons elsewhere. Intensified relations with Israel and the United States partly demon­ strate Turkeys alternatives to the Europeans. However, what Turkish policy makers have overlooked in this scenario are relations with the Asia-Pacific region. Although Southeast Asian countries are presently in the throes o f an economic crisis, Thailand, Singapore, Malaysia, Indonesia, Korea and China are seen as countries with the po­ tential to add new dimensions to Turkeys international standing. Thus far, these countries have played only a minor role in the overall Turkish foreign policy. Hopes are pinned on greater strategic partnership, as well as on economic and trade ties between the two countries in the early years o f the next century because of the expected rapid economic expansion in both the countries and the emergent

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geopolitical realignment from Central Asia to the Middle East. At the current junc­ ture, one o f the most plausible policy options for Turkey seems to be launching a strategic trade and investment offensive against China in order to carve a lasting mar­ ket niche for Turkish products and services. The purpose should be to bring down the Great Wall through the entrepreneurial strength of Turkish business and industry groups. The Turco-Sino economic relations currently stand far from reflecting the true potentials o f both countries. Let alone exploring new avenues and approaches, the existing trade composition fails to inspire any hopes for a sustainable trade growth, unless a radical upswing is effected to reverse the current trend. Turkeys exports to China arc dominated by iron/steel products— more than 80 per cent of Turkeys ex­ ports. Mutual investments are at a negligible level. However, it should be noted that trade volume has grown significandy since relations were normalised in 1971, with two-way trade reaching $648 million in 1994 and $600 million in 1997 compared to $98 million in 1985. Although this is no small achievement, the existing opportuni­ ties allow an even greater expansion o f the present trade volume in a relatively short time, if the right blend o f policies and promotions is put in place. Though Turkey continues to pay lip service to the private sector, seen as the driv­ ing force in the bilateral economic relationship, its leaders do not have a larger voice in shaping the Turco-Sino agenda. During an official visit to China in May 1995, President Suleyman Demirel promoted an active ‘bridge’ role for Turkey in the modern-day Silk Route from China to Europe and Turkish business groups identified textiles, leather goods, telecommunications, contracting services, agro-industries and spare parts production as suitable sectors for investment or joint ventures. Any real progress is yet to be seen and it is hoped that the great enthusiasm generated in Turkey due to such high level visits will precipitate the momentum towards a strategic China (and Asia-Pacific) policy. Turkish companies must take the time to learn about the Chinese culture and recognise the hard realities o f doing business in a country that is undergoing rapid economic and social change, bearing in mind that those that stay out of China would be losing 25 per cent o f the world s market. Foreign Minister Ismail Cem, the first Turkish minister to visit China in fourteen years, stressed the importance of improving Sino-Turkish political and economic ties, during his meeting with Jiang Zemin in February 1998. Speaking after the meeting, he said: ‘economic ties between the two countries should boom in the next three years’. He added that the political base for the fulfilment o f this ambitious objective had already been laid. During his talks with Jiang, Cem stressed that Turkey had very ambitious projects for the twenty-first century. Turkey, he said, would become the biggest terminal in the world energy corridor. To further cultivate the current fertile ground, Isin Celebi, the State Minister in charge o f the economy, visited China in April 1998 to attend a meeting of the Sino-Turkish Joint Economic Council. Besides economic cooperation, both sides also discussed the tense situation in the Middle East. They agreed that the continuing crisis between the United States and Iraq should be resolved through peaceful means. In his meeting with Chinas first Deputy Foreign Minister Tian Zcngpci, Cem said that along with China, Russia and France had expressed full support for Turkeys efforts to prevent a military strike

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on Iraq and establish peace in the Middle East, and noted that China is an active member o f the UN Security Council. Chinese officials said that it was unusual for the Chinese president to receive foreign ministers and explained that this was due to the great importance that China attached to its relations with Turkey. Emphasising the economic dimension of the visit, Cem added that Turkey was exploring ways to increase economic relations with China, and that this explained why a large group of businessmen had accompanied him on the visit. ‘Turkeys current economic ties with a country, whose foreign trade is worth $325 billion, are almost non-existent’, said Cemt noting that in 1997 Turkeys exports to China stood at $100 million while it imported $500 million worth o f goods.

TURKEY AND CHINA IN ENERGY DIPLOMACY

The energy policy has always been an integral component o f Chinas foreign and security policies. It is also becoming a variable o f Turkeys multidimensional foreign policy as a result of its increasing engagement both as a consumer and transit country in the Eurasian and Middle Eastern energy scene. Historically, energy was a marginal factor in Chinas foreign policy because its energy policy was based on the principle of self-reliance. The link between Chinas foreign/security policy and energy does not emerge during the period when China became a net importer of oil in 1993. The decisive event that led to the formulation of this foreign and energy policy and that contributed to Chinas emphasis on achieving absolute independence was the rupture with the Soviet Union in 1960, when Soviet assistance came to an end, leaving Chinas energy industry in a state of absolute chaos. From Turkeys vantage point, there are a few countries which enjoy its unique position at the cross-roads between the east and the west, overlapping Europe and Asia geographically, economically, politically, and even spiritually, as a Muslim country that aspires to be part of the west since the early twenties. Its immediate region, stretching from Eastern Europe, the Caucasus and the Balkans to Central Asia and the Middle East, has been dramatically altered and re-defined in the aftermath of the Cold War. This entire region is highly strategic in geopolitical terms and is rich in energy resources. Undoubtedly, Turkey is situated in a rather tough neighbourhood, sharing as it does common borders with mostly unfriendly* (Greece, Russia and Armenia) and ‘outcast* (Iraq, Syria and Iran) nations. To capitalise on Turkey’s geographical, economic and political assets in this region, many foreign firms are collaborating with Turkish firms for product distribution in regional markets and joint ventures to compete for regional project opportunities in Russia, Central Asia and the Middle East. China, which has vital stakes both in the Middle East and Central Asia— the main suppliers of crude oil and natural gas— is greatly interested in fostering its political and economic ties with Turkey to mutual benefit. Due to high domestic savings, a steady inflow o f foreign investment and tight controls on domestic expenditure, China is awash with capital. In 1997 capital surplus— foreign direct investment plus the country’s current account surplus—-hit an estimated $67 billion. More than half o f that are invested abroad. As part o f

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this drive, various Chinese oil companies notably, the China National Petroleum Corporation (CNPC) and the C N O O C have embarked, since 1991, on the path of overseas investments in the upstream petroleum sector* In 1997, several large contracts signed between the CNPC and state oil companies drew the global industry’s attention to Chinas overseas investments, which, varied in scale, are now scattered from Peru in South America to Kazakhstan in Central Asia. This is a new strategy associated with China’s changing petroleum policy in the nineties. At the national level, this strategy reflects the Chinese government s anxiety about dealing with potentially large oil shortfalls in the future. In the case of individual companies, however, self-interest appears to be the primary motivation driving them to overseas petroleum fields.

TURKEY'S ECONOMIC TRENDS AND PROSPECTS

Turkey has many characteristics of a highly dynamic emerging economy— rapid growth, a large and fast growing population (currently 63 million), openness to global economic forces, and vast under-developed markets ripe for expansion. However, decades of economic mismanagement by a series o f weak governments have led to monumental fiscal indiscipline and chronic heavy inflation, which have obscured many o f the country’s underlying strengths. In the last ten years stop-and-go cycles prevailed, with GNP per capita estimated to have risen to $3,331 in 1997 from $2,022 in 1988 (the 1996 nominal GNP was approximately $205 billion). The reforms of the eighties vasdy reduced the role o f the central government in the economy. While the public sector’s problems are preventing Turkey from reaching its full potential, the private sector continues to prove its ability to thrive despite the odds. Today, Turkey’s dynamic private sector dominates the economy and is the engine of economic growth. Besides directing output to exports in response to a shrinking domestic demand, the private sector has also shouldered much of fixed capital investments which largely compensated the declining trend o f public investments since 1990. Trade, trans­ portation and manufacturing were the highest growing sectors. The success of the energetic private sector is due, in pan, to the underground or grey economy, which has grown so large that it would be impossible to understand the country’s business and financial systems without a reference to the parallel world o f unrecorded exporters and tax evaders. The new Yilmaz government has pledged improved economic management, re­ duced inflation and strengthened public finances. However, the shaky nature of the three-party (minority) coalidon and the looming prospects for parliamentary elec­ tions, severely constrain the government’s ability to address the underlying structural problems o f the economy. Turkey’s fundamental problem is a fiscal one, and the solution lies in the implementation o f tough structural reform measures including privatisation o f money losing state enterprises, improved efficiency o f tax collection, and streamlining o f the social security system. Although the strong domestic demand

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and the introduction of the customs union contributed to a significant decline in foreign balances with trade deficit rising up to 10.4 per cent o f GNP, the Turco-EU customs union, in place since 1 January 1996, is still one o f several factors which is generating optimism about the Turkish economy in the medium to long term. The agreement covers industrial products and processed agricultural goods, and includes transitional protection for shortlisted sensitive items. Turkey has also adopted the E U s common external tariff, resulting in harmonised commercial laws and regula­ tions, which affects its trade relations with China. Increased spending on infrastructure projects and private sector investment is ex­ pected to create a strong demand for a wide range o f capital goods. Recent export growth underscores the agility of Turkish entrepreneurs and the geographic advan­ tage Turkey enjoys for sales in the European Union, Russian, Central Asian and the Middle Eastern markets. Turkeys outstanding growth prospects led to its designation by the US Department of Commerce as one of the world s ten big emerging markets. The value of US exports to Turkey exceeded total American sales to such countries as Russia, Sweden, India and all of Eastern Europe. The value o f total Turkish import demand is on par with markets like Brazil and Indonesia and is significantly higher than Argentina, Poland and South Africa.

ENERGY FUNDAMENTALS

Turkeys dependence on external energy supplies is far greater than that o f Chinas, but its strategic location enables it to serve as a natural energy bridge* between major oil/gas producing areas in the Middle East, Central Asia and the Trans-Caucasus and consumer markets in Europe. (It may be noted that more than half o f Iraqs pre-Gulf War oil exports passed through Turkey via the Kerkuk-Ceyhan pipeline.) Due to its large population base and high economic growth patterns, Turkey constitutes a large energy market for future Caspian supplies of oil and gas (not only as a transit country) and independent power producers (IPP). A marked characteristic of the Turkish energy situation is its high demand growth and heavy dependence on external supplies. Energy demand grew by 4.4 per cent per annum between 1973 and 1995, while electricity consumption increased at a dramatic rate of 9 per cent per year. Domestic energy production is inadequate and consists mainly o f lignite. As energy demand has risen quickly and production has stabilised, imports— mainly oil and natural gas— are surging. Together with the increase in consumption, energy supply has diversified: natural gas consumption started in the mid-eighties and amounted to over 9 per cent of total supply in 1995, the share o f hydropower increased from 1 per cent in 1973 to 5 per cent in 1995. Turkey plans to build a nuclear power plant at the beginning of the next century. Together with the increase in electricity generation, Turkey has been diversifying its fuel mix. In 1995 the output share o f hydroelectricity was the highest (41.2 per cent), followed by coal, mainly lignite (32.5 per cent), and natural gas (19.2 per cent); oil provided 6.7 per cent of generation. Natural gas has become an important fuel,

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but Turkey faces constraints in the supply of natural gas. New pipeline and LNG terminal construction and the upgrading o f existing pipelines are essential for the implementation of new large power plants. At present Turkey is a very minor gas producer (only 2.8 per cent of its consumption requirements) and its gas infrastructure is far from comprehensive, but it has embraced the fuel with an enthusiasm which surpasses even that of Europe’s other southern states. Gas consumption is projected to increase to 60 billion cubic feet per year (bef/y) (burning nearly as much gas as Algeria currently produces) by the year 2010 from the present level of 9 bef/y. Two new generating plants are under construction, and the authorities have called for tenders for six more, with a combined capacity of 5,200 MW, to be constructed on a BOOT basis. Plans have been made for the construction of at least thirteen plants in total, with a combined capacity of 10,700 MW. A large portion o f the increased natural gas imports will feed into electricity genera­ tion, and the proposed new LNG terminals will also be attached to new IPP gas-fired generation facilities. In recent years, Turkey has succeeded in substantially increasing natural gas imports from diversified sources and in building gas transport and distri­ bution infrastructure in the main consuming areas. As a result, Turkey has reaped rich benefits including better energy availability to its rapidly growing economy, in­ creased fuel diversification and security of supply and lower emissions of pollutants and greenhouse gases to the extent that gas has replaced the more carbon intensive and polluting fuels such as oil and lignite. The country’s gas import ambitions ap­ pear to be boundless; but Turkey should also be seen as a supply ‘bridge’, linking the large gas reserves of its easterly neighbours with the big consuming countries of Northwest Europe. Turkey has also looked to other sources to increase and diversify its gas supplies. In February 1996, a deal was signed for the supply of Turkmen gas to Turkey scheduled to begin in 1998 at about 70 bef per year, and expected to reach 530 bef/y by the year 2020. The two countries will jointly construct a 300 km pipeline needed for the supplies. Turkey also has a controversial $20 billion (twenty-two year) deal with Iran. Initial deliveries of 105 bef/y o f gas are scheduled to begin in 1999, and eventually reach 350 bef by the year 2005. This deal has, however, led to criticism from the United States, which views the deal as supporting the current Iranian regime, and as a possible violation of its Oil Sanctions Act. In addition to pipeline gas, Turkey plans to utilise imports of LNG to help meet its demands. It was supplied 70 bef of LNG from Algeria in 1994 at the terminal at Marmara Ereglisi (105 bef per year capacity) as part o f a twenty-year deal signed in the mid-eighties. Furthermore, Turkey has signed agreements with Nigeria, Qatar, Egypt and Yemen for supplies of LNG. In two instances it witnessed the disruption of natural gas supply. Turkey is vulnerable to natural gas supply disruptions, even though LNG supplies from Algeria and the LNG terminal allowing spot imports have increased its security of gas supply The new gas storage capacity being envisaged, the new LNG terminals as well as new natural gas suppliers, will diminish the impact of a possible disruption in supply. Likewise, China is also poised to take critical decisions about its young, but promising, natural gas industry and is likely to import increasing volumes of LNG and pipeline gas early

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in the next century. Both China and Turkey are viewed by foreign investors as the last bastions of the rapidly growing energy markets in the world.

THE WAY AHEAD: CONCRETE PROPOSALS

Turkeys failure to attend to Asia in general and to China in particular will undoubtedly be a grave mistake. Beyond the rhetoric, Ankara has not evolved a comprehensive, cohesive policy toward this region for many years. Turkey really followed a EuroAmerican-centric approach and failed to take into consideration the importance of Asia. At the present, there is a growing realisation of the fact that it is where the world s future lies and Turkish foreign policy has not been devoting enough energy, drive or resources to its Asian policy. Few intellectual leaders in Turkey have recognised the depth of change in Asia and what it may portend for Turkeys future vision. The following suggestions have been made in the light of professional and personal experiences with the Middle Kingdom over the past decade. First, Turkey should begin by enriching its knowledge of China, which is generally confined to well-known cliches, devoid of any substance and depth. The twentyfirst century will be a period of intellectual power where people will succeed or fail according to their level of creative intellect’, and where the quality and content of education will be the kernel ingredients. In the age of information, no policy decision stands any chance of success if it is not based on cross-checked, well investigated information, analysis and intelligence, gathered first-hand from the local and foreign sources. This vast country should be scrutinised in a selective manner through the lenses of Turkish experts—and not only through the perspective o f foreign sources. The political leadership must take the initiative to call on a group of experts, drawn from the government, the academia and the private sector to produce a comprehensive strategy report on Turkeys new foreign economic relations into the next century. The report could identify the major emerging markets and sectors to which Turkey should channel its resources. Second, the government could chalk out, in close coordination with Turkey’s busi­ ness and industry representatives, its long-term China (and Asia-Pacific) strategy and follow up vigorously the phases of its full implementation. Diplomatic and logistical (particularly information) support should be extended to Turkish enterprises doing, or desirous to do, business with China. In recognition of the increasing importance of exports and investments in the national economy and foreign policy, all govern­ ment bodies should be prepared to assist Turkish firms in identifying and qualifying direct leads for potential buyers, agents, joint venture partners, and licensees from both private and public sources. These would include supporting participation of Turkish groups in important China fairs and exhibitions, organising small missions of Turkish groups to visit Chinese provinces in search o f new business deals, preparing commercial publicity packages for Turkish companies participating in China fairs and

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missions, promoting Turkish goods or services at specially arranged seminars in im­ portant Chinese cities, and providing facilities for influential Chinese business leaders to visit Turkey to see what the Turkish companies have to offer. Third, the Turkish-EU Customs Union scheme, the Turkish-US strategic partner­ ship, the Black Sea Economic Cooperation and the Economic Cooperation Organi­ sation are no doubt invariable in Turkey s foreign economic relations scenario and are likely to continue to be so in the foreseeable future; but new openings are urgently needed to overcome the current bottlenecks and to diversify the country’s international exposure. A closer and comparative look at China reveals that the Chinese firms are among the strongest competitors o f Turkish companies in the Middle East, the former Soviet Union and the western markets, particularly in such familiar sectors as light industry, textile, clothing, food products and construction business. Nevertheless, it represents such as huge market in need of almost everything that one may think of in gigantic proportions, which makes it possible to turn the perceived competition into mutually beneficial cooperation and partnership. Turkey must find ways of di­ versifying its export commodities destined to China, which are currently limited to selling iron/steel and fertiliser, by exploring innovative trade, investment and financ­ ing mechanisms, and learning from the experiences of Chinas other major economic partners. Otherwise, unstable swings in trade relations will remain the order o f the day and Turkey will lag far behind other countries in fully exploring, and establishing itself in, the vast Chinese market. Fourth, insisting that China should buy more products and services from Turkey or favour Turkish enterprises has not led to any tangible results and no serious outcome is likely to emerge from such futile efforts because of the changing nature of the Chinese economy. Turkish enterprises need to learn the hard way o f doing business with China just like thousands o f their competitors from all over the world. There is an intense competition to get a larger slice from this ever growing China pie. No longer can the central government in Beijing give contracts easily to its favourites. Most business contracts are being negotiated directly with the increasingly autonomous Chinese conglomerates and powerful provincial authorities. In fact, although Beijing feels uncomfortable because of its slackening hold over national economy decisions, the success o f Chinas experience with socialist market economy lies exactly in this phenomenon o f decentralisation in decision-making. Fifth, transportation appears to be one of the most formidable obstacles to further development o f economic relations between Turkey and China. Hence, priority should be given to projects aimed at reducing geographical distances. In this context, the Turkish Airlines could, without further delay, introduce direct flights to Beijing and possibly other major Chinese cities including Shanghai, Guangzhou and Urumqi. Increased human traffic will give a strong boost to trade and investment ties and open up new avenues for partnership. Maritime transportation also deserves immediate attention. There is currently an agreement in force between the two countries on maritime cooperation, which should be effectively implemented. Freight charges should be brought down to the level o f Turkish competitors and waiting periods in ports be shortened. With the completion o f the 10,000 km long Silk Rail Road from

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Chinas eastern Pacific seaboard to the Dutch port of Rotterdam, Turkeys economic relations not only with China, but also with other countries to be transited on the way including Central Asia and the Trans-Caucasus will receive a boost and inject a new dynamism into the fabric of Turkey’s relations. Linking up with the EU s TRACERA project and contributing to the completion o f the Central Asian and Caucasian legs of this strategically important railway (later highway) are equally essential. Sixth, as planned, Hong Kong reverted to Chinese sovereignty in June 1997 and so will Macao in 1999. These economies (perhaps Chinese populated Taiwan and Singapore too) are the critical gateways to China. Hong Kong’s capital markets are a growing source for Chinas infrastructure and project needs. Hong Kong transformed itself over the past two decades into a major service centre, which exported $134 billion and imported $137 billion worth of goods and services in 1994. It is an ideal production, distribution and financing base for backing up any business operations in mainland China. In Hong Kong and other major Chinese cities such as Shanghai, Guangzhou and Urumqi, Turkish trade centres could be set up to pave the way for Turkish companies. These centres should be carefully developed and staffed with experts and managers well versed and experienced in the workings o f the private sector and in the Chinese way of doing business. The Turkish private sector, rather than bureaucrats, should play a pioneering role in the process. The present Turkish Embassy in Beijing, equipped only to perform traditional diplomatic functions, also needs to be reinforced and reorganised, taking into account the special circumstances of China and bringing to the fore the dynamics of the prevailing neo-mercantilist cconomic/trade diplomacy conception. An efficient network of economic intelligence gathering and sharing could be established with all Turkish overseas missions, companies operating in the Greater Chinese Economic Area and Ankara. Seventh, the presence of the Turkic and Muslim minorities in Chinas XinjiangUygur Autonomous Region may be seen as an asset to reinvigorate relations between the two countries. They can, and should, play an active role in fostering closer eco­ nomic and trade ties. In fact, a significant proportion o f what is known as ‘luggage' trade between the two countries has been transacted by Uygur Turks, whose popula­ tion numbers no less than 7 million. There is also an increasing number of overseas Chinese in Turkey, particularly in Istanbul, who are expected to spearhead the efforts to enhance bilateral economic ties. It is equally important to reinforce the political atmosphere of mutual trust between Turkey and China through constant dialogue and with a view to avoiding any misunderstanding of the Turkish cultural and economic interest towards the Xinjiang region. Among its neighbours, Russia, Japan and India are most important to China. Russia is its largest Asian neighbour, a major geostrate­ gic rationale is shaping the course of relations between the two countries. Friendly relations with China guarantee Russia’s soft belly in its relations with the west, just as friendly relations with Russia guarantee the same for China. Russia is aware, that there is no alternative to greater technological, economic and cultural cooperation with China. There are more than 3 million Chinese living in Russia (particularly in the Far East and Siberia) and, according to some demographers, the Chinese could become the second largest minority in the Russian Federation as early as the first half

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of the next century, if the current trend o f migration continues. Furthermore, Central Asia occupies a special place in Chinas new Asian policy. The fragmentation o f the Soviet Union has re-ignited the ancient contest for influence in Central Asia. For former communist states, China represents one of the successful models to emulate in achieving the economic modernisation they all seek. In general, Beijings political interests in Central Asia have been defensive— the avoidance o f disorder that would spread into the border province o f Xinjiang. A modern ‘Silk Road* should be built to link the regions in the next century and work has begun to construct such a link with rails and pipelines. Trade between the Xinjiang-Uygur Autonomous Region and Central Asian republics has grown rapidly, and China has established more than 180 companies or joint ventures in Kazakhstan alone. There are tensions as well as ties; Kazakhs protest Chinese nuclear tests near the border, while the Chinese protest the sanctuary Kazakhstan and Kyrgyzstan afford Uygurs seeking independence of Xinjiang, which they call Eastern Turkestan. To survive, however, Central Asia is conscious of the need to establish good relations with its two most powerful neighbours, Russia and China. Eighth, several encouraging developments have raised hopes that Turkey, rather than Russia or Iran, will provide the most important export route for energy from the former Soviet republics. But the diplomatic and commercial contest is far from over— in spite o f a series o f upbeat predictions that a final decision on building a giant pipeline linking Baku in Azerbaijan with Ceyhan in southern Turkey is on the cards. The governments o f the US, Turkey and Azerbaijan have all declared their strong support for this pipeline, which would cost around $2.5 billion and run through several potential zones of conflict on its 1,700 km route. But consensus still has to be reached among the partners in Azerbaijans main oil consortium, which include the US, the UK, Russian, Turkish and Japanese concerns. European companies such as Royal Dutch-Shell have expressed a strong interest in building pipelines across Iran, and a Franco-Russian contract has been signed to extract gas off the southern Iranian coast. These developments highlight the difficulties facing Washington in seeking to minimise the involvement of Iran in the regions long-term energy developments. But US officials insist that the oudook for their vision of the Caspian regions future— one o f multiple pipeline routes designed to avoid giving any country a stranglehold— has brightened in a number o f ways. First, Russia has moderated its position on the sharing of the Caspians riches by joining Kazakhstan in calling for an early agreement on dividing the seabed’s resources. Second, there are hopes o f a setdement of the Caspian demarcation dispute between the gas rich state of Turkmenistan and Azerbaijan, a republic on which western policy has made high bets. Another intriguing factor to enter the equation is the prospect of ‘gas leading oil*—with a gas pipeline shadowing the proposed oil pipeline from Central Asia to the Mediterranean and providing an extra justification for the use of that route. Kazakhstan and Turkmenistan are both seeking alternative routes to their oil and gas exports and China has the potential to absorb a large proportion of their exports. China also undertook to build a pipeline from Kazakhstan to Iran. Given China’s growing role as a player in, and buyer for, oil and gas in Central Asia, Russia and the

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Middle East, it is extremely important that Turkey should enter into a serious dialogue with China on coordinating policies and seeking possibilities o f joint ventures in Central Asian oil and gas schemes. Ninth, the cultural aspect of doing business with China is extremely important and is at times the determining factor. Differences in cultural and traditional perceptions between China and the west need to be dealt with intelligently and in an enlightened spirit, and not by adopting an intolerant and superior attitude. The scale o f economic and social achievements seen in China means that the west will have to come to terms with, and accommodate, Chinas new-found wealth and success. China is often the target of sharp criticism chiefly by western commentators who seem reluctant to give credit to China for its astonishing progress. On the contrary, what seems to draw maximum attention, as in the case of Turkey, are negative aspects, real or imagined. Due to the Oriental origins of Turkish business culture, ethics and traditions, as well as Turkish companies’ vast experience of working in difficult terrain be it in Libyan deserts or in Siberian steppes, the chances of success of Turkish businessmen and industrialists in China are not surprisingly higher in certain sectors than their western competitors. Turkeys perceived comparative advantage in this respect may encourage western companies to link up with Turkish enterprises in their operations in China either as joint venture partners or sub-contractors. Tenth, China is likely to face a severe food shortage in the first quarter o f the twentyfirst century and projections show that it will need 568 million tons of grain by the year 2030. Its current production is around 420 million tons. It is estimated that there will be a shortage of approximately 213 million tons o f grain in the next thirty-five years. This estimation, however, does not take into account the likely demand which will arise as a result o f rising standards of living between now and then. Since China will become a huge net importer of grain in the next few decades, while exploring new possibilities o f cooperation between Turkey and China, the potential o f the Turkish Southeastern Anatolia Project (GAP) should be kept in mind for meeting Chinas food and agro-industry requirements beyond the year 2000. Turkey could start preliminary discussions with the Chinese authorities on how Turkey could offer its vast agricultural potential to help China meet its food supply needs and monitor closely market developments. Eleventh, establishing a strong presence in China for long-term market share must remain the primary strategic goal of Turkish companies, no matter how much cost is incurred on their operation in the initial stage. They need to be content with modest margins of profit and wait to reap the fruits of their perseverance, patience and initial sacrifice. Quick and easy short-term profits are long gone. Setting up resident offices in China is an absolute necessity if there is to be any opportunity for continued business on a long-term basis. Joint ventures with both the Chinese and third country companies should be encouraged, where possible. Eximbank credit facilities offered to Turkish businesses must be commensurate with the terms offered to rival companies in the market to ensure a level playing field. Transparent, performance based and well-defined government subsidies may be provided only if they are likely to generate long-term gains for Turkey.

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Twelfth, Turkey must consider diversifying the range of its economic/trade ties with China, which may include not only commodity trade, but also the rapidly growing services sector. It seems that there are more business opportunities in this sector than in trade. Tourism offers one of the most promising areas in this respect. China will become one of the world’s most attractive tourist destinations. Particularly the Silk Road, the end point of which is Turkey, appeals to a broad cross-section of tourists, led by the Japanese. In tourism activities destined to China, Turkeys management, personnel training and marketing experiences, as well as its interna­ tional linkages can well be utilised, taking into account different tourist seasons in each country. The number o f middle income Chinese is steadily increasing, they look for new and relatively less expensive destinations like Turkey. Other service sec­ tor activities include partnership in banking, insurance, advertising, marketing and consultancy. Thirteenth, most o f Chinas large-scale infrastructure projects are being funded by multilateral development banks such as the World Bank and the Asian Development Bank, o f which Turkey is also a member, entitled to bid for such project tenders. It is, therefore, essential that an information network be set up to monitor closely the ICBs (International Competitive Biddings) opened in China for highways, railroads, airports, power generation plants, dams, telecommunication networks and pipelines, and bring them to the attention of Turkish companies operating in these areas. No matter how competitive the market will be, Turkey can step in to establish a reasonable presence in this booming infrastructure market, which is estimated to absorb an investment inflow o f $750 billion over the next ten years. Turkish firms should be kept posted of all developments in this market and, where necessary, be given strong political support. Turkish contracting firms can enhance their prospects if they can afford to undertake a few prestigious projects on a massive scale in China, just as they did in Russia, even if these start-up businesses may lead to some initial losses or lower profit margins. Since the needs of China are so lafge, Turkish companies can do business even in critical areas where China and Turkey compete with each other such areas as construction, textiles, clothing and food industry. Fourteenth, the focus should not be only on business and investment deals involving Turkey or China, the internationally recognised Turkish firms are ideally placed to strengthen China related business and investment links with third countries as well. It is not a distant possibility that Turkish companies may serve as an active bridge to revive the centuries-old Silk Road between China and the Turkish economic basin including the Middle East, the Balkans, the Trans-Caucasus and the European Union to market Chinese products and services or vice versa. To ensure this, Turkey must be prepared, o f course, to offer more favourable terms than do other countries in the region. For instance, some area around the port of Mersin may be offered to the Chinese for use as an entry port and storage facility in a bid to replace the current Chinese trade outposts in the Greek part of Cyprus. The possibility of offering China some export outlets to the European Union customs area may also be considered. The long-term Commission strategy vis-à-vis China should be carefidly examined to see whether Turkey can be involved in the Commission-financed cooperation, finance

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and business projects. After all, Turkey has become a part of the E U s common commercial policy through the Customs Union vis-à-vis China. Fifteenth, in addition to traditional diplomacy, it is important to promote Turkeys public diplomacy to sway influential Chinese groups. The significance that Turkey attaches to expanding economic and trade relations with China must be demonstrated through frequent exchange of visits at all levels. After being postponed several times, President Suleyman Demirel finally paid a state visit to China from 23 to 27 May 1995. For such high level political visits to be successful, they should necessarily go beyond routine protocol and rhetoric. They offer a unique opportunity to bring to life projects and proposals, which will serve mutual interests, and the groundwork for which needs to be laid down well in advance. A presidential summit meeting once in every two years should be instituted. The success of all Turkish state missions to China should be assessed against the background of the business and investment opportunities created for Turkish businesses, besides other possible diplomatic accomplishments. Besides these proposals, other projects may include energy cooperation schemes with China, particularly in the fields of oil and gas pipeline construction and de­ velopment of small hydro-power plants; cooperation in defence industry projects involving co-production of light weaponry, ammunition and armoured vehicles (on the basis o f the similar defence industry arrangements that exist between China and other NATO countries); making greater use o f Turkeys Chinese language teaching institutions, employing better the skills of Turkish Sinologists, improving the quality of analysis and policy advises about China and the Asia-Pacific region by creating a new Asia-Pacific think-tank group; launching publicity campaigns to increase aware­ ness among Turkish business and industry groups of Chinas importance as a major market, helping organise and participate in China exhibitions and fairs; promoting greater economic and trade ties with Taiwan without creating political sensitivities in mainland China; and expanding the scope of Turkey s cultural, economic and political relations through the Chinese media. The recent visit to China by Foreign Minister Ismail Cem (February 1998) highlighted once again the political will on the part of Turkey to open a new page in the historic Turco-Sino relations. The Chinese side, as always, responded positively but cautiously, to this initiative. Both sides agreed to develop concrete proposals, which will form the basis for further development o f the relationship.

FUTURE PROSPECTS

Forging an effective Turkish strategy in Asia and particularly China is an urgent task. This will demand presidential, governmental and business leadership, a sense of direction and hard work. To plan and carry out such a strategy, Turkish political and corporate leaders would do well to take a stock of resources, instruments at hand, and tap the talents of hundreds of Turkish who have studied, lived and worked in

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the region. All relevant players must be involved in this process. Turkey cannot, and should not, restrict itself to a single level of economic interaction with other nations. The European Union countries are Turkeys largest trading and investment partners. The North American Free Trade Agreement (NAFTA) countries offer good prospects. Latin America must figure prominently in Turkeys future economic/trade strategy. Turkeys immediate neighbours deserve priority attention. In spite o f these factors, Turkey must set eyes on East Asia to test the ground for its twenty-first century projections. Turkey should cease to merely reacting to, or falling in line with, other countries’ policies. Ankara should begin to innovate and engineer its own policies toward the Asia-Pacific region, a region that constitutes more than half the globe and that may well determine the fate of Turkey’s trade and investment growth in the coming century. China remains the key country to enter into, and consolidate in, this region. As Turkey looks to the period ahead, the future of China and of Turkey’s relations with China appear promising, should the right policies be formulated and put into practice. For future relations to gain in substance, Turkey and China should work together to develop new areas for common action and cooperation aimed at fostering their economic development and maintaining stability in their neighbourhood. President Demirel’s visit to China in May 1995 raised high hopes for the future development of bilateral relations and the enthusiasm of Turkish companies for doing more business with China. This momentum should be maintained and supported with new initiatives because sustaining engagement in China is vital to Turkey’s future interests. Closer government ties are essential, but in a period of generational change on both sides, Turkey also needs to deepen interaction at every level. Cooperation should be bolstered in regions where both countries share common interests and historic ties. O f course, nowhere is Turkey’s regional cooperation more important than in meeting the new challenges and opportunities facing Central Asia, Russia and the Middle East. Yet, despite all good-intentioned promises and policy statements, a long-term commitment to China is still lacking, and the relationship between Turkey and China needs to be further cultivated beyond the traditional issues in recognition of the growing economic and geo-strategic significance o f this region and China’s growing vital links with the Middle East and Central Asia. The Turkish government and the private sector should respond to the new China challenge. Turkey must act keeping in mind that those who look only to the past are certain to miss the future.

SELECT R E A D IN G S

An Outline History o fChina (Beijing: China International Press, 1991). Chinas East Coast (Beijing: China Economic Press, 1993), p. 275. China Reports from China Institute o f International Relations, East-West Centre (Honolulu), BritishChina Trade Development Council and USA-China Business Council. Michael Dobbs-Higginson, Asia Pacific: Its Role in the New World Disorder (Singapore: Mandarin Publications, 1994).

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Environmental Action Plan o f China: 1991-2000 (Beijing: National Environmental Protection Agency, 1994), p. 266. James M. Ethridge, Changing China: The New Revolutions First Decade, 1979-1988 (New World Press, 1988). Liu Guoguang and Liang Wensen (Comp), Chinas Economy in 2000 (1987). William Overholt, China: The Next Economic Superpower (London, 1993). Kevin Sinclair and Iris Wong Po-Yee, Culture Shock! China (London, 1990). Sure Statistical Bureau, Peoples Republic o fChina Yearbook; 1994/1995 (Beijing, 1995). The Benefits o fFree Trade: East Asia and Latin America (Paris: OECD). Paul Thereoux, Riding the Iron Booster (London: Penguin, 1990). Various issues of ASEAN Economic Review, AsiaWeek, Beijing Weekly Business China, China Daily China

M ail East Asia Journal Far Eastern Economic Review, Nikkon Weekly, South China Morning Post, Wall StreetJournal, and Xinhua Bulletin. World Bank Development Report 1995.

Sino-Pakistan Relations and the Middle East Sam ina Yasm een*

The Indian and Pakistani nuclear tests of May 1998 have once again drawn attention to Sino-Pakistan relations. Indian Prime Minister Atal Bihari Vajpayee explained his decision to test nuclear weapons in terms of the Chinese threat to India’s security, and the nuclear nexus between China and Pakistan.1 While announcing the five nuclear tests on 28 May, Pakistan’s Prime Minister, Nawaz Sharif refuted India’s claims and emphasised Chinas opposition to expansionism ‘despite its tremendous superiority in defensive capability’. He also praised China for its support for Pakistan during ‘this hour of crisis’ and said that Pakistan was proud of its neighbour.2 These explanations and the resurfacing references to an Islamic Bomb have raised issues about the relevance of Sino-Pakistan relations to the Middle East. They also raise questions about the exact nature of China’s relations with its Muslim neighbour. This paper answers some of these questions. It argues that Chinas relations with Pakistan can best be understood within the context of South Asia’s relevance to Chinas counter-encirclement strategy. It is essentially conducted as a South Asian and not a Middle Eastern relationship. However, it does have some relevance to the Middle East which, while limited in the past, is likely to increase in the aftermath o f the Indian and Pakistani entry into the nuclear club. To this end, the paper is divided into three parts. The first part discusses the evolution of Sino-Pakistan relations during the fifties and sixties. The second part discusses the emergence and implementation o f Beijing’s new South Asian policy and the extent to which a Sino-Indian rapprochement affected the relationship in the nineties. The last part discusses the manner in which the relationship between China and Pakistan has impacted upon the Middle East and discusses how the changed nuclear equation may make Sino-Pakistani relations more relevant to the region west of South Asia.

* The author wishes to thank Mrs Sarfraz Iqbal and James Trevelyan for their help in writing this paper. 1See, for example, Raj Chengappa and Manoj Joshi, "Hawkish India*, India Today (international edition), 1 June 1998, pp. 10-11. 2 M. Ziauddin, ‘Account Evened with India, says PM: Pakistan Opts to go Nuclear’, Daum> 29 May 1998.

Samina Yasmecn

92 FROM INDIFFERENCE TO ENTENTE

Sincc its indcpcndcncc in August 1947, Pakistan’s foreign policy has been shaped by the dynamics of a relatively smaller state existing next to a major state. Convinced that the partition of the Indian subcontinent did not and need not herald the region into an era of Indian hegemony, and determined to ‘balance’ the perceived Indian threat, Pakistan has sought to build relationships with regional and extra-regional states. The dominant theme in this search for equality has been the need for a patron or ally who could support Pakistan against its main regional adversary. In the fifties, this process resulted in Pakistan establishing close links with the US. Not only did Islamabad participate in the US-led alliances including the South East Asian Treaty Organisation (SEATO) and the Central Treaty Organisation (CENTO), but it also signed a Mutual Defence Assistance Pact with Washington in 1959. Membership of the alliance system earned Pakistan military and economic assis­ tance from the US. It also provided support for Pakistan’s claim for a UN supervised plebiscite in the disputed territory of Kashmir. By the end o f the fifties, however, the changing nature o f Sino-Soviet and Sino-Indian relations altered the level of American support for Pakistan. Eager to woo India, both the US and the Soviet Union supported India in the aftermath of the Sino-Indian border war of 1962. For Pakistan, it meant an era o f reduced US commitment to Pakistan’s security and its stand on the Kashmir issue. Disillusioned by the failure of its pro-US policy, Pakistan turned towards China in search of a patron state which could counter the Indian threat. The Chinese response to Pakistan’s overtures, which resulted in an era of SinoPakistan entente in the sixties, was a function of its counter-encirclement strategy and the place assigned to South Asia in this process.^ Since its rise to power in 1949, the communist regime in Beijing had viewed the US as its principal enemy engaged in a process of establishing a network of alliances to encircle China. The perception was re­ inforced by the bilateral pacts and Mutual Defence Assistance Agreements Washington concluded with Japan, Taiwan, South Korea, Thailand, Laos and Pakistan. These agreements enabled the US to establish a military presence around the mainland and the creation o f SEATO further reinforced the fear of encirclement in Beijing. Hence, in the early fifties the Chinese government embarked on a dual-track counter-encirclement strategy o f its own. On the one hand, the Chinese commu­ nist regime established close politico-military links with Washington’s main rival, the Soviet Union and on the other hand, it sought to improve its ties with neighbour­ ing states by using a combination o f economic and diplomatic measures. Such a dual-track strategy was expected to achieve two interrelated goals; first, to reduce and neutralise American influence in states where it was strong so as to decrease the chance o f their use as bases from where the US could pose a military threat to China; and 3

For details see, Samina Yasmeen, 'The China Factor in the Kashmir Issue’, in Rnju G.C. Thomas (Ed.),

Perspectives on Kashmir (Boulder: Westview Press, 1992), pp. 320-24.

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second, to prevent neutral states from ‘tilting’ towards the US and joining Washington in its encirclement strategy. As part o f this counter-encirclement strategy, Beijing targeted sympathetic groups in Japan, including the Japan Socialist Party, left wing intellectuals, students and business community. In Southeast Asia, Beijing maintained trade and aid relations with Malaysia, Singapore, Laos and Cambodia. It also demonstrated its willingness to expand the scope of inter-state relations by offering a non-aggression treaty to the Philippines, inviting Thailand to inspect the ‘Thai Autonomous Zone’ and concluding a dual-nationality treaty with Indonesia. In South Asia, Beijing had depended heavily on developing close links with India. During the fifties, the Indian leadership was frequently portrayed by the Chinese media as ‘progressive bourgeoisie’ and the mild Indian criticisms o f Chinese annexation of Tibet were ignored. In 1954, China concluded an agreement with Tibet on the basis of the five principles of the Panchsheelresulting in the abolition of the special privileges enjoyed by India in Tibet and withdrawal o f Indian military escorts, but it permitted India to maintain its trade agencies in Yatun, Gyantse and Gartok. More importantly, exchange of high level delegations took place between India and China and Prime Minister Zhou En-Lai also visited India. His visit was reciprocated by the Indian Prime Minister later the same year. The level of Sino-Indian trade grew and in the fifties Hindi Chini Bhai Bhai became a popular slogan in India. Despite an obviously pro-Indian policy in South Asia, Beijing avoided alienating Pakistan. Pakistan was rarely subjected to direct public criticism by the Chinese media for its membership of SEATO. Most of the time it was criticised only indirectly, and its government was portrayed as being naive and ignorant rather than an accomplice in the US grand strategy of containing China. Whenever possible, Beijing also attempted to build ‘correct’ relations with Pakistan. This Indocentric but not an anti-Pakistan policy was clearly evident in China’s neutral and cautious stand on the Kashmir issue. Instead of aligning itself with the Indian interpretation of the nature and solution of the dispute, Beijing restricted itself to acknowledging that a dispute existed and encouraging its solution through direct negotiations between India and Pakistan but without ‘American influence’.^ Developments at the turn of the sixties forced China to reassess its South Asian policy. As the Sino-Indian boundary dispute unfolded and the Sino-Soviet relations deteriorated, China redefined its understanding of the main threat to its security and the manner in which this threat manifested itself. The Soviet Union was no longer viewed as an ally in its counter-encirclement strategy. Instead, Moscow’s attempts to improve relations with countries surrounding China were seen as part of a Soviet drive to encircle China. This view was reinforced as the two communist states disagreed on the delimitation of their mutual border. Meanwhile, the US had not altered its antiChina policy and in some cases had even increased the level o f its military presence in areas adjoining China. Therefore, the Chinese government adopted the view that 4 See, for example, New China New Agency (hereafter NCNA), 25 December 1956, in Survey o f China M ainland Press (hereafter SCMP), No. 1440, 30 December 1956.

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the major threat to its security emanated not merely from American machinations, but from the American and Soviet collusion to encircle China. South Asia* and especially India, was seen as the focal point o f this collusion for encirclement. This view began to emerge as the Soviet Union and the US adopted a pro-Indian stand on the Sino-Indian border dispute. The Soviet Union wavered between neutrality and suggestions that China should give up its claims on the Aksai Chin area. The US also made overtures indicating its support for New Delhi against the Chinese government. The need to counter this perceived Soviet-American threat led China to reassess its counter-encirclement strategy in South Asia. Pakistan was no longer seen as a state enticed by the west in the latters machinations against China. Instead, it came to be viewed as a pillar state in South Asia that China could rely on in ‘balancing India and countering the perceived US-Soviet collusion. Within the context o f this reassessment, China responded favourably to Islamabad’s overtures for improved relations in early 1962. The first indications of Chinas shift towards a Pakistan-centric policy emerged as the two states concluded a boundary agreement in principle in December 1962 or weeks after the Sino-Indian border war. The agreement delimited the border between China and Pakistan-occupied Kashmir. Under its terms Beijing agreed to cede to Pakistan 1,350 square miles of territory, 750 of which had been actually occupied and administered by China. Pakistan, in return, made a symbolic gesture by giving up claim over 2,050 square miles of territory on map only. The next month, China and Pakistan concluded a trade agreement which guaranteed most-favoured-nation treatment on a bilateral basis. In August 1963 the two states also signed an air travel agreement which permitted the Pakistan International Airlines to operate in China without any conditions on the nationality of passengers travelling aboard. These agreements were followed by a perceptible change in Beijing’s attitude on the Kashmir issue. After an initial period o f remaining neutral, Chinese leadership sided with Pakistan. The joint communique issued at the end of Prime Minister Zhou En-Lai’s visit to Pakistan in February 1964 urged a solution of the Kashmir dispute ‘in accordance with the wishes of people of Kashmir as pledged to them by India and Pakistan’. In an obvious attack on India’s refusal to hold a plebiscite, the communique stated: ‘It would be of no avail to deny the existence o f... (this) dispute and adopt a big-nation chauvinistic attitude of imposing one’s will on others’. The Indo-Pakistan war of 1965 further confirmed the growing amity between China and Pakistan. Beijing did not approve of President Ayub Khan’s adventurism in Kashmir but once the war broke out, it sided with Islamabad. More significandy, as it became obvious that the US imposed arms embargo would limit Pakistan’s ability to continue the war, China extended support to Pakistan. Following assurances from Ayub Khan that Pakistan would not submit to the US, Soviet or UN pressure for a solution to the Kashmir dispute, Beijing issued an ultimatum to India on 17 September 1965 demanding that India should dismantle ‘within three days its aggressive military 5 'China-Pakistan Joint Communique, NCNAy24 February 1964, in SCMP, No. 3167, 27 February 1964.

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works on the Chinese side of the China-Sikkim boundary* or bear ‘full responsibility for all the grave consequences. By creating the possibility of escalating the IndoPakistan conflict, Beijing secured a change in the Security Councils treatment of the Indo-Pakistan war and achieved a resolution favourable to Pakistan.6 In the years following the 1965 Indo-Pakistan war, a military dimension was added to Chinas Pakistan-centric policy. Under the terms of an agreement which was not made public until 1966, Beijing supplied 4 MiG-15s, 4 IL-28 bombers, 40 MiG-19s and approximately 80 T-59 medium tanks to Pakistan. Beijing also assisted Islamabad in setting up an Ordinance factory in Ghazipur, in the erstwhile East Pakistan.7 From Pakistan s point of view, the military aid proved invaluable at a time when it was refused military aid from the US and yet could not tap alternative sources among the NATO states. The assistance enabled Pakistan to continue its strategy of ‘balancing* the perceived Indian threat. Although the Sino-Pakistan entente continued, geopolitical changes at the global level towards the end of the sixties and domestic power struggles in China prompted Beijing to reassess its counter-encirclement strategy. The slow advent o f SinoAmerican rapprochement coincided with the further deterioration in Sino-Soviet relations which ultimately resulted in the Sino-Soviet border clashes in 1969. That these clashes were followed by Moscow's intensive efforts to build economic links with countries surrounding China was viewed by Beijing as part o f a gradual yet grand Soviet strategy of encircling the mainland. Moscow, therefore, came to occupy the position the US had occupied in the fifties; the USSR was now identified as the principal threat to Chinese territorial integrity. The need for a revised counter-encirclement strategy seems to have initiated a debate between the Chinese moderates and radicals in the late sixties. The debate was o f special relevance to South Asia. While radical groups favoured a continued close relationship with Pakistan, the moderates appeared to favour a gradual return to a relatively even-handed policy in South Asia. Moving away from the hostile relationship with New Delhi formed an essential part of this alternative policy. That the moderates were partially successful was obvious in the overtures made by the Chinese government towards India at the turn of the seventies. On May Day 1970, for example, Mao smiled and shook hands with the Indian Charge d’Affaires and suggested that the two great Asian states should live peacefully together. In the same year, Beijing reportedly expressed an interest in restoring diplomatic relations with New Delhi at the ambassadorial level. Beijings successful return to a relatively even-handed South Asian policy, however, was hampered by the civil war in and the impending disintegration of Pakistan. The 1971 Indo-Pakistan war, the dismemberment o f Pakistan, and the emergence of Bangladesh against the background o f the Indo-Soviet Treaty of Friendship and Cooperation, led Beijing to suspend all initiatives for improving relations with India. 6 Yasmeen, op. cit.t pp. 326-27. 7 Samina Yasmeen, ‘Chinese Policy towards Pakistan: 1969-1979’, Doctoral dissertation submined to the University of Tasmania, 1985, ¿h. 8.

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Instead, for the next five years, China offered political, economic and military support to Pakistan. At the political level, China sided with Pakistan against India during the war and later Beijing assisted Pakistan to secure the release of more than 80,000 prisoners-of-war held in captivity in India. By linking the issue of the admission of Bangladesh to the United Nations to the unconditional release of the prisoners, the Chinese government ensured that Pakistan was not forced to make compromises on the ground in Kashmir. Economically, Islamabad bccame the recipient of Chinese economic aid on extremely soft terms. Not only did the Chinese government convert its previous four loans into grants, but it also extended the grace period for a loan o f over US $217 million provided in November 1970 for another ten years. Most importantly, the Chinese government reinforced its military links with Pakistan. In fact, the relationship was placed on a much stronger footing than before. The prospect o f Pakistans further disintegration in the wake of the 1971 IndoPakistan war, coupled with the drastic restructuring of the regional military balance laid the basis for Chinas strong military alliance with Pakistan. While unwilling to accept Zulfiquar Ali Bhuttos suggestion for concluding a defence pact during his visit to Beijing, the Chinese government agreed to support Islamabad militarily. During the next two and a half years, Pakistan became a major recipient o f Chinese weapons and received 495 T-59 tanks, 101 MiG-19s and 8 naval vessels. These supplies helped reduced the imbalance in military capability between India and Pakistan. The ratio o f the total number o f Pakistani tanks to those in India, for example, was reduced from 1:2.3 in 1972 to 1:1.8 in 1974. Beijing also assisted Pakistan in building up an indigenous defence production capability. Pakistan was helped in setting up an aeronautical complex at Kamra, and a Heavy Rebuild Factory in Taxila. While Pakistan was required to provide the site, labour force and building materials, the Chinese supplied the equipment and technical assistance.8 In the wake of India’s first nuclear test in May 1974, China was reported to have assigned twelve scientists to assist Pakistan in its efforts to develop its nuclear capability.

A 'NEW ' SOUTH ASIA POLICY AND SINO-PAKISTAN RELATIONS

Despite Beijing’s strong support for Islamabad, however, the Sino-Pakistan entente did not prove as enduring as claimed by some Pakistani sources or alluded to by nonPakistani analysts. In fact, as Pakistan appeared comfortable with its ‘new’ identity and the danger of the country’s disintegration subsided, Beijing made an effort to pursue the South Asian policy it had suspended in 1971. Instead of only relying on Pakistan to counter the Soviet influence, it endeavoured to improve links with India as well. The media relented on its criticism of the Indian government, began to acknowledge progress made by New Delhi and portrayed its neighbour as less than an 8 Ibid., ch. 8. 9 ‘A Friend Indeed’, Far Eastern Economic Review. 11 June 1998, p. 22.

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accomplice in Moscow’s encirclement strategy. The most important change occurred in 1976 when the two states upgraded their diplomatic relationship to ambassadorial level. The rapprochement with India did not end Chinas relationship with Pakistan. However, it did introduce caution in Beijing’s response to South Asian developments. As the Sino-Indian rapprochement continued, Beijing became more circumspect in siding with Islamabad on the Kashmir issue. During General Zia ul-Haq’s first visit to China in December 1977, for example, Beijing avoided making even a cursory reference to its support for the Pakistan government on the Kashmir issue. When the issue was mentioned, a clear distinction was drawn between the people o f Pakistan and the people of Jammu and Kashmir. Once trailed, the ‘new’ South Asian policy became the basis on which Beijing related to Pakistan and India. The main features of this policy as it emerged during the eighties and nineties are: (a ) a close political and military relationship with Pakistan which continues despite occasional difference of opinion on issues facing the two states; (b) a continued move towards a rapprochement with New Delhi; and (c) a cautious and circumscribed support for Pakistan on its differences with India, with an increasing emphasis on settling South Asian disputes in the spirit of cooperation and dialogue. China’s close political relationship with Pakistan has been evident in its support for the latter on the Afghanistan issue during the eighties. The Soviet invasion of Afghanistan in December 1979 created a sense o f insecurity in Islamabad and a fear that Pakistan would be the next state in Moscow’s search for warm water ports. This view, while not supported by historical evidence on Russia’s interest in the warm water ports of the Indian Ocean region, was shared by Beijing. China viewed the Soviet move as part of its two-pronged strategy to establish control of the Indian Ocean by linking its presence in Afghanistan with that in Vietnam in the east and the Horn of Africa in the west. Although Beijing frequently identified ‘the west’ as the main target of this two-pronged strategy, the increased discussion of the Soviet encirclement strategies indicated that Beijing feared that the Soviet presence in Afghanistan was also directed against China. The convergence of Sino-Pakistani interpretation of Soviet moves led them to co-ordinate their response to developments in Afghanistan. This co-ordination was apparent in Beijing’s acceptance of the revival o f a strong security relationship be­ tween Islamabad and Washington. Unlike in the fifties when US-Pakistan alliance was viewed with apprehension, Pakistan’s identity as the frontline state was not only ac­ cepted but also encouraged in the eighties. In fact, Beijing tacitly agreed to the US lead­ ing the process of using Pakistan to contain and roll back the Soviets. Pakistan received strong political support from China against the Soviet presence in Afghanistan. Dur­ ing Pakistani Foreign Minister Agha Shahi’s visit to China, for instance, his Chinese counterpart Huang Hua categorically stated: ‘We appreciate the correct position o f the Pakistani government which insists that the Soviet Union should withdraw its troops and the Afghan people must be allowed to decide their own future free from outside interference’.10 10 Dawn, 27 December 1980.

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In the subsequent period, the number of high level visits exchanged between the two countries increased. These exchanges included, for instance, visits by Chinese Vice Prime Minister Ji Pengfe inMarch 1982, President Zia ul-Haq in October 1982, Chinese President Li Xiannian in March 1984, Prime Minister Junejo in 1985 and the Chinese Prime Minister Zhao Ziyang in June 1987.11 These high level visits were supplemented by exchange of visits between senior civil and military officials of the two states. China also provided humanitarian aid to the Afghan refugees based in Pakistan. The end o f the Cold War and the emergence of a new international system have not ended the political understanding between China and Pakistan. Instead, the emergence o f new Central Asian Republics has opened another avenue for cooperation between the two states. In 1996, for instance, Pakistan, Kazakhstan, Kyrgyzstan and China ratified the transit trade treaty. According to this agreement, major roads from Almaty and Bishek would be extended to join the 420 km long Karakorum Highway built in 1978 which links China and Pakistan. The roads arc expected not only to increase trade between the four states but also to create favourable conditions for a considerable expansion of local trade'.12 Meanwhile, Beijing and Islamabad have maintained close links despite the fre­ quent change o f governments in Pakistan and the change of leadership in China. In September 1990, for instance, President Ishaq Khan visited China and the following March Prime Minister Nawaz Sharif paid a visit to China following the end of the 1991 Kuwait war. This was reciprocated by President Yang Shangkun in October the same year. The next year, Nawaz Sharif again visited China. In 1994, four high level delegations exchanged visits. These included visits by the Chinese Defence Minis­ ter and by Prime Minister Benazir Bhutto, President Farooq Leghari and the Chief o f Army Staff. In 1995, Benazir Bhutto again visited China to participate in the Beijing Conference on Women, followed in February 1998 by Prime Minister Nawaz Sharifs visit. While not a major feature of the Sino-Pakistan relationship, economic links have also persisted during the eighties and nineties. Building on the trend established in the sixties and seventies, Beijing has provided loans to Pakistan on favourable terms with the option of repayments made in the form o f locally produced goods. In 1989-90, Pakistan received a US $10.6 million interest free loan from Beijing with an amortisation period of twenty years. The next fiscal year, Beijing extended another loan for US $75.6 million at an interest rate of 9 per cent to be paid in ten years. During 1991-92, Pakistan was provided an additional US $10 million interest free loan to be repaid in twenty years. Beijing also agreed to extend a loan of Rs 1068.00

11 Hasan-Askari Rizvi, Pakistan and the Geostrategic Environment (New York: St. Martins Press, 1993), pp. 149-51. 12 ITAR-TASS News Agency, 19 August 1994, in BBC Monitoring Service o f World Broadcasts, 26 August 1994. 13 Economic Survey 1992-93 (Islamabad: Government of Pakistan, Finance Division, Economic Advisers Wing, 1993), p. 182.

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million (about US $29 million) to Islamabad during the 1996-97 fiscal year.14 These and previous loans have been used to set up projects in the four provinces including two textile mills in the North West Frontier Province (NWFP), two sugar mills in Sindh and a copper mine in Saindak.15 China has also been assisting Pakistan in power generation and transmission. Apart from providing a nuclear power plant subject to the safeguards by the International Atomic Energy Agency (IAEA), Beijing has erected transmission lines in Sindh. Equally significant has been the assistance provided in upgrading the Heavy Mechanical Complex and the Heavy Foundry and Forge earlier completed with Beijing’s assistance. The most outstanding feature of Sino-Pakistan relations during the eighties and nineties, however, has been defence cooperation between the two states. Building on the links established during the sixties and seventies, China has maintained its supply of weapons to Pakistan. While China was exporting arms for political reasons in the seventies and eighties, Pakistan remained one of the top five recipients of Chinese arms.16 Most of these weapons were supplied as gifts or at ‘friendly prices’. According to one source, Pakistan has received ‘long-range and anti-armour guns, and communication equipment; F-6, F-7 and Q-5 Fantan aircraft; CSA-SAM batteries, and various naval craft including Romeo submarines*.1^ In March 1991 the two states agreed to expand defence cooperation. Although no details were provided at the time, cooperation included ‘the progressive production o f T-59 and T-85 tanks as well as a new tank in Pakistan’. Pakistan and China have also cooperated in developing the Chengdu FC-1 jet fighter. According to some reports, their joint efforts included reverse engineering of the F-16 aircraft supplied to Pakistan in the eighties. With a unit cost of US $15 million, the aircraft is to be inducted into the Pakistani airforce. This cooperation is a natural extension of the joint Sino-Pakistani efforts to build K-8 jet trainers which were inducted into the Pakistani airforce in January 1995.^ The two states have also been collaborating to build a missile boat for the Pakistan Navy at the cost of US $19 million.20 The Chinese have played an active role in expanding and modernising the ordnance factory at Wah. More significantly, China has assisted Pakistan in developing a nuclear and missile capability. Repons o f their collaboration in the nuclear field date back to 1983 when, according to US intelligence sources, China gave Pakistan a complete design for a nuclear weapon and enough enriched uranium for two bombs. Reports of such collaboration became more frequent in the nineties when China agreed to help 14 Estimates o f Foreign Assistance: 1996-97 (Islamabad: Government of Pakistan, Finance Division, 1996), p, 61. 13 South China Morning Pm , 8 October 1990, p. 11. 16 Michael Brzoska and Thomas Ohlson, Arms Transfers to the Third World 1971-1985 (Oxford: Oxford University Press, 1987); SIPRI Yearbook 1991, pp. 208—11. See also Yitzhak Shichor 'Unfolded Arms: Beijing’s Recent Military Sales Offensive’, The Pacific Review, Vol. 1, No. 3, 1988, pp. 236-27. 17 Rizvi, op. cit.t pp. 156-57. 18 Ibid., p. 157. 19 Xinhua; 25 January 1995. 20 ‘All Set to Produce Pak Missile Boats’, The Nation (Lahore), 1 May 1998.

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Pakistan build the 300 MW nuclear power plant at Chashma and a tritium gas purification plant at Khushab. In 1995 China was alleged to have supplied 5,000 nuclear related ring magnets used in gas centrifuges to enrich uranium for weapon use. While the actual extent o f Chinese support remains unclear, it is obvious that Beijing has played a significant role in helping Pakistan develop its nuclear capability. It has also provided the necessary support to help Pakistan develop a missile capabi­ lity to counter the Indian development of short and medium range missile capability. O f the three variants of the short range missiles, Hatf, Hatf III with a range of around 600-800 km is related to the Chinese M-9 missile. China has reportedly assisted Pakistan in the development of Hatf II/M-11 missile with a range o f280 km. Apart from the news that Pakistan bought components for this missile, American intelligence reports claim that Beijing supplied ‘more than 30 ready-to-launch M1 Is that are stored in canisters at the Sargodha airforce base’.21 China is reportedly assisting Pakistan in the development o f an indigenous capability to produce these missiles. Since the early nineties, there have been numerous reports that China had supplied parts of the M-l 1 missile to Pakistan. Notwithstanding the strong military links with Pakistan, China has studiously fol­ lowed the blueprint of a ‘new* South Asian policy developed at the turn of the seventies. While supporting Pakistan politically, economically and militarily and thereby con­ taining India, Beijing has continued its efforts to improve links with New Delhi. Following the upgrading of relations to ambassadorial level in 1976, it has attempted to broaden the level of contacts and reduce hostility with its southwestern neigh­ bour. The process has been aided by New Delhi’s positive responses to these moves such as Rajiv Gandhi’s landmark visit to China in 1988. In the joint communique issued at the end of the visit, India delinked a Sino-Indian rapprochement with a settlement of the border dispute and expressed ‘concern over anti-Chinese activities by some Tibetan elements in India’.22 Three years later, in December 1991, China’s Prime Minister Li Peng paid a four-day visit to India. This was the first such visit by a Chinese Prime Minister in thirty-one years and indicative of a changed Chinese attitude to India.2^ Thereafter, exchange of visits between the two states continued and a cooperative relationship developed. China, for example, supplies fuel for the Tarapur nuclear reactor. More importandy, the Joint Working Group on the Boundary Question has paved the way for Confidence Building Measure Agreements (CBMs) between 1993 and 1996. The agreement on building confidence in the military sphere, concluded in 1996 during Chinese President Jiang Zemins visit, has paved the way for exchange o f visits between medium and high level military commanders.2^ The two states have also adopted similar or often mutually supportive stand on international issues. 21 Douglas Waller, ‘The Secret Missile Deal’, Time, 30 June 1997, p. 36. 22 Swaran Singh, ‘Problems of Dealing with an Emerging Superpower’, Mainstream (New Delhi), 24 January 1998, in Selections from Regional Press (Islamabad: Institute of Regional Studies, 15 February 1998), p. 3. 23 See, for example, ‘Sino-lndian Ties Usher in a New Era', Beijing Review, 23-29 December 1991, p. 4. 24 'Army Vke Chief to Visit China on May 22’, The Hindustan Times, 21 May 1997.

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The Indian and Chinese positions on global climate change and the conclusion of the Multilateral Investment Agreement, for example, have been similar with both arguing for the rights of developing states and opposing agreements that would erode the sovereignty of such countries. They also agree that the right to subsistence and development are part of the human rights regime and must not be ignored. The Sino-Indian rapprochement, however, has not been without implications for Chinas political support for Pakistan. On the one hand, Islamabad has been supported by Beijing in its suggestions for holding a five power meeting to deal with the nuclear issue, and its idea of establishing a nuclear weapon free zone in South Asia. Beijings support for Pakistan on the Kashmir issue, however, has become muted over the last two decades. Unlike in the sixties when Pakistan’s demand for a UN supervised plebiscite received unequivocal support from China, the emphasis in the eighties and nineties has been on the need for cooperation and resolution. Significantly, Beijing has avoided blaming New Delhi for the deterioration o f the situation in Kashmir. Significantly, China has offered to mediate between the two South Asian states. Realising that this may be unacceptable to India, it has expressed hope that the issue be resolved ‘through dialogues’ between India and Pakistan.2^ Despite references in the Pakistani media to continued Chinese support, this prefer­ ence for dialogue comes closer to India’s demand that the Kashmir dispute be resolved bilaterally under the terms o f the Simla Agreement and not through a UN supervised plebiscite.26 The suggestion has been consistently made with reference to the situa­ tion in South Asia and without reference to its implications for other regions. This is despite the fact that the revival of the Kashmir issue has attracted some Islamic groups/individuals from other regions and could, even if indirectly, impact upon de­ velopments in countries like Sudan and Egypt. Such an approach and its treatment of issues affecting Islamabad and New Delhi indicates that China has consistendy conducted its relations with India and Pakistan within the South Asian context. To put it differently, as in the case of India, China’s Pakistan policy has been designed and conducted with a distinct South Asian focus. The question arises if, despite the narrow regional focus, Sino-Pakistan relations have impacted upon or been affected by developments in the adjoining region, the Middle East.

MIDDLE EAST IN THE SINO-PAKISTAN EQUATION

Against the background of China’s focus on Pakistan within the context o f its South Asian policy, the Middle East has remained marginal to the Sino-Pakistan relationship. In the fifties China focused more on the Southeast and South Asian region while leaving the Middle East primarily to the Soviet Union. In the sixties, as China and 25 See, for example, Xinhua News Agency Report, 22 February 1994, in BBC Monitoring Service o f World Broadcasts, 24 February 1994. 26 Singh, op, «>., p. 3.

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Pakistan established an entente, Beijing’s policy of relying on a selected few pillar’ states meant that it did not venture much into the Middle East. Pakistan’s Islamic identity, therefore, was not highlighted in the Chinese media as a reason for SinoPakistani links. This is not to suggest that the relationship had no symbolic value. Nor does it mean that the relationship did not indirectly contribute to projecting a positive image of China among other Islamic countries in the Middle East. However, it was not until the turn of the seventies that the linkages between SinoPakistan relations and the Middle East became apparent. The 1971 Indo-Pakistan war and the emergence of Bangladesh drastically changed the geostrategic environment in South Asia. It also altered Pakistan’s foreign policy outlook. While in the past it had been more focused on South Asia, the loss of its eastern wing forced Pakistan to redefine its identity. Pakistan’s Muslim and Middle Eastern identity entered the foreign policy discourse when Bhutto came to identify Pakistan as a state at the crossroads o f two regions. Since then, while remaining at the periphery of their relationship, the Middle East and especially the Gulf have acquired some relevance to the Sino-Pakistan relationship. The linkage has been apparent in the concept of a China-Pakistan-Iran axis. The concept dates back to the post-1971 era when dismemberment raised the possibility of Pakistan’s further disintegration. The NWFP had a history of such tendencies but the likelihood o f further disintegration was most feared in the southwestern province of Baluchistan where Zulfiquar AH Bhutto’s refusal to accept a non-PPP government in the province led to a four-year insurgency. While the exact nature of such aid is unclear, the anti-federal Baluch elements were supported by Iraq and the Soviet Union. The spectre o f an Iraqi-Soviet aided insurgency in Baluchistan created concern in Iran. Having been identified as a pillar state for the US in the era of detente and interested in establishing his own sphere of influence in Southwest Asia, the Shah of Iran reacted to the possibility of further disintegration of Pakistan. He was especially concerned about these tendencies spreading to the Iranian part of Baluchistan. These concerns were shared in China which wanted to balance India’s links with the Soviet Union in South Asia and at the same time was not keen to see further disintegration of a Third World state it had studiously helped. The mutuality of interest led Iran and China to provide simultaneous support to the Pakistan govern­ ment. Apart from statements expressing support for Pakistan’s territorial integrity, this support took the form of aid for development projects in Baluchistan. Although there is no evidence that their policies were jointly designed and developed, Chinese and Iranian efforts to prevent Pakistan’s disintegration gave the appearance of an Iranian-Chinese-Pakistani understanding. In the eighties, the notion of a Pakistani-Chinese-Iranian understanding meta­ morphosed into the concept o f an Iran-Pakistan-China axis.27 The concept gained support from some groups in Pakistan in the nineties but was essentially linked to Pakistan’s South Asian concerns. The need for such an axis was justified in terms of 27 See, for example, 'New Axis Emerging—Says B B C , The Muslim, 7 October 1992; and Arif Azim, ‘The China-Pakistan-Iran Axis’, The Nation, 1 November 1991.

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providing strategic depth to Pakistan against any possible clash with India. Despite references to the idea and the reality o f such an axis, however, Sino-Pakistan relations have not expanded to include a close tripartite defence relationship. In fact, both China and Pakistan have denied the existence and need for such an axis as neither of them wish to alienate the US by closely and openly aligning with Iran. Realities on the ground, such as Iranian-Pakistani differences over the solution to the Afghan crisis and allegations that Iranian support for Shi’ite groups in Pakistan contributed to sectarian violence have militated against a tripartite relationship. Nonetheless, mere references to such understanding or pacts have meant that parts o f the Middle East, especially Iran, have figured in the discussion o f Sino-Pakistan relations. At another level, the relationship has also been pertinent to the development o f Beijing’s links with the Middle Eastern states. After the dismemberment of Pakistan, the new state of Pakistan established a network of multifaceted links with the Middle Eastern states. While receiving economic aid from them, Pakistan provided unskilled manpower to the Gulf states as the latter rose in prominence after the 1973 oil embargo. Pakistan also established military links with these states including defence cooperation with Saudi Arabia. The partial re-orientation of Pakistan’s foreign policy was beneficial for China. Having left the Middle Eastern region to the Soviet Union, Beijing had expressed increasing concern about Moscow’s moves in the region in the seventies.2 The concern stemmed from the perceived threat o f a Soviet Indian Ocean strategy that was to supplement its land-based strategy of encircling China. The seventies, therefore, witnessed an increased interest in China to establish links with the Middle Eastern states to counter the Soviet moves. In the eighties and nineties, as China embarked upon and then progressed along the path of economic modernisation, it perceived the Middle East as a source of meeting its energy requirements. The nature o f Pakistan and China’s relationships with the Middle Eastern states is essentially different. Despite Pakistan’s military links with some o f the Gulf states, it has been primarily a recipient of economic aid from these states and hence has been in an unequal relationship with its Muslim neighbours. The Chinese relationship with the Middle East, on the other hand, has been conducted from a position o f relative strength and a mutuality o f economic and military interests. Despite differences in the nature of the relationships, their parallel orientation towards the Gulf states has created the basis for some linkages between Sino-Pakistan relations and the Middle Eastern region. During the seventies, China used its support for Pakistan to establish its credentials as a fellow Third World state which was supportive o f a Muslim state. This opened avenues for Beijing to establish inter-state links with the G ulf states. During the eighties, the Soviet invasion o f Afghanistan further broadened the space in which the Chinese, Pakistani and the Middle Eastern interests intersected. Concerned that Moscow was interested in gaining access to warm water ports and posing a threat to oil supplies, the Gulf states united in their efforts to push the Soviets back. The Chinese, motivated by their own interest, also provided aid to Pakistan. This mutuality of 29 For an excellent analysis o f China’s Middle Eastern policy see, John Calabrese, Chinas Changing Relations with the Middle East (New York: Pinter Publishers, 1991).

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interest and parallel policies enlarged the scope of cooperation between China and some o f the Gulf states. While evidence is hard to come by, it can be argued that the relationship between China on the one hand and Kuwait, Saudi Arabia and Egypt on the other partially improved as a result of their common approach towards Pakistan. Egypt, for instance, was able to explore options of defence cooperation with China and Pakistan to acquire ‘modern weapons according to (its)... capability’.2^ However, it is important to point out that regardless of the role played by Pakistan, once China established links with the Gulf states like Saudi Arabia, it has chosen to conduct its Middle Eastern/Gulf policy independent o f its relationship with Islamabad. Chinas conscious attempt to separate its links with a South Asian state from those with the Middle Eastern countries was apparent in its approach to the G ulf crisis and war in 1990-91. Saddam Husseins invasion of Kuwait was condemned by China from the outset. However, while concerned about the invasion and its implications, Beijing urged a diplomatic solution to the crisis. It urged restraint by all parties involved and asked Iraq to withdraw unconditionally from Kuwait.^0 This line of thinking continued as the GulfWar broke out in January 1991. While distancing itself from the UN Security Council Resolution 678, Beijing issued appeals for restraint by all parties concerned with a view to avoiding escalation of the conflict. It reiterated demands for unconditional withdrawal by Iraq from Kuwaiti territory and expressed hope that upon cessation of hostilities, all troops (including those of the US) would leave the region. Pakistan’s response to the crisis and the war was slightly different. The Iraqi invasion of Kuwait had affected the network of economic, military and political relations Pakistan had developed since the early seventies. The invasion, therefore, was viewed with apprehension. The loss of remittances from nearly 100,000 Pakistanis employed in Iraq and Kuwait and the prospect of rising oil prices as a result of the invasion caused great economic concern in Islamabad. These concerns prompted the caretaker government in Pakistan to immediately agree to Saudi Arabia’s request for support and to send 5,000 troops to join the multinational force. Upon being elected Prime Minister, Nawaz Sharif upgraded the lev$l of commitment by sending 6,000 soldiers to Saudi Arabia. Meanwhile, facing a domestic backlash and a split in society between pro- and anti-Saddam Hussein groups, Nawaz Sharif took a political initiative. He paid a visit to the Gulf region suggesting a peaceful resolution of the crisis. The emphasis on a diplomatic solution, although it came after Pakistan’s commitment to send troops, revealed some similarity of views between China and Pakistan on the best way of dealing with the crisis and the subsequent war. This was acknowledged by both sides when Pakistan’s President Ghulam Ishaq Khan visited China in September 1990. Although both governments favoured diplomatic resolution of the Gulf crisis, Beijing did not acknowledge that Pakistan had an active role to play in the unfolding 29 See, for example, ‘Egypt: Agreement Reached with China and Pakistan to Modernise Weapons’, 5 August 1994, in Reuters Business Briefing, 8 August 1994. 30 See, for example, ‘Foreign Minister Qian on World Issues’, Beijing Review, 7-13 January 1991, p. 10.

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crisis and the war. Nor did it reinforce Pakistan’s projection o f itself as a state at the crossroads of the Gulf and South Asian region. Instead, Beijing consistently under­ scored indirectly that while Pakistan had an interest in developments in the Gulf, it remained an outside actor with a limited role to play in the crisis and the post-war scenario in the Gulf. This approach was apparent in the Chinese government and media’s treatment of developments in the Gulf. While elucidating Chinas position on the Gulf situation, for instance, Qian Qichen ‘firmly supported the efforts o f me­ diation by Arab nations and other parties concerned’ without specifically mentioning Pakistan.31 Once the Gulf War broke out, the Chinese media failed to mention Pakistan’s stand except with reference to efforts and suggestions made by other regional states. An article published in the Beijing Review, for instance, referred to Nawaz Sharif s call for the Organisation of Islamic Countries (OIC) to hold an emergency meeting but only within the context o f the Iranian position on the conflict, and even then after the discussion between the Iranian President, Hashemi Rafsanajani, and the Indonesian ambassador had been reported. Most obvious was the authors failure to report Pakistan’s reaction to the GulfWar while it discussed pleas from other countries such as Yugoslavia, Mali, Kenya, Romania, Czech Republic and Slovakia, Hungary, Algeria and the Maghreb Union.32 As the war drew to a close, the Chinese media’s discussion of post-war developments in the Gulf studiously avoided referring to any role that Pakistan might play. Thè distinction between Pakistan as a South Asian state, as opposed to a state at the intersection of two regions, became apparent after the GulfWar. As the war was drawing to a close, Nawaz Sharif paid a visit to China from 26 February to 1 March 1991. He discussed the Gulf situation and the Chinese media reported Sharifs view that Iraq’s boundaries be respected and that regional security be guaranteed by the Gulf and Islamic countries. Nonetheless, Li Peng did not categorically support the view and merely restricted himself to stating that ‘both China and Pakistan share(d) many identical and similar views on the Gulf Crisis’. Later in the year, Yang Shangkun left on a tour of Pakistan and Iran from 26 October to 2 November, Beijing was careful to reiterate its view of Pakistan as a South Asian state. An editorial note in the Beijing Review, for instance, outlined the history and frequent exchange o f visits between Pakistan and China. The note said: Pakistan is a big country in South Asia and has played important role in promoting cooperation and maintaining peace and stability in the region---- The development of the existing friendly relations will not only benefit the two countries but also contribute to peace in South Asia and Asia as a whole (emphasis added). That Pakistans role was different from that of Iran, a Middle Eastern state, was apparent in the same article’s reference to the identity and similarity o f views between 31 Ibid., p. 10. 32 Zhang Xiaodong, *Worldwide Pleas for Peace Intensify’, Beijing Review, 4-10 February 1991, pp. 9-10. 33 ‘Pakistani PM’s “Homecoming to Beijing"*, Beijing Review, 11-17 March 1991, p. 5.

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China and Iran ‘especially the Middle East issue and the situation in the G u lf. Pakistan was not accorded such a role and only its concerns on the Afghanistan issue were acknowledged.^4 The Chinese policy of distinguishing South Asia (and hence its relations with Pakistan) from the Gulf and the Middle East has continued as the nineties draw to a close. While acknowledging Pakistan’s views on the Middle East, Beijing has been careful to reiterate Pakistan’s South Asian identity. Its approach to the escalation in the G ulf region during early 1998 is a case in point. Beijing had all along demanded that Iraq adhere to the UN Security Council resolutions and open its sites for inspection by the United Nations Special Commission on Iraq (UNSCOM ). However, when Iraq refused to open all its sites to inspection, China refused to support the US request for the Security Council to sanction strikes against Iraq. Qian Qichen insisted that the Security Council had a responsibility to seek a peaceful solution. ‘If force is used*, he said, ‘it will inevitably cause serious consequences and significant casualties of innocent people and will not contribute to a solution of the question over weapons inspection.* The position was similar to that espoused by Islamabad which supported a diplo­ matic resolution of the Gulf crisis. Nawaz Sharif, during his visit to China in February 1998, expressed Pakistan’s opposition to the use of force and urged all parties con­ cerned to peacefully resolve the crisis through diplomatic channels*. Probably indicat­ ing a role in the Gulf situation, he also voiced appreciation and support for China’s position on the Iraqi issue’. His Chinese counterpart, Li Peng, while reciprocating Sharif’s support, however, focused more on Pakistan’s links with other South Asian states and ‘expressed the hope that South Asian nations will live and develop to­ gether in harmony’. Once again, Pakistan’s South Asian identity was reiterated and Sino-Pakistan relations were placed within the South Asian context.

CONCLUSION

The limiting o f Sino-Pakistan relations to the South Asian sphere has not ended with the recent nuclear tests by India and Pakistan. As the Indian Defence Minister George Fernandes voiced for the first time threats posed by China’s military potential and New Delhi explained its nuclear tests in terms o f the China factor, Beijing expressed its dissatisfaction. However, it discussed the nuclear tests and Pakistan’s response to it on 28 May within the South Asian context. Despite references to Pakistan’s tests as the era o f an Islamic bomb by some international analysts, Beijing has refused to broaden the scope o f analysis and has restricted itself to the regional reasons for the tests and w Hu Guangyao, ‘A Visit to Enhance Friendship and Cooperation*, Beijing Review, 28 October-3 November 1991, pp. 4-5. 35 Scott Hillis, ‘China Focus: US Says Split with China over Iraq’, Reuters News Service, 14 February 1998.

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its implications for South Asia only. The Pakistan government has adopted a similar approach by categorically denying that it would share its nuclear technology with any other Muslim state. These conscious efforts to restrict the discourse to South Asia notwithstanding, India’s nuclear test and Pakistan’s response to it are likely to encourage similar responses from other states. Iran, while critical of both Indian and Pakistani tests, may be prompted to follow suit. While Israel has reacted cautiously to Pakistan’s entry into the nuclear club, it may not react in a similar fashion if Tehran was to follow suit. To the extent that India has identified Sino-Pakistan cooperation in the nuclear field, and Pakistan has responded to the Indian tests by those of its own, the relationship between Beijing and Islamabad may result in implications beyond the South Asian region into the Middle East. The current marginality o f the Middle East to SinoPakistan relations thus might not last for long. However, the increased relevance is more likely to be a function of perceptions than a reality.

China's Middle East Strategy B a rry Rubin

The People's Republic of China has neither strong historical ties nor long-standing strategic interests in the Middle East. Yet its relationship with the region is an inter­ esting and increasingly important one. Three motives are prominent in shaping Beijings regional policy, namely, ideology and self-image; economic profit; and the areas direct or indirect effect on interests closer to home. Each of them has a number o f aspects and implications, and all o f them have evolved over time.

IDEOLOGY AND SELF-IMAGE

How a country views its identity and role in the international system are prime deter­ minants of foreign policy, especially in relation to issues where strategic connections and material interests are limited. In Chinas case, this has passed through a series of stages. First, from the communist insurrections victory through the seventies, China saw itself as a revolutionary vanguard, spreading Marxist-Leninist revolutionary thought throughout the world. While this approach was shaped by Chinas national and the regimes interest, it was no mere rationale but a seriously implemented— if very unsuccessful—effort, The fact that most Middle Eastern states preferred rela­ tions with Taiwan over the Peoples Republic and the prolonged denial o f its legi­ timate place in the United Nations gave China less o f an incentive to accept the status quo. Thus, China helped a conglomerate of small radical groups which claimed to have the proper ideology, imitating Chinas ideology and past revolutionary tactics. These included various Palestinian factions and Persian Gulf militants, most notably in the Palestine Liberation Organisation (PLO) and the Popular Front for the Liberation o f the Occupied Arab Gulf (later known as the Popular Front for the Liberation o f Oman). These forces could do little to help China in any way, except perhaps on the propaganda front and Raphael Israeli called this the 'radicalism of impotence’.1 1 There is a vast body o f literature on these relatively marginal events: W A .G Adie, ‘PLO’, Asian Perspectives, No. 2, June 1975, pp. 5-22; Hashim S.H. Behbehani, Chinas Foreign Policy in the Arab

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Second, however, the Sino-Soviet rift gradually led China to befriend regimes like Anwar Sadat’s Egypt, which also opposed the USSR’s influence, even though they were pro-western. Indeed, this conflict led to China’s eventual detente with the United States as the lesser of two evils compared to Moscow. As its political isolation ended and the expectations for global revolution dimin­ ished, Beijing switched its partners from small opposition groups to governments and began to project itself as leader of the Third World, struggling against the hegemony of the two super powers, the USSR and the United States. Lacking the strength and level o f development of other great powers, China tried to become the leader of a massive coalition of weaker states. Unable to provide large amounts of aid, loans, or modern technology, Beijing emphasised non-material factors. Essentially, this posture evolved into the basis for China to become a global power in its own right. While echoes o f this approach survive, it is difficult to maintain this stand after the end o f the Cold War, the disintegration of the Soviet Union, the collapse of Eastern Europe, the fading of the short-lived ‘South versus North’ and non-aligned consciousness, and the formation of many other regional combinations and bilateral alliances. China’s ideological fervour faded in the post-Mao Zedong re-evaluation of the country’s politics and society. Mao’s slogan of politics in command’ was replaced by the slogan economic development in command’. At a time when Third World regimes openly aspire to imitate the west and Japan, China is rapidly becoming a normal great power. That status is legitimised by China’s presence as a permanent member of the UN Security Council. Normalisation allows China co openly express the same motives as those held by the other major states. Thus, while China has little or no strategic interest in the region, the theoretical un­ derpinning o f its policy remains, in part because if the United States completely domi­ nates the Middle East there may not be any scope there for Chinese economic foothold. In 1991, commenting on US policy on the Kuwait crisis the Communist Party of China Central Committee stated, ‘Their first task is to teach Saddam a lesson then to dominate the world’. President Jiang Zemin asserted in 1994 that China should oppose ‘hegemony’ by helping dissident countries like Iran, but emphasised interna­ tional stability essential for China’s development as a for more important objective.2

World (London: Routledge, 1985); Lillian Craig Harris, ‘Chinas Relations with the PLO \ Journal o f Palestine Studies, Autumn 1977, pp. 125-54; Raphael Israeli, ‘The Peoples Republic o f China and the PLO \ in Augustus Richard Norton and Martin H. Greenberg (Eds), The International Relations o f the Palestine Liberation Organisation (Caibondale and Edwardsville, IL: Southern Illinois University Press, 1989), pp. 138-65; Glen Allerhand, ‘Sino-Palestinian Relations’, Journal ofInternationalAffairs, Summer 1981, pp. 133-35; John Cooley, ‘China and the Palestinians', Journal o fPalestine Studies, Winter 1972, pp. 19-34; Moshe Macrz, Soviet and Chinese Relations with the Palestinian Guerrilla Organisations, Davis Institute Papers on Peace Problems (Jerusalem: Leonard Davis Institute for International Relations, 1974); and Yitzhak Shichor, ‘The Palestinians in Chinas Foreign Policy’, in Chun-tu Hsueh (Ed.), Dimensions o f Chinas Foreign Relations (New York: Praeger, 1977), pp. 156-70. 2 Deng-Ker Lee, ‘Pekings Middle East Policy in the Post Cold War Era’, Issues and Studies, Vol. 30, No. 8, August 1994, p. 85.

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Chinas emphasis on modernisation requires extensive financing and increasing access to oil. The Middle East has become Chinas fourth largest trading partner, but developing this commerce has sometimes led to Chinas involvement in political controversies and regional issues. Being a late comer in the region— and having less to offer in economic or technology terms than the United States, Russia, Japan or Europe-China must pursue marginal or risky markets where others cannot or will not go, supplying customers no one else will or service goods no one else will sell them. While China wants to exploit and expand such links, it does not want to sacrifice its relations with the United States or incur costs in other, more important, policy areas. By 1990, Chinas exports to the Middle Eastern countries reached $1.5 billion, and more than 50,000 Chinese workers were employed in the region. By 1994, overall trade with the Gulf Cooperation Council was estimated at $2.26 billion, with Chinas exports falling short by about $700 million in covering its bills. Iran has been a special focal point. From 1990 to 1993, China-lran trade rose from $314 to $700 million. In 1995, the two countries signed a $2 billion trade deal and China tripled its oil purchases to 60,000 barrels a day and agreed to build a joint oil refinery in China and cooperate in oil exploration.3 It also built power plants, cement factories and joint shipping lines in Iran. Nonetheless, arms sales have been Chinas leading single field o f endeavour.4 The principal area of Chinese profit, advantage and risk is arms sales and Iran is its number one customer.5 (An end of sanctions would probably lead to huge sales to Iraq as well.)** The Sino-Iran relationship is plagued with four major problems: 1. 2.

3.

Iran is a major threat to regional stability and security. The United States considers Iran the worlds leading sponsor of terrorism, strongly opposes arms sales to Iran and acts to discourage them. US officials repeatedly warned that Chinese arms supplies were a major concern and a threat to the US allies and forces in the Gulf.7 Iran wants China to sell it technology for weapons of mass destruction, vio­ lating other Chinese international commitments, jeopardising regional peace,

3 Jonathan Rynhold, ‘Chinas Cautious New Pragmatism in the Middle East, Survival, Vol. 38, No. 3, Autumn 1996, pp. 102-16. 4 Iran Nfcws Agency, 'China-lran... Ties Growing in Various Areas’, 2 October 1995. 5 On these issues, see also Barry Rubin, North Korea's Threat to the Middle East and the Middle Easts Threat to Asia (Ramat Gan: BESA Centre for Strategic Studies, 1997). 6 British statistics show that between 1984 and 1989, Iraq bought $3.3 billion worth of arms from China, see Rynhold, op. cit. 7 TheJerusalem Post, 20 April 1997.

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and damaging Chinas reputation. This aid includes helping Iran build a mis­ sile, chemical, nuclear and, perhaps, biological warfare arsenal.8 China is Iran’s number one supplier o f unconventional arms.9

The Sino-Iran military relationship was largely established during the Iran-Iraq War, when Tehran was desperate for supplies following US sanctions and Soviet reluctance to provide weapons. If Tehran had a choice it would buy from western sources but for China, however, Iran’s isolation is an opportunity to exploit a market that would otherwise not exist. In short, Iran’s isolation by other major powers makes it an attractive market— or even a market at all— for China, as a supplier of last resort for certain conventional goods and weapons of mass destruction. According to a 1997 CLA report, ‘Iran continues to be one o f the most active coun­ tries seeking to acquire all types of [Weapons of Mass Destruction, WMD] technology and advanced conventional weapons.. . . China was the most significant supplier of WMD-related goods and technology to foreign countries. The Chinese provided a tremendous variety o f assistance’ to Iran’s missile, nuclear and chemical warfare capability.10 In addition to bringing in a significant amount of foreign exchange, arms sales provides political leverage to China vis-à-vis Iran. Like any other arms exporting country, such transactions also lower China's research and development as well as unit costs for building its own weapons. Growing Chinese oil purchases from Iran would increase Beijing’s incentives for balancing trade through weapons’ supplies. In 1988 the Chinese plan to sell missiles able to carry unconventional warheads to Syria was cancelled following US pressure. Iran is being given Chinese (as well as North Korean and Russian) assistance in building longer range missiles that would pose an even greater threat to more distant countries while Chinese made groundand ship-based missiles threaten tanker traffic and pro-western naval forces in the Persian Gulf. China has violated its commitments under the Missile Technology Control Regime (MTCR) by supplying sensitive technologies to Iran, and to Syria and Pakistan as well. In early 1991, adverse publicity about China selling a nuclear research reactor to Algeria resulted in the cancellation of that deal. The US Defence Department estimates Iran will have nuclear arms by the year 2000. If that happens, it will subsequendy destabilise the Middle East and China will be largely held responsible.11 China negotiated deals to supply Iran (and also Pakistan) with equipment and tech­ nology useful for making nuclear weapons, despite having signed the Nuclear Non­ proliferation Treaty. The United States strongly opposed these deals and offered, in 8 US House o fRepresentatives Committee on NationalSecurity: M ilitary Procurementand Research and De­ velopmentSubcommittee Hearings on: The USResponse to the Emerging Proliferation Threat, March 15,1995, transcript; TheJerusalem Post, 20 April 19^7; New York Times, 10 November 1995; and Joseph Fewsmith» America and China: To the Brink and Back', Current History, Vol. 93, No. 584, September 1994. 9 US Senate Foreign Relations Committee, Subcommittee on Near Eastern and South Asian Affairs, Hearings on Terrorism, April 17, 1997, transcript (Washington DC, 1997). 10 Central Intelligence Agency, The Acquisition o f Technology Relating to Weapons o fMass Destruction and Advanced ChemicalMunitions: Juiy-December 1996 (Washington, DC: GPO, 1996). 11 H aarttz (Tel Aviv), 27 June 1997.

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exchange for their cancellation, to sell nuclear power plants to China while the latter promised Washington not to start any new nuclear projects in Iran. In September 1995, it suspended the sale of two nuclear power plants to Iran, though probably because of technical and financial disagreement with Tehran. China also rejected Iran’s request to sell a heavy-water research reactor for producing plutonium.12 In October 1997, when President Jiang Zemin visited the United States, China pledged to stop cruise missile sales to Iran. Despite having signed the Chemical Weapons Convention, China reportedly sold chemical precursors, production equipment and technology to Iran. Also, there are reports, though not very reliable, of the sale of technology and equipment for the production of biological weapons. In addition to these, China sold Iran a variety of armoured vehicles; fighter planes; artillery; anti-tank, surface-to-surface and anti­ aircraft missiles; small ships; naval mines; and land- or naval-based cruise missiles.14 Perhaps China is using its political leverage to sell arms in other markets as well. China has hinted that it will withdraw its support to the UN proposal for imposing trade sanctions against Iraq if Kuwait does not agree to the estimated $300 million purchase of Chinese-made self-propelled howitzers.15 Chinas facile response to criticism has been that all arms exports should be regulated and the sale of all kinds of weapons limited in the Middle East.1** Until then, China can act freely, as do other states. Given Chinas interests, sales will continue unless reduced by Iran’s inability to pay or a combination of US pressure and concessions on issues relating to Chinas interests in East Asia, nuclear development or bilateral trade. If China becomes concerned that arms supplies could destabilise the region, this may encourage restraint.

SEEKING ECONOMIC ADVANTAGE: OIL

Apart from arms sales, by the nineties a new factor kindled Chinas economic interest in the Middle East. As its rapid economic growth required more oil, China became an importer in 1993 and is a major buyer, expected to require 30-50 million tons by the year 2000. The Middle East (Saudi Arabia, Kuwait, Iran) and Central Asia (whose estimated, barely tapped reserves are currently a whopping 170 billion barrels) are the best sources for meeting these needs. 12 Michael Eisenstadt, ‘US Policy and Chinese Proliferation to Iran: A Small Leap Forward?’, Policy Watch (Washington Institute for Near East Peace), 1997. 13 Reuters, 18 October 1997. 14 Bates Gill, Silkworms and Summitry: Chinese Arms Exports to Iran and the VS-China Relationship (Washington, DC: Asia-Pacific Rim Institute, 1997); Yitzhak Shichor, ‘Unfolded Arms; Beijing’s Recent Military Sales Offensive’, Pacific Review, Vol. 1, No. 3, 1988, pp. 320-30. 15 Washington Post, 15 July 1997. 16 For example, see, the statement by the Chinese Foreign Ministry in July 1991 concerning Middle East arms control, Xinhua, 9 July 1991, in FBIS-CHI, 10 July 1991, p. 19.

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In June 1997, the China National Petroleum Corporation (CNPC) outbid US and other companies to win a major share in two of Kazakhstan’s largest oilfields and a contract to build a 3000 km pipeline from Kazakhstan to China which would also supply Iranian refineries. Taking clue from his western counterparts, Chinese Premier Li Peng lobbied hard to close this $4.4 billion deal.17 ' One potential advantage for China is its lack of political baggage, since its political ambitions are more limited than those o f the United States, Russia, Iran or Turkey. For example, Kazakhstan is using China to become increasingly independent from Moscow, which tried to use its political leverage and offered poor terms for an oil deal. The Chinese plan means more money and employment opportunities for Kazakhstan as it can make better bids since it lacks alternative supplies and has a government willing to give subsidies at commercially unprofitable rates. But China is hurt by the inefficiency o f its oil industry and may not be able to build the proposed pipeline; in political terms, the Kazakhstan deal will make Beijing an even closer ally o f Iran in the region.1® Being a late comer in the highly competitive oil market, China must pursue more risky and marginal sources neglected by others— including Iran, Iraq and Sudan— which create international political problems. More conventionally, China has entered into a $1.5 billion deal for a huge Sino-Saudi oil refinery in China and 10 million tons o f Saudi oil annually for a fifty-year period.19

LINKAGE WITH OTHER STRATEGIC INTERESTS CLOSER TO HOME

Despite the factors mentioned above, East Asian and domestic issues remain more important for China than any Middle Eastern considerations. These include the integration of Hong Kong, the reconquest of Taiwan, avoiding international sanc­ tions over human rights and trade violations, promoting economic development and domestic stability. Maintaining good US-Sino relations— in large part to further all these goals— is also a high priority. For example, in 1993, China boycotted the Middle East arms talks to protest a US warplane sale to Taiwan. Two years later, it broke off talks on the M TCR over the visit o f Taiwanese President Lee Tenghui to the United States; while announcing the suspension of reactor sales to Iran that same year Qian explicitly mentioned China’s 17 Xiaojie Xu, T h e New Great Games in Central Asia, a Geopolitical Perspective on [the] Chinese Con­ nection, Turkestan News, Vol. 98, No. 2, 5 January 1998; Cengiz Candar, ‘Strategic Competition, Sabah, 28 December 1997, in Turkestan News, Vol. 98, No. 2, 5 January 1998. See also Matthew R. Simmons, Chinas Insatiable Energy Needs (Beijing: Simmons & Company International, 1997); and Xiaojie Xu, The Geopolitics o f O il and Gas in New Century (Beijing: Social Science Literature Publishing House, China Academy o f Social Sciences, January 1998). 18 Xiaojie Xu, Call for Debate on ‘Who could Win the Great Game?’, Turkestan News, Vol. 98, No. 2, 5 January 1998. For reasons why Chinas oil industry is ineffectively competitive, see ‘Chinese Oil Industry will Collapse without Reform’, O il GasJournal and China Daily Business Weekly, 25 January 1998. 19 C. Raja Mohan, ‘China Joins the Great Game’, Turkestan Times, 1 February 1998.

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expectation that the United States would be more prudent in future on the Taiwan issue. Second, if China assists Iran and supports anti-US elements in the Middle East, it will have to pay a price in terms of its relations with the United States. As Senator Alphonse D ’Amato, the strongest congressional advocate of sanctions against Iran and those who help it, explained: China cannot have cooperation with the United States while it sells materials used for making chemical weapons to Iran, and China could lose its trade surpluses with the United States that way----You cannot trade with us and... build a relationship of mutual respect, and then because you’re going to receive a half a billion dollars in hard currency sell weapons’ technology to Iran.. . 20 The Chinese decision to reduce weapons’ sales to Iran or refrain from supplying weapons of mass destruction can reap rich dividends. In January 1998, President Bill Clinton submitted to Congress a nuclear cooperation pact he had signed with China. White House spokesman Mike McCurry said that the President was satisfied that China had met the necessary conditions on nuclear non-proliferation ‘to engage in peaceful nuclear cooperation with US industry’. Despite considerable provocation, the United States never imposed sanctions on China over Middle East arms sales. This indicates that Washington accords higher priority to other bilateral issues than to China’s Middle East policy. Finally, a new factor in China’s Middle East policy is concern over unrest in its mineral rich western province of Xinjiang, where 10 of 16 million residents belong to Muslim ethnic groups. Separatists have been involved in riots, assassinations and bombings since 1996. Nationalist and economic discontent may be sparked off and aided by other members of these communities in neighbouring Kazakhstan and Kyrgystan, as well as by sympathisers in Iran, Turkey or Afghanistan. Chinese officials accuse dissidents of seeking to establish an Islamic Republic of East Turkestan. This instability is also discouraging western investors from developing oil reserves in that province.21 To mitigate this problem, China wants to build good relations with neighbouring states and to increase local prosperity by making oil and other deals in Central Asia.

CHINA AND MAJOR MIDDLE EAST ISSUES

China took a cautious stand on the crisis involving Iraq’s conquest o f Kuwait, the antiIraq coalition, the 1991 Gulf War, and the subsequent sanctions against Baghdad. 20 Hearing o fthe Near East and South Asian Affairs, Subcommittee ofthe Senate Foreign Affairs Committee, 19 April 1997. 21 Muslim Uprising Brews in China« 23 November 1997, AP; Reuters, 4 January 1998; AP, 24 November 1997.

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It supported both Baghdad's compliance with UN-mandated arms controls and a quick end to sanctions. This policy was aimed at pleasing Saddam Hussein without antagonising the United States. After Iraq’s invasion of Kuwait in 1990, China urged a diplomatic solution, a position favoured by Baghdad. Beijing abstained (that is, neither supported nor vetoed) on the UN resolution authorising the coalition to expel Iraq from Kuwait by force. In order to win Chinese support, the United States and Europe lifted all remaining sanctions against China following the Tiananmen massacre.22 By 1994, China was urging an end to sanctions against Iraq, which was a lucrative market for Beijing for selling arms and other services, and for buying oil. Ideally, Iraq would comply with the UN demands that it eliminate its weapons o f mass destruction and thus make possible a return to normal relations. When this did not happen, China was cautious and limited in opposing the US policy o f maintaining pressure on Iraq. Consistent with this strategy, during the 1997-98 crisis with Iraq, Qian Qichen called on the world community to be fair and lift sanctions soon, while urging Iraq to cooperate with the UN to make an end to sanctions possible. There was, however, a pro-Iraq tilt, with Qichen suggesting Iraq did not have any weapons of mass destruc­ tion: ‘I can say that what was discovered has been destroyed. And there are doubts about the existence o f those which have not been discovered yet’.23 China opposed any attack against Iraq, and Prime Minister Li Peng suggested that UN inspectors setde for only limited access to suspected weapons hiding places.24 Historically, China had taken a strongly anti-Israel stance on the Arab-lsraeli peace process. But China shifted from total support for the PLO and Israels destruc­ tion to establishing diplomatic relations with Israel after the Madrid conference. Subsequently, Beijing supported the Oslo agreements and the Israel-Palestinian and Israel-Jordan peace processes, advocating the creation o f an independent Palestinian state alongside Israel. However, Chinas role was secondary in promoting mediation, though it suggested that regional peace and stability was the most important goal. In practice, China gave litde material help to the Palestinians while establishing its relations with Israel very rapidly. Despite its small size, Israel became an important investor in Chinese development projects and supplier o f high technology weapons.25 Prime Minister Benjamin Netanyahu told the Chinese that 'Israeli know-how is more valuable than Arab oil’.26 Whether or not that is true, Israeli technology did have a high value for Beijing. Moreover, like many countries, China thought good relations with Israel would improve its relations with the United States. Thus, Sino-lsrael relations have become important independent of the peace process’s current status or the final outcome.

22 Mohan Malik, ’Peking's Response to the Gulf Crisis’, Issues and Studies, September 1991, pp. 107-82. 23 AP, 26 December 1997; Reuters, 6 January 1998. M Kol Israel (Jerusalem), 12 February 1998. 25 David Horowitz, 'Breaking Down the Wall o f Secrecy', TheJerusalem Report, 9 January 1992, p. 9. 26 AP, 24 August 1997.

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The balance and caution of Chinese policy is a result of that country's varied interests in the Middle East. On the one hand, China wants a peaceful, stable Middle East and to avoid entanglement in regional conflicts or crises. Rather than seeking a sphere of influence or strategic advantage, Beijing prefers to focus on trade and economic development. It prefers not to damage relations with the United States. On the other hand, it does not want to give up lucrative relationships with Iran (and potentially Iraq), reduce arms sales (especially the supply o f missile and nuclear technology), or see the region so dominated by the United States that there is no place for a Chinese economic role. Two factors cut across this contradiction. First, Chinas link to radical states is not primarily an ideological or strategic choice but the result o f its relative weakness and lack o f a technological edge. Second, China has managed to develop and maintain good relations with virtually every country in the region, most obviously with both Israel and Iran simultaneously. In general, Chinese strategy can be judged as relatively successful and its irresponsibility regarding arms sales— and a tendency to violate commitments to restrain them— could point to serious problems for Chinas Middle East policy in the future.

Chinese Arms Exports to Iran* Bates Gill

Since the mid-eighties, Chinese arms exports to Iran have raised concern within the international community.1 More recently, in conjunction with the US-China sum­ mit of October 1997, China apparently took a number o f steps to curtail sensitive transfers to Iran as part of a broader, more positive trend in Chinese non-proliferation policy. While it appears that Chinese arms exports to Iran may diminish, numerous concerns nevertheless persist that China continues to provide Iran with systems and technologies which contribute to the further development o f its cruise and ballistic missile capability, as well as to its alleged nuclear, chemical and biological weapons related programmes. Greater attention should be brought to bear on these concerns for several reasons. First, the Iranian development and possible deployment weapons of mass destruc­ tion run counter to international agreements and multilateral arrangements such as the Nuclear Non-proliferation Treaty (NPT), the Chemical Weapons Convention (CWC), and the Missile Technology Control Regime (MTCR).2 Second, an increas­ ing military capability for Iran, based in part on its cooperation with China, may escalate regional tensions as Iran presents a robust military capability in the Persian Gulf and beyond. Third, Chinas arms trade relationship with Iran has posed serious obstacles to the improvement of an important global relationship— Sino-US. ties. Fourth, at the level of Chinese national policy, there remain a number o f questions as * Portions o f this article appeared in Silkworms and Summitry: ChineseArms Exports to Iran and US-China Relations (Washington, DC: Asia-Pacific Rim Institute, December 1997). 1 Throughout this paper, the terms ‘arms’ and 'weapons’ will be broadly defined to include major conventional weapons, nuclear, chemical and biological weapons, ■missiles, as well as technologies and assistance related to these systems. However, the focus o f this paper will be on Chinese transfers to Iran of systems and technologies related to weapons o f mass destruction and missiles. 2 Iran is a party and member in good standing to both of these treaties. According to the provisions of the CWC, Iran’s October 1997 ratification of the CWC means that it must within thirty days submit a declaration to the Convention's governing body to 'declare whether it owns or possesses any chemical weapons, or whether there are any chemical weapons located in any place under its jurisdiction or control’. China is not a member of the MTCR. Through bilateral commitments with the United States in 1992 and , 1994, it has agreed to abide by the original guidelines and control list of the MTCR« but not to subsequent revisions to the regime. The regime regulates the export o f missiles and unmanned vehicles capable of delivering a 500 kg payload at least 300 km, and their related technologies.

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to whether the country has both the will and the ability to implement, monitor and enforce its non-proliferation commitments. In order to assess the current and likely future scope and nature of Sino-Iran arms trade, and how it affects these larger international and regional security concerns, several important questions should be addressed. 1. What are the broader strategic, political, and economic motivations which drive Chinese arms trade with Iran? Have these factors changed over time in a way conducive to diminished Sino-Iranian arms trade in the future? 2. What has been the extent and nature of Chinese arms trade with Iran? Has China taken meaningful steps to curtail its arms trade with Iran? 3. Has the nature of this trade changed significantly over time? In what ways has this trade changed to make it more or less problematic for international and regional security concerns? In the following, these and related questions will be addressed by reviewing the back­ ground and strategic rationale for Chinese arms exports to Iran, detailing the extent and nature of that trade, and assessing the encouraging developments and continuing concerns related to the Sino-Iranian arms trade relationship. While China has taken a number of positive steps in recent years to curtail its export o f sensitive weapons and technologies to Iran, more needs to be done to reduce continued exports to Iran and ensure that China can fulfil the non-proliferation goals it has set for itself.

BACKGROUND TO SINO-IRANIAN ARMS TRADE

With the collapse o f the Sino-Soviet relationship in the early sixties and with the increasing US presence on Chinas border in Southeast Asia, China stepped up its diplomatic efforts to establish friendly relationships with the developing world. The 1965 visit of Zhou Enlai to Tehran broke new ground in this regard, and by the end of the decade the Shah of Iran was on record in support of opening the United Nations membership to the PRC. In early 1970 Iran abstained from voting on the resolution to admit the PRC to the United Nations— the first time it had not voted against admitting the PRC— and in August o f that year the two countries established formal diplomatic relations. In severing official ties with Taiwan, Iran recognised the PRC as ‘the sole legal Government of China and for its part, China promised to support ‘the Imperial Government o f Iran in its just struggle to safeguard national independence and state sovereignty and protea its national resources’. Beijing increasingly saw Iran as a bulwark against perceived Soviet expansionist aims toward the Persian Gulf, and favourably viewed the Shahs efforts to become, with US assistance, the most powerful military force in Southwest Asia. Interestingly, the 3

‘J°im Communique on Establishment of Diplomatic Relations Between China and Iran’, Peking

Review, 20 August 1971, p. 4.

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Shahs dependence on US military assistance was not criticised, but supported: ‘the Shah is concerned about growing Soviet influence in the Middle East and is anxious to improve Iran’s military forces’.* Sino-lranian relations continued to be strong even into late 1978 as the Shahs regime began its final decline. China expressed concern in its public diplomacy with Soviet efforts to take advantage of the deteriorating situation in Iran. In September 1978, Maos hand-picked successor, Hua Guofeng, led a high ranking delegation to Tehran. Huas visit— coming just four months before the final departure of the Shah from Iran—was the last by a head of state to Tehran before the collapse of the Shahs rule. It took some time for diplomatic ties between China and Iran to develop following the establishment of the Islamic Republic in March 1979. China had just launched its punitive war against Vietnam and focused its attention on expanding Soviet influence in Southeast Asia. The new Iranian leadership was suspicious o f countries such as China which had close ties with the Shah. However, owing to Chinas abiding con­ cerns about Soviet influence in Southwest Asia, China took steps to re-establish good relations with Iran. In July 1979, it was reported by Arab News that Hua Guofeng, through a Pakistani intermediary, actually apologised to the Iranian leadership for his visit to the Shah nine months earlier.5 With the Soviet backed Vietnamese invasion of Cambodia (in December 1978), alleged Soviet activities to depose the Shah (in the late seventies), and with the Soviet invasion o f Afghanistan (in December 1979), the Chinese had few ideological compunctions about strengthening ties with the new regime in Tehran. With the onset of the Iran-lraq War in September 1980, China stepped in to become one of Iran's closest international partners, both diplomatically and in terms of assisting Iran’s war efforts against Iraq. For China, arms sales and improved Sinolranian relations served a number of strategic, political and economic interests. China had enjoyed a good relationship with the Shah in the seventies, and while the leadership in Iran had dramatically changed, the strategic rationale for strong Sino-lranian ties had not. Indeed, with the Soviet threat looming large following the invasion of Afghanistan, China was even more concerned about strengthening ties with Iran. In addition, China was able to realise billions o f dollars in foreign currency during the Iran-lraq War as a result of its arms exports to Tehran. It was within this larger strategic and economic context that the Sino-lranian arms trade relationship was established. The end of hostilities between Iran and Iraq in 1988 did not slow down the steady pace o f development of the Sino-Iran relationship. Chinese arms exports to Iran continued, and moved beyond basic conventional weaponry to include cooperation in ballistic missiles, advanced cruise missiles, and possibly nuclear, chemical and biological assistance. The two countries also expanded their relations in other areas of political and economic cooperation, including development aid and trade. In 1996, a renewed arms agreement valued at US $4.5 billion was reached between the two sides. 4 ‘Uneasy about Soviet Presence in the Middle East’, Peking Review, 3 August 1973, p. 20. 5 'Peking Leader Apologises for Official Visit to Shah’, Arab News (Jeddah), 30 July 1979.

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Throughout most o f the nineties, China and Iran maintained stable and improved ties across the spectrum of political, economic and military related relations. Contrary to widely held views, it is clear that Beijing’s interest during the eighties and the early nineties to forge closer tics with Iran— including the provision of weapons—had as muSTto do with strategic and political considerations as to those of profit.raking. ftoth under the Sliah and-i he AvatoIIaK. Iran-eeettpted a viiat~positiori within Chinas strategic frame of reference in the late seventies and throughout most of the eighties. Iran’s position in the Persian Gulf and in the oil rich region has long made ¡fan Important country lor C h ina. Throughout the eighties, Iran offered a noisome presence to the Soviet southern flank throughout the latter’s ill-starred occupation of Afghanistan and later maintained a fiercely independent force in the face of a powerful US presence in the region, especially after the US led coalition victory over Iraq in 1991. Iran’s revolutionary policies and strong stand against outside influence meshed well with China’s policies from the late seventies to the early nineties of maintaining independence from the super powers while building Chinese regional influence. However, Wrth the'dramatic shifts in the i1rrefnatio naTenvironment in the early nineties, much of the strategic rationale for strong Sino-Iranian ties has changed, and with it the arms trade component of that relationship. At the same time, while China’s arms trade with Iran has diminished overall, China continues to offer Iran sensitive weapons and technologies. O f most concern, these exports are increasingly in the realqi^of technology transfers, dual-use trade and scientific assistance which are far more difficult id inuilttorT Such transactions may help Iran to develop a greater indigenous capacity to produce and deploy advanced conventional and mass destruction weapons. CHINESE ARMS TRANSFERS TO IRAN

The Chinese arms trade relationship, couched as it is in a broader strategic, political and economic context, has since the early eighties covered a spectrum of conven­ tional, missile, nuclear and chemical related activities. With the exception of Pakistan and possibly North Korea, China’s arms trade relationship with Iran has been more quantitatively and qualitatively comprehensive and sustained than with any other recipient.6 This trade has included the provision of thousands of tanks, armoured personnel vehicles and artillery pieces, several hundred surface-to-air, air-to-air, cruise and ballistic missiles as well as thousands of anti-tank missiles, more than a hundred fighter aircraft, and dozens of small warships. In addition, it is widely believed that China has assisted Iran in the development of its indigenous ballistic and cruise missile production capability, and has offered technologies and assistance in the development of its clandestine chemical and nuclear weapons programmes. 6 On Chinese arms trade, see R. Bates Gill, ChineseArms Transfers: Purposes, Patterns and Prospects in the New World Order (Westport: Praeger Publishers, 1992). Chinas arms exports to North Korea have been drastically curtailed since the late seventies.

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Most important, China appears to have made significant contributions to Iran’s indigenous military production capability through the provision of scientific expertise, technical cooperation, technology transfers, production technologies, blueprints and dual-use transfers. Such transfers are far more difficult to monitor and assess, and are likely to constitute a greater proportion of Chinas militarily relevant transfers to Iran in the future. While it is possible to draw together a great deal of information and analysis concerning Chinese arms transfers to Iran, it is important to note that this open source information and analysis cannot be fully verified without access to further, possibly classified, sources of information. In order to present this information in detail and to focus on areas of greatest proliferation concern, the discussion is divided into four principal parts: (a) anti-ship cruise missiles; (b) ballistic missiles; (c) nuclear assistance; and (d) chemical and biological related transfers.

Anti-Ship Cruise Missiles Chinas exports of anti-ship cruise missiles to Iran has led to substantial concern both in the United States and among Iran’s neighbours in the Persian Gulf. In spite o f these concerns, China continued its cruise missile trade with Iran from the mid-eighties through the mid-nineties. Concerns about anti-ship cruise missile sales ran especially high during the Iran-Iraq War because of the threat these missiles posed to maritime commerce and naval vessels in the Persian Gulf, including re-flagged US vessels, oil platforms and US warships patrolling the area. Following the conclusion o f the Iran-Iraq War, the high profile public concern over Chinas cruise missile trade with Iran subsided somewhat. This was due in pan to Chinas ballistic missile deals with Pakistan and Syria, and in part because the 1991 Persian GulfWar diverted American attention to the threat of Iraq and its proliferation activities. However, by the mid-nineties Chinas missile trade with Iran again aroused international concern, particularly in the US. Most recently, Chinas reported sale of C-802 cruise missiles to Iran triggered off a strong reaction in the United States, leading Congress to call for san a ions against China. In the lead-up to the October 1997 US-China summit, China apparently agreed to stop sales o f anti-ship cruise missiles to Iran. A review of Chinas cruise missile trade with Iran can be divided into three parts: (a) the sale of anti-ship HY-2 (‘Silkworm’) missiles, mostly during the Iran-Iraq War; ( b) the sale of C-801 missiles toward the end o f thfc Iran-Iraq* War; and (c) the more recent Iranian acquisitions o f advanced C-802 missiles in the nineties. During the Iran-Iraq War, one of Chinas most controversial arms transfers involved the HY-2 anti-ship missile, commonly referred to as the ‘Silkworm’.7 The HY-2 has a number of variations, including coast, ship and air launched versions. The missile 7 ‘HY* denotes the Chinese name for the system, 'haiying or ‘sea eagle’. According to some sources, the proper US designation for the HY-2 is actually 'Seersucker*, Silkworm being the designation for the older HY-1 missile. However, Silkworm is the generally accepted designation for the HY-2. The export version of the HY-2 missile is also sometimes referred to as the C-201. To avoid confusion, this paper will refer to the system in question by the Chinese designation, HY-2.

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uses liquid fuel, has an approximate range of 95 km, reaches speeds o f up to 475 miles per hour, and carries a conventional high explosive payload o f approximately 513 kg and is not generally considered a very sophisticated weapons system, even by Chinese standards. Based originally on the fifties technologies, the HY-2 was first static tested in 1966 and flight tested in 1969; and the more advanced versions, the HY-2A and HY-2B, were tested in the mid-seventies and certified in the mid-eighties. The overall development cycle o f the missile was twenty years.8 The missile raised heightened concerns in the mid-eighties when its presence in Iran was confirmed; it was among the most advanced anti-ship cruise missiles in the Persian Gul£ The first o f several HY-2 shipments was delivered in the summer of 1986, and Iran successfully test-fired the HY-2 missile in February 1987.9 The vulnerability of the US naval vessels to anti-ship cruise missiles became especially clear when the USS Stark was attacked by an Iraqi-fired Exocet missile in May 1987 and in October an American-owned tanker under the Liberian flag and a Kuwaiti tanker called the Sea hie City under the US flag were both hit by Silkworm missiles. On 22 October 1987, the Reagan Administration, following the attack on the Sea Isle City and dissatisfied with the Chinese responses to the US demarches, froze further liberalisation o f technology sales to China. This was the first time the United Sutes had acted against a third country for supplying weapons to Iran. The US administration apparently hoped that freezing high technology exports would put enough pressure on China and the PRC leaders would agree to halt HY-2 transfers. The administration further stepped up the pressure by hinting that the United States would consider pre-emptive air strikes on HY-2 sites in Iran, although little came of these threats. The US pressure apparendy resulted in a Chinese pledge, but not necessarily in a Chinese admission or change in proliferation activities. Despite Beijing's assurances, reports indicate that China continued to sell HY-2 missiles to Iran in 1988 and 1989. Furthermore, Iran claimed in early 1988 that it had developed the capability to manufacture HY-2s and other anti-ship cruise missiles indigenously.10 Also, after the US pressure forced China to curtail direct sales of HY-2 missiles, Iran reportedly turned to North Korea for the supply of HY-2s.11 This clearly indicates that Chinas previous pledges to prevent this type o f third party transfer were not enforced. Moreover, reports in the early nineties indicated that Chinas assistance to Iran’s HY-2 programme was continuing. However, instead o f direct transfers o f complete weapons, it appeared China was assisting Iran in improving its indigenous missile pro­ duction capabilities. As has already been noted, Iran claimed that it had the capacity to * Xie Guang et al. (Eds), Dangdai Zhongguo de Guofang Keji Shiye (Contemporary China Undertakings in Science and Technologyfor National Defence), Vol. 2 (Beijing: Dangdai Zhongguo Chubanshe, 1992), pp. 73-81. See also Anthony Cordesman and Abraham Wagner, The Lessons o fModem War Volume II: The Iran-lraq War (Boulder Westview Press, 1990), pp. 274-77. 9 Timothy McCarthy, A Chronology of PRC Missile Trade and Developments' (Monterey, CA: Monterey Institute of Internarional Studies, 1992), p. 6. 10 Ibid , pp. 8 and 10. 11 Andres de Lion is, T h e Coastal Missile Threat in the Middle East’, Janes Intelligence Review, January 1994, pp. 25-28.

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produce HY-2s indigenously as early as 1988. In 1991 >the US administration officials also confirmed that China was assisting in, and perhaps supervising, the construction of an Iranian missile production facility near Isfahan capable of producing the HY-2, among other missiles.12 China also provided training to Iranian scientists in China. Iran’s indigenous cruise missile programme is probably based on these production facilities and assistance, in addition to help from North Korea. Some sources suggest that, with Chinese assistance, Iran could develop turbojet or ramjet variations of the HY-2 missile, which would give the weapon a longer range and greater accuracy.1^ Studies in the early nineties reported that China had supplied Iran with about 124 HY-2 missiles and eight launchers in the eighties.14 If one were to add up Irans HY-2 missiles from North Korea and those Iran has produced indigenously, it is not clear how many HY-2 missiles it has in its arsenal at present. According to recent estimates, Iran fields approximately 100 HY-2 missiles on eight to ten mobile launchers on the north side o f the Straits o f Hormuz.1^ In December 1993, US naval sources suspected that Iran’s naval modernisation programme included the purchase of more HY-2 missiles and that Iran was attempting to upgrade its existing HY-2 arsenal by improving the accuracy and counter-measures o f the missile. However, these reports did not specify whether Iran intended to import the missile from China or North Korea, or whether Chinese assistance would be involved in upgrading the guidance system.16 Generally speaking, concerns about HY-2 sales in the eighties were displaced by concerns regarding the Chinese exports of the more advanced C -801 and C-802 anti-ship cruise missiles to Iran. In addition to the HY-2, China also exported the C-801 anti-ship cruise missile to Iran during the Iran-Iraq War. According to one source, Iran may have imported as many as 100 C-80 Is and eight launchers toward the end of the Iran-Iraq War in 1987-88. According to a report in 1994, Iran at the time possessed around 200 C-801 missiles.17 The C-801 (known as YJ-8 in China), approved for use and export by the Chinese in the late eighties, marked a significant advance over the HY-2s. The YJ-8 series was developed to have solid fuel, longer ranges and multiple launching modes, as well as fly at very low altitudes employing frequency-hopping radar to combat electronic counter-measures. The first in the series was the C-801, which has a range o f 8 to 42 kilometres, a solid propellant motor, and can be launched from aircrafts, ships, shore batteries and submarines. Some sources claim that China 12 Gordon Jacobs and Tim McCarthy, ‘Chinas Missile Sales— Few Changes for the Future’, Janes Intel­ ligence Review^ December 1992, p. 561; and McCarthy, op. cit., p. 19. 13 Duncan Lennox, ‘Cruise: A Missile for the 90s*, Janes Defence Weekly, 17 May 1994, pp. 19-20. China made similar improvements to its HY-2 missiles to produce the 0 8 0 1 and C-802 missiles. Xie, et a!., op. cit., pp. 75-81. Gill, ‘Chinese Arms Transfers’, op. cit., p. 213; ‘N-Arms Cut Ruled Out’, Asian Recorder, 29 January 1993, pp. 22880-81; de Lionis, ‘The Coastal Missik Threat*, op. cit., pp. 25-28. 15 Janes Strategic Weapon Systems, No. 25» September 1997; and ‘HY-2 “Silkworm” Anti-Ship Missile Detailed’, Jane*s Soviet Intelligence Review, March 1991, p. 120. 16 Philip Finnegan, ‘Iran Navy Build-up Stirs US-Arab Response’, Defence News, 6 December 1993, p. 1. 17 Gill, ‘Chinese Arms Transfers’, op. cit., p. 213; and de Lionis, ‘The Coastal Missile Threat’, op. cit., pp. 25-28.

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provided Iran with the means and know-how to produce the C-801 indigenously; and the Iranian C-801 equivalent is called Tondar, according to one account.18 The US defence officials reported that in June 1997 Iran tested two Chinese-built C-801 air-launched cruise missiles from an F-4 fighter. This was the first time that Iran had successfully test-fired air-launched missiles, a significant improvement in its military capability, particularly in anti-ship weaponry. Finally, the Iranian military modernisation programme o f the early nineties in­ cluded the import of several military items from China, most prominendy the ad­ vanced C-802 anti-ship cruise missile. The C-802 at the time, and even today, is Chinas top-of-the-line anti-ship cruise missile (though China is continuing its efforts to develop more advanced versions). The C-802 (Chinese name, YJ-8A) marks some important advances over the C-801. Like the C-801, it can be fired from air, land, submarine, or surface ship, and employs sea-skimming radar. But the C-802 is slightly lighter than the C-801 and employs a turbojet engine for an extended range o f appro­ ximately 95 to 135 km. In 1994, there were reports that China was working on a more powerful .version o f the C-802 with a maximum range of up to 180 km. Bv mid-1997, Iran reportedly possessed approximately sixty ship-launched C-802s. * In addition, Iran deployed a number of coastal C-802 batteries on Qeshm Island, a strategic point on the eastern side of the Arabian peninsula.21 In the early nineties, Iran expressed an interest in purchasing a number of C-802s from China and by 1995, in spite of initial Chinese reluctance, Iran had apparently succeeded in its efforts to acquire the C-802, and the missiles were shipped in July of that year.22 In early January 1996, Iran first tested a Chinese C-802 cruise missile.2^ Iran stationed the C-802 missiles on all ten of its Hudong fast attack craft, the second five of which were delivered in March 1996, as well as on two French-made Combattante II (Kaman-class) patrol boats. Later in March 1996, US Navy sources stated that Iran was refitting its other eight Combattante II patrol boats to carry the missiles, bringing the total number of warships carrying C-802 missiles to twenty. In November 1996, Iran successfully test-fired a C-802 from one of its Chinese fast attack craft during a series of naval exercises.25 As was the case with the HY-2, the more long­ term concern, from a non-proliferation and arms control perspective, may be Chinas contribution to Iran’s ability to produce the C-802, or similar missiles, indigenously. As a result o f these political and non-proliferation concerns, and the fact that the US-'-China summit was on the horizon, US and Chinese negotiators apparently reached an agreement on the Chinese sales of cruise missiles to Iran prior to the 18 Jane's Strategic Weapon Systems, No. 25, September 1997; James Bruce, ‘Iran’s Long-Range Tondar Causes Concern in West', Janes Defence Weekly, 22 May 1996, p. 17. 19 'Naval Commander Warns o f Iran Missile, Washington Post, 31 January 1996, p. A10; Duncan Lennox and Barbara Starr, 'Briefing: Cruise Missiles’, / « * * / Defence Weekly, 1 June 1996, pp. 19-21. 20 Bill G era, ‘Senate Asks for Sanctions on China, Washington Times, 18 June 1997, p. 13. 21 Harold Hough, ‘Iran Targets the Arabian Peninsula’, Janes Intelligence Review, October 1996, p. 458. 22 ‘China Deepens Arms Relationship with Iran’, Iran Brief, 1 October 1994, p. 2. 23 ‘Iran Continues Missile Testing’, Indian Defence Review, July-September 1996, p. 88. 24 Bill Gertz, ‘US Mulls Sanctions on China for Arms Sales to Pakistan, Iran’, Washington Times, 8 March 1996, p. A8. 25 ‘Improved Silkworms Test-Fired’, Iran B rief 5 December 1996, pp. 7-8.

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late October 1997 meeting of President Bill Clinton and President Jiang Zemin. The agreement was reached on 23 September 1997 during a meeting in New York between Secretary of State Madeleine Albright and Chinese Foreign Minister Qian Qichen; the latter made a verbal pledge that China would halt all future sales o f anti-ship missiles to Iran.26 By the time of the summit, it was evident that no written pledge on the missile was forthcoming from Beijing and in a White House statement at the end o f October, officials noted that during the summit: ‘The US and China discussed the danger posed by the provision of advanced conventional weapons to Iran which threaten maritime activities and regional stability. China has agreed to take steps to address US concerns. The United States will continue to monitor this issue. During Secretary of Defence William Cohens visit to China in January 1998, these pledges were reiterated. Nonetheless, it is possible that some form of SinoIranian cooperation on cruise missiles— technical assistance and training, production technologies and sub-components— may continue. *7

Ballistic Missiles While the primary concern with cruise missiles has been their implications for Irans ability to control oil traffic in the Persian Gulf, or even to threaten foreign naval vessels, the concern about ballistic missiles is based on their possible use in attacks on land-based targets, and particularly their use as delivery systems for weapons of mass destruction. Targets in the region could include military bases or staging areas, population centres in the region, and, over the long term, targets in Israel. Accord­ ing to some sources, Iran had approached both the PRC and North Korea for the purchase of ballistic missiles and missile technology as early as 1985.28 Since then, China has been directly or indirectly involved in a number of Iranian ballistic missile programmes. Most of the Chinese transfers in this area have not been complete mis­ sile systems, but in terms of designs, technology and assistance to indigenous Iranian production efforts. The Chinese M-9 and M-l 1 ballistic missiles were developed for export and most (though not all) of Chinas controversial ballistic missile sales and technology transfer agreements have involved either of these two missiles. However, available evidence in­ dicates that while China and Iran may have discussed the transfer of complete M-9 and M-l 1 missiles, it is more likely that China at most provided technical assistance in the development o f such systems. In the case of another M-series missile— the M-7— it appears more credible that China made direct transfers of complete missiles to Iran.29 26 Steve Erlanger, ‘US Says Chinese will Stop Sending Missiles to Iran, New York Times, 18 October 1997, p. 1. 27 The White House, Office of the Press Secretary, 'Fact Sheet: Accomplishments o f the US-China Summit', 30 October 1997. 28 McCarthy, op. cit.> p. 5. 29 In addition to the M-series missiles, at least one report has indicated that Iran expressed an interest in purchasing the Chinese DF-3 (western name: CSS-2) in the early nineties. The DF-3 is a nuclear-capable ballistic missile with a range of approximately 2800 km. There have been no further reports o f Iranian attempts to acquire that particular system. See Bombsfrom Beijing: A Report on Chinas Nuclear and Missile Exports (Washington, DC: Wisconsin Project on Nuclear Arms Control, May 1991).

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The M-9, which is based on the Chinese DF-15 (western name: CSS-6) is a singlestage solid fuel missile with a 600 km range. China reportedly first entered into negotiations with Iran about the possible sale of M-9 missiles in late 1987, around the same time it initiated similar negotiations with Syria, Libya and Pakistan.30 Some reports suggest that Iran may have provided a part of the funding for the development o f the M-9 missile.31 In early 1992 and again in April 1994, reports surfaced that Iran had expressed an interest in the purchase of the M-9, but these reports did not comment on the Chinese response.3 These reports were outrighdy denied by the Chinese.33 The M-9, with its 600 km range, is clearly within the parameters of the M TCR. This may explain in part why the M-9 deal did not proceed. However, as will be discussed later, it is likely that Chinese missile technologies and assistance related to the M-9 were provided to Iran. The M -l 1 is based on the Chinese DF-11 (western name: CSS-7), and is a twostage solid fuel missile with a 300 km range. Discussions with Iran about the possible Chinese sale or joint production of the M -ll ballistic missile reportedly began in the summer or fall o f 1989, and simultaneously talks on the M-9 also continued.34 An agreement to transfer complete M -ll missiles from China to Iran may have been imminent in late 1991 and in late 1992, but the deal was apparently cancelled, modified, or postponed, following US pressure on China. In November 1991, shordy after China pledged that it would abide by the guidelines of the MTCR, US Secretary of State James Baker stated that the PRC had pledged to cancel the proposed M-l 1 sales to both Pakistan and Iran, as well as sales of M-9 to Syria. At the time, US sources revealed that no M -l Is had yet been delivered to cither Pakistan or Iran.35 However, Chinas pledge to abide by the M TCR apparently did not dampen Iranian interest in procuring Chinese M-series ballistic missiles and in early September 1992, a spokesman of the Iranian embassy in Beijing publicly stated that 500 Chinese M-l 1 missiles were ready to be shipped to Iran.36 The lack of Chinese and Iranian denials in this case is puzzling and suggests that the deal was imminent, or was deliberately leaked in response to US President George Bushs announcement on 2 September 1992 to sell 150 F-I6s to Taiwan.37 A year later, in October 1993, Defence News reported that China and Iran had signed a US $5 billion deal for the transfer of 600 M-l 1 missiles.38 But it did not indicate that any o f these M-l Is had been delivered, nor were there any media or government reports in the months following the September announcement that any M-l Is had actually been shipped from China to Iran. By 30 McCarthy, op. cit., p. 7; ‘Syria’s Acquisition o f North Korean “Scuds", Jane's Intelligence Review, June 1991, pp. 249-51. 31 ‘Syria, Iran Want to Buy Chinas M-9’, Flight International (London), 22 January 1992, p. 18. 32 Ibid., p. 18. 33 See, for example, ‘Chinese Officials Meet with JINSA’, Security Affairs, April 1994, p. 3. 34 McCarthy, op. cit., p. 13. 35 ‘China Promises to Join NPT by March, will Follow Missile Export Guidelines’, Arms Control Today, December 1991, p. 22. 36 McCarthy, op. cit., p. 29; ‘Sino-Iran “Arms Link"*, Daily Telegraph, 10 September 1992. 37 ‘F-16 Fracas’, Pacific Research, November 1992, pp. 17-18. 38 James Kraska, ‘Iran Flexes Maritime Muscles in Gulf*, Defence News, 4 October 1993, pp. 25-26.

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available indications, while Iran may have been interested in the M -11, the Chinese, in accordance with their M TCR commitments, did not provide complete M-l 1 missile systems to Iran. China probably provided M-series technologies and assistance to Iran. The M-7 (western name: CSS-8) is a short-range (150 km) surface-to-surface missile based on the Chinese HQ-2 surface-to-air missile.39 The two-stage, solid propellant missile can carry a single warhead payload of 190 kg. It is derived from the so-called ‘8610* project in China which converted the HQ-2 into a surfaceto-surface missile, a programme which was probably launched around 1985 and became operational in the early nineties. According to some reports, China shipped approximately ninety M-7 missiles to Iran in June 1992.40 Iran denied these reports; later reports, however, revealed that some Iranian M-7s entered into service in early 1994.41 The 1994 report o f the International Institute for Strategic Studies (IISS) stated that Iran had received at least twenty M-7 missiles from China but a later IISS publication, The Military Balance 1996197, estimated that Iran had 200 M7s. However, it is not clear whether Iran has direcdy imported all of these M-7 missiles, or whether it has converted— possibly with Chinese assistance—some of the estimated 130 HQ-2 surface-to-air-missiles it imported from China in the mid­ eighties.43 Since the M-7 is clearly a short-range missile, it is not covered by the MTCR, and its transfer, even if it had not been a secret, would not have been a violation of Chinas non-proliferation commitments. The available evidence suggests that China has provided expertise, technology and production equipment related to the M-9 and M -ll programmes and as a result, Iran has developed and produced variants of these systems indigenously. As in the case of anti-ship cruise missiles, the transfer of expertise and production technology generally attracts less attention than the transfer o f complete systems, but may have greater long-term significance for the military balance in the region. Chinas most significant contribution to Iran in the area o f missile expertise, training and technology has been its assistance in the construction of missile production facilities. Iran’s largest missile factory, located near Isfahan, was originally built in cooperation with North Korea, possibly with Chinese assistance. According to some sources, work on the Isfahan project probably began sometime in the early eighties, though it is not clear whether China was involved at that point.44 Beginning in 1987-88, the Isfahan facility served as the assembly site for Irans Scud-B missile kits, which were imported from North Korea.4^ 39 'Sneaking in the Scuds, Newsweek, 22 June 1992, pp. 42-46 ; ‘Iran has Acquired Chinese Missiles— IISS’, Executive News Service, 12 October 1994. Details on the M-7 are given in Jane's Strategic Weapons Systems, No. 25, September 1997. Janes Strategic Weapons Systems, op. cit.; McCarthy, op. cit., p. 28. ** Duncan Lennox, 'Ballistic Missiles Hit New Heights’, Jane's Defence Weekly, 30 April 1994, pp. 24-28. 42 Institute for International Strategic Studies, The M ilitary Balance (London: Oxford University Press, 1996), p. 132; ‘Iran has Acquired Chinese Missiles— IISS’, op. cit. Gill, 'Chinese Arms Transfen’, op. cit.t p. 213. 44 McCarthy, op. cit., p. 11. 45 Martin Sieff, ‘N. Korean Missiles may be Tested in Iran this Year’, Washington Times, 16 June 1994, p. A l3; ‘Iran Prepares Missile Sites on Abu Masa, Mednews, 7 December 1994, p. 5.

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Although it is not dear when China became directly involved in the Isfahan missile complex, reports of Chinese involvement surfaced in the late eighties. In January 1990, it was reported that China and Iran had signed a ten-year memorandum of un­ derstanding which covered military technical assistance; reports in the Arab press later revealed that this agreement included Chinese M-9 and M-l 1 technology transfers and related assistance.^ In May 1991, US administration officials asserted that China was supervising and assisting in the construction of Isfahan missile production facil­ ity. They further added that this facility could produce, among other missile systems, the M-9 and M-l 1. Beijing asserted that it had not assisted Iran in the production of medium-range ballistic missiles, and dismissed such reports as ‘totally groundless and fabricated’.48 The wording of Beijing’s denial, however, is ambiguous, since the PRC uses different definitions of ‘medium range than those commonly accepted in the west, and it also did not deny its role in the construction and supervision of the Isfahan facility. CHINESE ASSISTANCE TO IRAN'S SCUD AND INDIGENOUS MISSILE PROGRAMMES

In addition to providing significant assistance to Iranian production of Chinesedesigned ballistic missiles, and possibly some transfers of complete systems or com­ ponents, China has reportedly provided technical assistance to Iran for its indigenous missile programmes as well. Besides providing production assistance to the Isfahan facility, sources report that China has helped build a ballistic missile plant and test range east o f Tehran, and may also be involved in the production of solid-fuel rockets at the Semnan facility.49 As will be discussed later, China has allegedly provided other assistance, including guidance technologies and precision machine tools for Iran’s bal­ listic missile programmes. US intelligence sources have repeatedly emphasised that Iran received large and significant amounts of assistance for its missile programmes from China. In June 1997, the Director of Central Intelligence reported that in the second half of 1996, China contributed ‘a tremendous variety o f assistance’ to Iran’s ballistic missile programme.50 For instance, while it is generally accepted that Iran’s sizeable arsenal of Scud missiles was supplied primarily by North Korea rather than China (which does not produce or export Scuds), there have been reports that China has indirectly assisted Iran’s Scud programme. In 1993 it was reported that Iran had begun to produce the more 46 ‘Iran, China Sign Arms Technology Pact’, Washington Times, 22 January 15)90, p. 2; McCarthy, op.

a t., p. 16. 47 McCarthy, op. cit., p. 19; ‘Danieli at Risk in Isfahan Project*, Iran Brief, 6 May 1996, p. 5. 48 McCarthy, op. cit., p. 26. 49 ‘Special Report: The Iranian Defence Industry’, Mednews, 1 March 1993, p. 1. 50 These intelligence reports are noted in Robert Shuey and Shirley A. Kan, Chinese Missile and Nuclear Proliferation: Issuesfor Congress (Washington, DC: Congressional Research Service, 29 September 1995), p. 12; Shirley A. Kan, ChineseProliferation o f Weaponso fMassDestruction: CurrentPolicy Issues (Washington, DC: Congressional Research Service, 22 September 1997), pp. 6-7.

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advanced Scud-C missiles, possibly with Chinese and North Korean assistance.51 The Scud-B missile, based on thirty year old Soviet technology, has a range of approxi­ mately 300 km with a payload of 800 kg. The extended-range Scud-C is believed to have a range of between 500 and 550 km and a payload o f 700 kg. According to the IISS, Iran has around 210 Scud-Bs and Scud-Cs in service. Several other Iranian indigenous missile programmes may have also benefited from Chinese assistance. In 1994, for example, it was reported that Iran was developing a new ballistic missile, the Iran-700, probably a version of either the Chinese M-9 or the North Korean Scud-C.52 There have been scattered reports since early 1992 of an indigenous Iranian missile called the Tondar-68, which was originally reported to be a 1000 km ballistic missile. It is possible that the Tondar-68 was based on the M -ll and/or North Korean Nodong-1 missile technologies.53 Israeli sources report that the Iranian 1000-1500 km range Zelzal (Earthquake) missile was developed by the Self-Sufficiency Department o f the Revolutionary Guard with technical assistance from Russia and China.54 However, to date, the longest-range missile known to be deployed by Iran is the Scud-C, with a range of between 500 and 550 km. According to a report published by the Stockholm International Peace Research Institute (SIPRI), Iran originally wanted to acquire long-range missiles in order to deter pre-emptive strikes from Israel. However, at present, Iran’s plans for long-range missiles have been curtailed, according to the SIPRI study.55 The most recent controversies concerning Chinese technology transfers to Iran’s indigenous ballistic missile programmes are the alleged transfers of numerous missile related technologies, including sensitive gyroscopes, other advanced guidance system technology, solid fuel technology and computerised machine tools. According to intelligence reports, Chinese officials began negotiations with their Iranian counter­ parts over the sale of such technologies as early as 1992.56 A 1995 report, citing CIA sources, stated that China had transferred missile system components to Iran and Pakistan. The CIA report stated that during the course of 1994-95 China had delivered dozens, if not hundreds, of computerised machine tools and missile guid­ ance systems, supporting Iran in its efforts to increase the accuracy of its Scud missiles from North Korea, arid assisting it in the production o f its indigenously developed Scud-type missiles.57 Another CIA report, entided Arms Transfers to State Sponsors 51 Dani Lesham, ‘Regional NBC, Missile Delivery Capabilities’, Politiqa (Tel Aviv), July 1993, pp. 12-15. 52 Lennox, op. or., pp. 24-28. 53 ‘Iran Builds Its Strength’, Janes Defence Weekly, 1 February 1992, pp. 158-59; ‘Improved Silkworm Test-Fired*, Iran B rief 5 December 1996, pp. 7-8. * ‘Missile Test Reported’, Iran B rief 5 May 1997, pp. 7-8. 55 Eric Arnett (Ed.), M ilitary Capacity and the Risk o f War: China, India, Pakistan, and Iran (Oxford: Oxford University Press, 1997). See also, ‘Iran’s Missile Ambitions Scaled Down, says SIPRI’,Janes Defence Weekly, 16 April 1997, p. 16. 56 Open source reports to this effect appeared in ‘The New Order’, Wall Street JoumaL 18 March 1992, p .A l. 57 Elaine Saolino, ‘CIA Report says Chinese Sent Iran Arms Components’, New York Times, 22 June 1995, p. AI; Jeffrey Smith and David Ortaway, ‘Spy Photos Suggest China Missile Trade’, Washington Post, 3 July 1995» p. 1.

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o f Terrorism, leaked to the Washington Times in August 1996, stated that the China Precision Machinery Import & Export Corporation, the trading arm of the China Aerospace Corporation, sold missile technology and components, specifically gyro­ scopes, accelerometers and test equipment to Iran. In September 1996, follow on reports indicated that China and Iran had concluded a massive deal which covered conventional weapons as well as ballistic missile tech­ nology. The deal valued at US $4.5 billion was concluded during the visit of Defence Minister Chi Haotian to Iran in August 1996. The deal would include the transfer o f combat aircraft, warships and armoured vehicles as well as missile and electronics production equipment, and a military training package. It was reported that Iran would pay for the military technology in cash and oil over a period of five years, with US $1.5 billion earmarked for missile related transfers.58 Other reports revealed that solid fuel, gyroscope and guidance technology would be used for Iran’s Zelzal-'b missile, currently under development. Reportedly scheduled for testing sometime after 1998, it is a solid fuel missile with a range between 1000 and 1500 km.59 In addition to solid fuel and guidance technology, China may be supplying production technology for the programme, according to some sources.60 Nuclear Trade and Cooperation Since 1992, both China and Iran have argued that the Chinese transfers o f nuclear assistance are legal and consistent with the provisions of Article 4 of the NPT which allows for peaceful nuclear cooperation, and that Iranian nuclear facilities are under the International Atomic Energy Agency (IAEA) safeguards. To date, based on its fullscope safeguards agreement with Iran, the IAEA noted that Iran is in full compliance with its obligations as an N PT member not to develop nuclear weapons. However, in spite of these assurances, the United States has been putting strong pressure on China and has steadily gained ground to bring Sino-Iranian nuclear cooperation to an end. Most importantly, as pan o f the negotiations leading up to the US-China summit of October 1997, Washington sought and received written assurances from China that it would stop all new nuclear assistance to Iran. This was the price China had to pay so that the US-China Peaceful Nuclear Cooperation Agreement of 1985 could be put into force. Nonetheless, prior to this agreement, China provided Iran with a range o f nuclear related assistance, including alleged cooperation in uranium min­ ing, uranium enrichment and conversion technologies, research reactors, production facility blueprints, and technical training and assistance.61 58 James Bruce, ‘Iran and China in $4.5 Billion Partnership’,/¿ ik ; Defence Weekly, 11 September 1996, p. 3; ‘Sino-Iranian Arms Deal’, Janes Defence Weekly, 18 September 1996, p. 13. 59 Wyn Bowen, Tim McCarthy and Holly Porteous, 'Ballistic Missile Shadow Lengthens’, Jane's IDR Extra, February 1997, p. 5. 60 ‘Iran’s Chinese Shopping List’, Iran Brief 1 October 1996, p. 4. 61 An excellent and comprehensive discussion of Iran’s nuclear related imports is found in Andrew Koch and Jeanette Wolf, ‘Iran’s Nuclear Procurement Programme: How Close to the Bomb?’, Non-proliferation Review (Monterey), Fail 1997, pp. 123-3$.

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Chinas nuclear cooperation with Iran probably began in the mid-eighties and in both countries signed an agreement on reactors and reactor sites, an agreement which the Chinese government did not officially acknowledge. It is generally believed that most of Chinas nuclear related assistance to Iran in this early period involved the Isfahan nuclear complex. The Isfahan facility began operations in 1 9 8 4 , but was not declared a nuclear facility until after an inspection by the IAEA in 1 9 9 2 . China allegedly began to assist operations at the Isfahan nuclear research centre shortly after it began operation. In 1 9 8 5 , the PRC in all probability supplied two subcritical ‘training reactors* to the site (a 2 7 kilowatt miniature neutron source reactor and a heavy water zero power reactor). In addition, around 15 nuclear engineers from the Isfahan centre were trained in China between 1 9 8 8 and 1 9 9 2 , and in the late eighties China reportedly sold a small electromagnetic separator called a calutron (used in uranium enrichment) for use at the Isfahan facility.62 In 1 9 9 1 , it was reported that China and Iran had signed a deal under which China would sell a research reactor ( 2 0 - 3 0 megawatts) to Iran, to be located at the Isfahan site. Prior to 1 9 9 1 , China dismissed all reports of nuclear cooperation with Iran as ‘groundless* and ‘preposterous’, stating that, ‘China has struck no nuclear deals with Iran’.64 China finally stopped denying reports o f Sino-Iranian nuclear coopera­ tion in November 1 9 9 1 , when the Chinese Foreign Ministry admitted that Chinese and Iranian companies had signed contracts for the Chinese sale o f the calutron and mini-research reactor in 1 9 8 9 and 1 9 9 1 , respectively. But the Chinese Foreign Ministry insisted that these items could be used only for peaceful purposes, such as medical diagnosis and physics research, and that the facilities would be under the IAEA safeguards.65 The Chinese side fttrther argued that the proposed 2 0 megawatt research reactor was too small to pose a proliferation threat.66 The 1 9 9 2 IAEA in­ spection concurred with the China-Iran position on the Isfahan project and found that the calutron at Isfahan did not appear to be part o f a nuclear weapons programme and was too small to be used for uranium enrichment.67 Moreover, the IAEA did not consider the proposed 20 megawatt research reactor project large enough to produce 1985,

significant amounts of weapons-grade nuclear material. Many in the United States were sceptical, and feared that the proposed research reactor could be used to manufacture fuel for nuclear weapons and held that the 62 ‘Iran's Nuclear Weapons Programme’, Mednews, 8 June 1992, pp. 1-5 and 7; Shirley A. Kan, Chinese Missile and Nuclear Proliferation: Issues for Congress (Washington, DC: Congressional Research Service, 24 August 1992); David Albright, ‘An Iranian Bomb?’, The Bulletin o f the Atomic Scientists (Chicago), July-August 1995, p. 25. 63 Shuey and Kan, op. cit.t p. 11; Albright, ib id , p. 25. 64 Xinhua (Beijing), ‘Special Memorandum: Chinese Statements on Proliferation Issues, 1979-1991’, in Foreign Broadcast Information Service— China (hereafter FBIS-CH i), 18 December 1991, pp. 10—1165 Ibid 66 Mark Hibbs, ‘Sensitive Iran Reactor Deal may Hinge on M FN for China’, Nucleonics Week, 1 October 1992, pp. 5-6. 67 Kan, op. cit.t pp. 1-15. 68 Hibbs, op. cit.t pp. 5-6.

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reactor had the ability to produce up to 6 kg of plutonium per year.69 Although the IAEA does not consider this amount significant, it is enough to manufacture one nuclear bom b/0 Because the US believed that Iran was pursuing a clandestine nuclear weapons programme, even this small amount of weapons-grade material was enough for Washington to put pressure on China to cancel the 2 0 megawatt reactor deal. The United States did not apply similar pressure with regard to the calutron sale partly bccause it accepted the IAEA finding that this particular calutron was too small to pose a proliferation threat, and also because the calutron transfer had already been completed by September 1 9 9 2 .71 However, the termination of the 20 megawatt reactor deal did not end Sino-Iranian cooperation in small-scale nuclear research and technology projects. In February 1 9 9 3 , China and Iran signed an agreement under which the PRC would provide Tehran with a HT-6B Tokamak nuclear fusion reactor, to be located at Azad University in Tehran. In 1 9 9 4 , Chinese technical teams paid two visits to Tehran to install, test and fine-tune the reactor and in February 1 9 9 5 , Iran informed China that the reactor had successfully produced a 2 0 millisecond electromagnetic discharge.72 However, this transfer apparently did not have any direct application to Iran’s nuclear weapons programme, and it attracted minimal attention in the west. At the same time that Washington was pressuring Beijing to cancel the 2 0 megawatt reactor deal, China and Iran were negotiating the sale of two 3 0 0 megawatt pressurised water reactors. On 10 September 1 9 9 2 , almost a month before China cancelled the 2 0 megawatt research reactor deal, both countries signed a nuclear energy cooperation agreement during Iranian President Hashemi Rafsanjanis visit to Beijing and this cleared the way for the sale of the 3 0 0 megawatt reactors, as well as other nuclear technology.73 This sale was not a clandestine arrangement and both sides insisted, repeatedly and publicly, that the reactors would be used only for peaceful purposes and would be subject to the IAEA safeguards. However, the US government and military officials were concerned that the reactors in question could be used to support what the US viewed as a clandestine nuclear weapons programme in Iran. There were apprehensions that the transfer of the reactors and associated technology would include equipment to manufacture nuclear fuel rods, which could be used to generate fissile material for nuclear warheads.74 In April 1 9 9 5 , the United States again issued an appeal to China to suspend the reactor sale but the latter rejected the appeal, pointing out that the sale was legal under international non-proliferation law and 69 Shuey and Kan, op. «>., p. 11; Albright, op. a t.t p. 25. 70 Hibbs, op. a t., pp. 5-6. 71 Elaine Sciolino, 'China to Build Nuclear Plant for Iran’, New York Times, 11 September 1992, p. A3. 72 Cheng Yan, Zhongguo Kexue Boo (Beijing), in Joint Publications Research Service, CST-95-006, 8 March 1995; ‘“ Transfer*’ of Nuclear Device to Iran Cited’, Zhongguo Tongxvn She, 21 April 1995, in FB1S-CHI, 24 April 1995, pp. 8-9. 73 ‘Iran Signed a Nuclear Cooperation Pact with China’, Nuclear News, October 1992, pp. 17-18. 74 ‘Pact with China Sets Stage for Reactor Deal', Nuclear News> August 1993, p. 64; Elaine Sciolino, ‘Beijing Rebuffs US on Halting Iran Atom Deal’, New York Times, 18 April 1995, p. A l; R. Jeffrey Smith, ‘China-Iran Talks Spark US Worry’, Washington Post, 18 April 1995* p. A13.

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reiterated that the proposed reactor was for strictly peaceful purposes and would be subject to the IAEA safeguards.75 However, Sino-Iranian negotiations on the reactor deal did not proceed smoothly. On 27 September 1995, Chinese Foreign Minister Qian Qichen told US Secretary of State Warren Christopher that China had unilaterally decided to cancel the sale of the two 3 0 0 megawatt power reactors to Iran.7** The three countries appeared to have different interpretations of what had transpired. The United States apparently believed that China had decided to back out of the deal entirely, and the US indicated Qian Qichen had stated that the deal had been ‘terminated’. Qian, however, later denied that the deal had been cancelled, and said that it had merely been suspended for the time being’ because of Chinese-Iranian disagreements over the location of the reactors. In the mean time, Iran stated that it had no knowledge o f any change in the status of its nuclear cooperation agreement with China.77 By October, Iran flatly denied that the deal had been cancelled, and reiterated the Chinese position that it had merely been put on hold while the two sides negotiated over the final site for the reactors.7 Despite these varying interpretations, it appears that the 3 0 0 megawatt reactor deal was scrapped, even though it was not publicly cancelled by either side. On 9 January 1996, Chinese Foreign Ministry spokesman Chen Jian reaffirmed that China and Iran would continue their nuclear cooperation under the appropriate IAEA safeguards, and added that the deal to supply two 3 0 0 megawatt power reactors to Iran had been ‘temporarily’ frozen.79 Although Iran’s Atomic Energy Council stated that it was again interested in purchasing 3 0 0 megawatt power reactors from China in April 1997, there were no response from China. Another area of possible cooperation between China and Iran has been in uranium conversion and enrichment. As early as June 1994, there were reports of Chinese nuclear experts assisting in the construction o f uranium enrichment plants at Rudan and Shiraz. According to some US experts, the town o f Fasa, in the Shiraz region, was to be the site of a Chinese-constructed uranium hexaflouride (UF6) plant.81 The conversion of uranium ore into UF6 gas is a key step in the process of uranium enrich­ ment, and reports of the UF6 plant project therefore caused considerable concern. 75 'China Rejects US Plea not to Sell Iran 2 Reactors’, International Herald Tribune (New York), 18 April 1995, p. 1. 76 Elaine Sciolino, 'China Cancels Deal for Selling Iran 2 Reactors’, New York Times, 28 September 1995, p. A l. 77 Jeffrey Parker, Reuters Insurance Briefing* 29 September 1995; IRNA (Tehran), 28 September 1995, in FBIS-NES-95-190,28 September 1995; Nuclear Proliferation News, 12 October 1995, p. 14. 7 8 Mark Hibbs, ‘Iran, China said to Disagree Only on Site Selection for New PWRs, Nucleonics Week, 5 October 1995, pp. 1 and 8-9. 79 'Foreign Ministry Holds Regular News Conferences on Nuclear Cooperation with Iran', IRNA (Tehran), in FBIS-CHI-96-008, 9 January 1996. 80 Alan George, 'Revival of Iran’s Nuclear Ambitions Causes Alarm’, Janes Intelligence Review & Janes Sentinel Pointer, April 1997, p. 6. 81 Intelligence Newsletter (Paris), 23 June 1994, p. 5; Iran B rief 1 June 1995, p. 11.

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Although enriched uranium has civilian applications, Iran’s desire to construct its own UF6 plant was indicative o f an intention to use the enriched uranium in a clandestine nuclear weapons programme. Iran could purchase enriched uranium for its civilian reactors on the international market for a fraction what it would cost to develop an indigenous uranium enrichment capability. Throughout 1994 and 1995, reports on the China-Iran UF6 plant project, as well as other uranium enrichment related technology transfers poured in. In September 1994, western intelligence sources believed that Iran had acquired gas centrifuge design data from China and was seeking other components and technology» including the UF6 plant, that would enable its military to enrich uranium for its clandestine nuclear weapons programme.8^ Following April reports surfaced that China was assisting in the construction of Iranian uranium purification and conversion (UF6) facilities.84 Other reports around the same time revealed that China may be prepared to proceed with the transfer of technology for uranium mining, conversion and fuel fabrication to Iran. In response to these reports, Chinas Ambassador to the Conference on Disarmament (CD) Sha Zukang declared on 1 May 1995 that China had never sold uranium enrichment, reprocessing, or heavy water production technologies abroad.85 In July 1995, a high ranking US official declared that in addition to uranium repro­ cessing facilities, China had assisted Iran in developing uranium mining, fuel fabrica­ tion and zirconium tube production, and may provide uranium metal and UF6 plants in the near future.86 In September Chinas Ambassador to Iran conceded Chinese sales o f uranium enrichment technology and other nuclear technology to Iran. However, he claimed that the technology sold to Iran was entirely for peaceful purposes and part of an agreement signed ten years earlier. This statement contradicted Sha Zukangs previous denial as well as a statement by the Chinese Foreign Ministry spokesman Chen that China, ‘has never exported any sensitive technology or equipment con­ cerning reprocessing and enrichment of uranium... this repon is groundless*. The same day Iranian officials flady denied that China had sold Iran uranium enrichment technology, apparently retracting the Chinese Ambassadors previous claim.87 In early 1996, China informed the IAEA of the proposed sale o f auraniumcon­ version facility to Iran, and added that it planned to go ahead with the saleunderthe appropriate IAEA safeguards. Iran clarified that the facility was for peaceful purposes and would be used to manufacture fuel rods for its civilian nuclear programme.88 The plant was reportedly close to completion by early 1997, and was scheduled to become 82 ‘US Protests Chinese Hex Plant’, Iran Brief, 3 July 1997, p. 1. w Risk Report (Washington, D C ), September 1995, pp. 1-4. M ‘China Rejects US Plea not to Sell Iran 2 Reactors’ International Herald Tribune, 18 April 1995, p. 1; Albright, op. cit., p. 25. Xinhua, in FBIS-CHI, 19 April 1995, pp. 1-2; Gregory Polyanichko, ‘On Russia's Nuclear Reactor Sale to Iran, Ukranian Relations’, Post-Soviet Nuclear & Defence Monitor, 12 June 1995, pp. 12-15. 96 Albright, op. cit., pp. 21-26. 97 Xinhua, in FBIS-CHI, 26 September 1995, p. 1; ‘Nuclear Cooperation with Iran: A Confused Picture’, Nuclear Proliferation News, 12 October 1995, p. 14. M R. Jeffrey Smith, ‘China May Cancel Proposed Sale o f Nuclear Facility to Iran’, Washington Post, 6 November 1996, p. 9.

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operational by the year 2000.89 However, following the agreement concluded during the US-China summit of October 1997, it appears that the UF6 conversion plant will not be completed with Chinese assistance but reports indicate that China did agree to provide Iran with the blueprints necessary for the construction o f the plant.90 Twelve to eighteen months prior to the US-China summit o f October 1997, it became clear to US negotiators that China would have to take several steps for the proposed certification of the 1985 US-China Peaceful Nuclear Cooperation Agree­ ment. The presidential certification that China was not assisting other countries’ nuclear weapons programmes would allow US companies to engage in civil nuclear trade with China. In 1996 and 1997, US officials held several rounds of talks with the Chinese to secure critical agreements that would facilitate the presidential certi­ fication of the 1985 nuclear accord and assure improved US—China relations. First, Washington wanted China to establish public regulations on nuclear expons that were comprehensive, nationwide, include dual-use items, and were ‘catch-all’. Second, the US wanted China to join the Zangger Committee, a group o f nuclear suppliers work­ ing together to harmonise their nuclear export controls and abide by a specific list of nuclear technologies and equipment which are subject to careful monitoring and controls. China sat in as an observer at the meeting of the Zangger Committee in May 1997, and formally joined as a full member in October 1997. Third, the United States wanted China to strictly adhere to its May 1996 pledge not to provide nuclear assistance to unsafeguarded nuclear facilities. Finally, US negotiators sought written assurances from China that it would not provide nuclear related assistance to Iran. As the summit drew near, reports in August 1997 revealed that Chinese Deputy Prime Minister Li Lanqing had offered assurances to the visiting Israeli Prime Minister Benjamin Netanyahu in Beijing that China would not provide nuclear reactors to Iran but the Chinese Foreign Ministry did not comment on this development.91 Around the same time, unnamed sources at the IAEA revealed that Iran had postponed the construction of three nuclear power facilities, two of which were to be built with Chinese assistance. According to the report, Iran cited financial problems as the cause of the delay.92 During the US-China summit in October 1997— on the day o f the formal meeting between the two presidents— ‘authoritative, written communications’ were given confidentially to the United Sutes stating that China would not offer any new nuclear assistance to Iran. Under the agreement, China would complete two existing projects which did not lead to proliferation concern in the United States: the construction of a zero power research reactor that uses natural uranium and heavy water and a zirconium cladding production factory. Following the completion o f these 99 ‘Chinese to Deliver Hex Plant, Despite Assurances', Iran Brief* 6 January 1997, p. 5; ‘China has Far to go Before US will Certify, Agencies Now Say', Nucleonics Week* 12 December 1996, p. 1. 90 John Fomfret, 'US May Certify China on Curbing Nuclear Exports', Washington Post* 18 September 1997, p. A28. 91 ‘lian: China Urged to Clarify Israeli Report on Nuclear Decision, in FBIS-TAC, 25 August 1997. 'China Silent on Whether Iran Nuclear Sale Shelved', Reuters* 26 August 1997; Jay Bushinsky, ‘China Promises PM: No Nuclear Aid to Iran’, TheJerusalem Post, 25 August 1997. 92 Al-Sharq al-Awuu (London), in FBIS-NES* 26 August 1997 (on-line version).

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projects, China would not provide new, follow-on assistance to them. Specifically, the two sides agreed that China would not provide assistance for the power reactors and UF6 conversion plant which were under discussion.93 In October 1997 US National Security Advisor Sandy Berger declared: ‘We have received assurances from the Chinese that they will not engage in any new nuclear Cooperation with Iran and that the existing Cooperation— there are two projects in particular—will end. That is the assurance we have received*.94 CHEMICAL AND BIOLOGICAL RELATED TRANSFERS

Iran began its pursuit of an offensive chemical weapons capability in the early eighties, in response to mustard gas attacks on Iranian troops by the Iraqis. These Iraqi attacks led to approximately 50,000 casualties.9^ According to the US Department o f Defence, Iran was able to deliver chemical agents against enemy troops by 1987, and had produced hundreds of tons o f blister, blood, and choking agents.96 However, Chinas precise contribution to this programme is difficult to assess on the basis of these open sources. As an original signatory to the CWC in January 1993, and having ratified the treaty and joined its governing body as a founding member in 1997, China is under the strictest obligations not to assist countries in the development of chemical weapons. Iran, too, has signed and ratified the CWC, and is under similar international obligations. China is not a member of the Australia Group, a multilateral body o f states which aims to discourage and impede chemical and biological weapons (CBW) proliferation by harmonising national export controls on CBW precursors. The United States invited China to join the Australia Group in May 1997, but China declined the offer. Several US government sources indicated Chinese chemical warfare-related* ex­ ports to Iran and added that Iran has obtained considerable chemical weapon (CW)related assistance from China in the form of production equipment and technology’.97 In an April 1997 testimony, Deputy Assistant Secretary o f State Robert Einhorn, who is charged with monitoring proliferation concerns, stated:

” 'China Agrees to End Nuclear Trade with Iran when Two Projects Completed’, Nuclear Fuel. 3 November 1997, pp. 3-4. 94 The White House, Office of the Press Secretary, ‘Press Briefing by Secretary o f State Madeleine Albright and National Security Advisor Sandy Berger’, 29 October 1997; R. Jeffrey Smith, ‘Chinas Pledge to End Iran Nuclcar Aid Yields US Help"» Washington Post%30 October 1997, p. 1. 95 Robert Kamiol, ‘China Supplied Iran with Decontamination Agent’, Janes Defence Weekly, 30 April 1997, p. 17. 96 Proliferation: Threat and Response (Washington, DC: Office o f the Secretary o f Defence, April 1996), p. 15. An extensive and detailed study o f Iranian chemical weapons programmes can be found in Anthony H. Cordesman, Iranian Chemical and Biological Weapons (Washington, DC: Centre for Strategic and International Studies, 30 July 1997). 97 The Acquisition o f Technology Relating to\Weapons o f Mass Destruction and Advanced Conventional Munitions—July-December 1996 (Washington, DC: Central Intelligence Agency, June 1997); Proliferation: Threat and Response (Washington, D C Office of the Secretary of Defence, April 1996), p. 15.

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We... welcome Chinas adoption in December 1995 of its chemical export control regulation and the supplement to that regulation issued in March of this year. We are deeply concerned, however, by the discrepancy between these positive steps and substantial information available to us that various Chinese entities have transferred chemical precursors, chemical production equipment, and production technology to Iran, which we expect will use them in its chemical weapons programme, one of the most active in the world today. These dual-use chemical-related transfers to Iran’s CW programme indicate that, at a minimum, Chinas chemical export controls are not operating effectively enough to ensure compliance with Chinas prospective CWC obligation not to assist anyone in any way to acquire chemical weapons.98 Regarding its chemical related exports, China stated, ‘the governments of importing countries provide assurances that the relevant goods imported from China not be used to manufacture chemical weapons or re-transferred to a third country*. To date, one of the most controversial chemical related exports from China to Iran resulted in the imposition of US sanctions against Chinese companies and persons. On 21 May 1997, the US government imposed a set of sanctions against five Chinese citizens, two Chinese companies and a Hong Kong company for exporting such commodities as dual-use chemical precursors and chemical production equipment and technology which would contribute to Iran’s chemical weapons programme. Since the US Administration could not prove government complicity, these sanctions did not extend to cither the Chinese or Hong Kong governments. This was the first time the United States had imposed sanctions against Chinese entities for chemical weapons proliferation activities. On 30 October 1997, the Washington Times, citing a classified US intelligence re­ port, stated that China had assisted Iran in the completion in June of a dual-use factory for the manufacture of glass-lined equipment that can be used to produce chemical weapon precursors; the export of such equipment is controlled by the Australia Group. The Chinese company, the Nanjing Chemical and Industrial Group, involved in the construction of this factory was one of three Chinese companies sanctioned by the United States in May 1997 for chemical related exports to Iran. The report men­ tioned undelivered orders of 49 metric tons of alkyl dimethylamine (used to produce detergent) and 17 metric tons of sodium sulphide (used to produce mustard gas) from Chinas North Chemical Industries Corporation (NOCINCO). Also mentioned in the report was a Chinese company, Q Chen (related to one of the individuals sanc­ tioned in May 1997), which was a major supplier o f glass-lined equipment and chemicals to Iran’s chemical weapons programme’.100 98 Testimony by Robert J. Einhora, Deputy Assistant Secretary of State for Non-proliferation, before the Subcommittee on International Security, Proliferation, and Federal Services, Senate Committee on Governmental Affairs, 10 April 1997. 99 China: Arms Controland Disarmament (Beijing: Information Office o f the State Council of the People’s Republic of China, November 1995). 100 Bill Genz, ‘China Aided Iran Chemical Arms*, Washington Tima, 30 October 1997, p. 1.

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China has a huge chemical industry but lacks adequate mechanisms to monitor and enforce export controls on the industry. Moreover, the dual-use nature of many chemical related exports renders the task of policing such transfers difficult, even for countries with greater export control experience. Chinese exports o f potentially threatening chemical agents and technologies is likely to continue, though it appears that the Chinese government is determined to closely monitor and prevent such exports. As in the case o f chemical weapons, Iran began to seriously consider the biological weapons option in the early eighties, during the Iran-Iraq War. The CIA reported that Iran has stocks of biological agents and weapons, and in a number o f cases Iranian entities linked to military agencies have sought to procure equipment and commodities with the potential for biological weapons production. However, the open source evidence provides only limited substantiation o f an Iranian biological weapons programme.101 Chinas involvement in that programme, if any, is even more difficult to verify from open sources. In 1984 China became a member o f the Biological Weapons Convention (BWC), a 1972 agreement in which signatories agreed not to develop, produce, stockpile, or acquire biological agents or toxins. However, the BWC at present docs not include enforcement and verification provisions such as those in the NPT or the CWC. In 1995 Chinas white paper on arms control and disarmament stated: ‘China has consistently advocated a complete prohibition and thorough destruction o f biological weapons. It opposes the production o f biological weapons by any country and their proliferation in any form by any country*.102 According to a US intelligence official, China sold Iran dual-use equipment and vaccines with both civilian medical and biological weapons applications.10^ This report pointed out some of the problems inherent in tracking biological transfers for weapons use: the dual-use nature o f most biological research and production activities means that they can be relatively easily turned over to weapons use, making it often very difficult to differentiate between civilian and military end uses.

ENCOURAGING PROGRESS, CONTINUING CONCERNS

Chinas trade with Iran in missiles as well as nuclear, chemical and biological related systems and technologies is and should be of continuing concern to the existing arms control and non-proliferation arrangements. At the same time, one should not lose sight of the very encouraging steps China has taken, particularly during the past three to five years, to stem the flow of sensitive weapons and technologies to Iran. The key 101 For an extensive and detailed study o f Iranian biological weapons programmes see Cordesman, op. cit. 102 China: Arms Control and Disarmament, op.cit. 103 Bill Gertz, Albright Concedes "Concern” over China-Iran Transfen*, Washington Times, 24 January 1997, p. 6.

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to assuring that such developments continue will be to clearly identify the causes and sources of possible breach of Chinese non-proliferation commitments, and to work with the Chinese as well as with the international community to enhance Chinas ability to comply with the non-proliferation goals it has set for itself. In short, it is a question of closing the gap between Chinese policy and practice. At least two broad trends suggest that the Chinese arms trade relationship with Iran will become increasingly difficult to sustain over the long term. The first involves Chinas slow but steady acceptance of global arms control and non-proliferation norms beginning in the early eighties and accelerating over the course of the mid-nineties. It is still early to say if this trend will be sustained over the long-term, but initial signs are encouraging. For example, in the nineties alone, China joined the NPT (1992); it agreed bilater­ ally with the United States to abide by the parameters o f the M TCR (1992); it signed the CWC (1993), ratified the treaty (1997), and joined the C W C s governing body as a founding member (1997); it urged North Korea to negotiate the agreed framework with the United States which had frozen Pyongyang’s nuclear weapons programme (1994); it went along with the indefinite extension o f the NPT (1995); it withdrew the offer of a 300 megawatt Qinshan civil nuclear power reactor to Iran (1995); it unilaterally placed a moratorium on its nuclear testing and signed the C TBT (1996); it agreed to stop all exports o f anti-ship cruise missiles to Iran and agreed to comply with the United States* appeal to stop all nuclear related assistance to Iran. These steps are part of a broader post-CoId War trend.which finds China increasingly integrating itself in the international community, and accepting a greater role as a major power. The second broad trend which points to the difficulty o f sustaining Chinas arms trade relationship with Iran is related to a diminishing strategic and political rationale for Sino-Iranian ties. Several factors illustrate this trend. First, Chinas relationship with the Soviet Union/Russia— the difficulties which were a crucial factor in fostering Sino-Iranian ties in the first place—has dramatically changed. The two countries have now established a ‘strategic partnership and continue to strengthen their relationship. The strategic partnership between China and Russia has strengthened Chinas interna­ tional position in relation to the United States and other western powers such as Japan with which China shares the greatest mid to long-term concerns. In the past, coun­ tries such as Iran could help China assert its independence and gain regional influence in its relationship with major powers, but this is a role that Russia can play far better. Third, the new international environment implies that Iran has been able to tap increasingly alternative sources o f weaponry. With its defence industries reeling under the impact of economic and political collapse, Russia finds in Iran a willing cash customer which prefers more sophisticated Russian arms to Chinese weapons. As a result, Chinese exports have narrowed down to areas where it has some proven expertise and to systems other countries are less willing to export, such as cruise missiles, ballistic missiles and nuclear related technologies. But even in these areas, China cannot compete with potential exports from Russia. Fourth, as Chinas economic modernisation advances in the nineties, its dependence on foreign sources of energy has radically increased and is likely to increase further. As a result, it is likely to be increasingly concerned about the stability o f the oil rich Persian Gulf region.

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CONTINUING CONCERNS

In spite of these encouraging developments, a number of serious questions and con­ cerns remain. Addressing these concerns should be the joint task of China and the international community in their efforts to stem the proliferation of sensitive weapons and technologies. First, concerned observers must ask whether the observed progress could have been achieved in the absence of the leverage afforded by the US-China summit and other incentives and disincentives. There is no clear answer to this q u e s­ tion as the record appears mixed. It seems that China engages in constructive non­ proliferation activities when there is a significant degree of US pressure, and when this pressure is representative of clearly established international non-proliferation norms. Second, in the past, there have been a number o f occasions when China and the US differed over their respective interpretations o f non-proliferation assurances. These varying interpretations leave the door open for other sales or technology transfers which are not explicitly covered by the pledges made by China. Unfortunately, with pledges and loosely worded agreements, it is often the spirit rather than the letter which is violated. Third, there are a number of concerns as to how well the Chinese can establish, implement and enforce the explicit non-proliferation commitments they have under­ taken. Some o f the positive steps China has taken— such as promulgating nuclear, chemical and conventional weapon export controls, and joining the CWC and the Zangger Committee—will demand a more robust and effective export control system in China. Such a system not only requires the ‘hardware* of customs monitoring and enforcement at export points, but also the ‘software* of accepting non-proliferation norms throughout the government and industrial communities. These problems relating to export control are exacerbated by the fact that the Chinese defence industrial base is beset with enormous socio-economic and technoindustrial difficulties. Responsible for the employment and social well-being of hundreds o f thousands o f workers and their dependents, but with diminishing mili­ tary procurement orders at home and abroad, some industries—such as in aerospace, nuclear technology and chemicals—will naturally seek money-making opportunities wherever they arise. This is a recipe for potentially threatening exports o f sensitive systems and technologies.104 Moreover, some parts o f the Chinese defence industrial base are benefiting from close ties with external sources o f know-how and technology, particularly Russia and Israel. These cooperative activities could over the long term allow China to export increasingly sophisticated systems and technologies to countries of concern.105 Fourth, another problem is the changing nature of Chinese weapons and military related exports. Such Chinese exports are and will continue to be increasingly in 104 See John Frankenstein and Bates Gill, 'Current and Future Challenges Facing Chinese Defence Indus­ tries’, Chins Quarterly (London), No. 146, June 1996, pp. 394-427. 105 On Chinese imports o f weapons and military technologies, see Bates Gill and Taeho Kim, Chinas Arms Acquisitionsfrom Abroad: A Questfor \Superb and Secret Weapons’ (Oxford: Oxford University Press, 1995).

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the realm o f technology transfers, scientific assistance, production technologies, sub­ components and dual-use transfers. These transfers will be far more difficult to monitor than exports of complete plants or weapon systems, even if China has every intention to strictly prohibit illicit exports. This problem is not unique to China, but is a universal non-proliferation dilemma facing all industrialised economies. As legitimately traded commercial technologies in many cases have military applications, one can only expea that as Chinas economy grows, so too will its exports of potentially sensitive systems and technologies. To address these many potential difficulties, while at the same time building on the positive non-proliferation measures taken by China, will not be an easy task. Sensitive exports from China to Iran will not cease overnight, and will continue over the short- to medium-term. Careful consideration must be given to formulation o f policies which slow down the pace of sensitive Chinese exports to Iran while encouraging positive Chinese non-proliferation policies and actions.

Chinese Policies on Arms Control and Proliferation in the Middle East *

Gerald Steinberg

Among the major powers China has always been the most removed from arms control and non-proliferation activities. In contrast to the US and Russia, it has not been involved in any of the strategic nuclear reduction talks and agreements, such as Strate­ gic Arms Limitation Talks (SALT)» Strategic Arms Reductions Talks/Treaty (START), Intermediate-range Nuclear Forces (INF), and Anti-Ballistic Missile Treaty (ABM). This is, in pan, a reflection of its relatively small arsenal as well as the fact that for many years, it was isolated and played a relatively limited role in international diplomacy. Historically, China was a target o f major arms limitation initiatives, including the early stages of the Nuclear Non-Proliferation Treaty (NPT). After its first nuclear test in 1964, China has gradually developed its nuclear capabilities, including the de­ ployment o f intercontinental ballistic missiles. During this period, the Chinese gov­ ernments declaratory policy supported nuclear proliferation as a means o f ‘breaking the hegemony of the superpowers’.1 As Chinas defence industries and technological sector developed, commercial factors have also become more important. This is par­ ticularly true of nuclear and missile related technologies, and in the past decade, the role o f the Chinese military-industrial complex in such exports has increased. As in the case o f other arms exporters, the changes following the end o f the Cold War have led to an intensified search for new markets. Technology transfer from China has been most blatantly visible in the case of Pakistan, and this technology provided an important foundation for the Pakistani missile and nuclear weapons programme. For China, the Middle East has been and continues to be a major source o f income and the primary market for advanced military technologies. China, like other weapons producers, has sought to increase its share of exports to this region. In addition to the sales of conventional weapons to both Iran and Iraq, in the late eighties, China transferred a number o f long-range * Research for this paper was funded by a grant from the BESA Centre for Strategic Srudicr. The author would like to thank Seth Axelrod, Michal Cooper, Melissa Wohl and Daniel Silberman for their assistance. 1 'Engaging China on Non-proliferation, Testimony of Robert J . Einhom, Deputy Assistant Secretary of State for Non-proliferation Before the Subcommittee on International Security, Proliferation, and Federal Services Senate Committee on Governmental Affairs, 10 April 1997.

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ballistic missiles to Saudi Arabia, signalling a fundamental change in the rate of missile proliferation in the Middle East. In 1991, China undertook the construction of an unsafeguarded research reactor in Algeria, which, like China, was not an NPT signatory at the time.2 It was not involved in the activities o f the Nuclear Suppliers Group (NSG), or in other supplier regimes and as the only nuclear power outside the NSG, China has become one of the major suppliers o f dual-use nuclear technology.3 As will be discussed later, China has extensive links with Iran which include the transfer of nuclear and missile technology, and this has led to a series of confrontations with the US government. In some cases, the available evidence indicates that China has not been an entirely unrestrained prolifcrator as it rejected attempts by Libya to obtain nuclear weapons.4 In recent years, Chinese policy has undergone a sea change from ‘detachment' to ‘active participation.5 Indeed, Chinese leaders claim to be deeply committed to the principles of non-proliferation, and in terms o f declaratory policy, have come closer to the international norms. In a detailed policy statement, a Chinese official asserted that Beijing ‘is keenly aware o f its inevasible responsibility toward international arms control and disarmament.. . . It shares the major concern of the world community over the danger o f the spread o f weapons o f mass destruction, and wants to work with other nuclear-weaponstates toward WMD non-proliferation.6 In 1992, China ratified the NPT, committing itself to seek IAEA approval and safeguards on any exports o f nuclear reactors and other major facilities covered under the NPT/LAEA system. In May 1996, it formally announced that it would not provide further assistance to nuclear facilities which were not subject to full IAEA safeguards/ On 17 October 1997, in the wake of intense American pressure, China also joined the N SG (also known as the Zangger Committee or the NPT Exporters 2 The existence o f the 15 MW heavy water reactor located at Ayn O ussera, 250 km south of Algiers, was kept secret, and was discovered shortly before completion by US reconnaissance satellites in 1991. The reactor is reportedly capable o f producing from 2 to 4 kg o f plutonium annually, and some analysts speculate that it might be expanded to 60 mwt in order to increase the rate of production. Following international pressure, Algeria ratified the NPT in 1995 and accepted full scope safeguards. See Leonard Spector, Mark McDonough and Evan Medeiros, Tracking Nuclear Proliferation (Washington: Carnegie Endowment for International Peace, 1995), p. ISO; Vipin Gupta, ‘Algeria's Nuclear Ambitions’, International Defence Review* April 1992, p. 329. 3 Russia is a member o f the NSG , but continues to supply reactors and other technology to'rogue states such as Iran, and has recendy agreed to provide a large 'research reactor’ to Syria. David Makovsky, 'Iran Negotiating with Russia for a Reactor, Haaretz* 18 February 1998 (http://www3.haaretz.co.il/eng). 4 Shai Feldman, Nuclear Weapons andArms Control in the Middle East (Cambridge, MA: The MIT Press, 1997), pp. 63-64. * Wang Ling, 'Whither Arms Control?’, Contemporary International Relations (Beijing), Vol. 7, No. 3, March 1997, cited in Guang Pan, 'Chinas Success in the Middle East’, Middle East Quarterly, Vol. 4, No. 4, December 1997, p. 39. 6 Wenguang Shao, 'WMD Proliferation in Asia; A Chinese Perspective’, in William H. Lewis and Stuart E. Johnson (Eds), Weapons o fMass Destruction: New Perspectives on Counter Proliferation (Fort McNair, Washington: National Defence University Press, 1995), p. 135. 7 SIPRI Yearbook 1997: WorldArmaments and Disarmaments (Oxford: Oxford University Press, 1997), p. 351.

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Committee.)8 In addition, China was among the original signatories and has since ratified the Chemical Weapons Convention, indicating a growing involvement in the global system of non-proliferation agreements. However, China has not joined the Australia Group (regulating trade in chemicals) or the Missile Technology Control Regime (MTCR), but on various occasions and in response to American pressure, it has indicated an increased willingness to abide by some of the limitations. To date, Beijing has also rejected invitations to join the 33-nation Wassenaar Arrangement on limiting the sale of unsafeguarded dual-use technologies. China is a signatory to the 1972 Biological Weapons Convention, but the absence of verification mechanisms makes it difficult to verify compliance. Thus, in global terms. Chinas arms control and non-proliferation policies can be described as ambivalent or contradictory. On a declaratory basis, the government is formally committed to the objectives of non-proliferation, and has agreed to partici­ pate in the major multilateral frameworks. This marks a major change in comparison to the declaratory policies of the previous decades. At the same time, in its behaviour and implementation of these policies, China, like Russia, has often been willing to allow the transfer of weapons and dual-use technology and facilities that most other members of the various suppliers* regimes have prohibited. According to the director of the US Central Intelligence Agency, China is the principal supplier of weapons o f mass destruction and missile technology to the world.^ Chinese behaviour can be explained in terms of the difficulties of the central gov­ ernment in imposing its regulations on decentralised organisations with large budgets which are independent and relatively powerful. This is particularly true with respect to the military-industrial complex, which continues to pursue what it sees as its own and Chinese national interests through arms and technology sales. As in the case of Russia, the ability of the central government to control critical actors in this process is unclear, and the possibility that it lacks the willingness to impose restrictions and limitations on them cannot be discounted. As noted, the Middle East is one the most active areas for the transfer o f this problematic and often destabilising technology. Chinese arms sales and assistance to Pakistan, particularly with respect to the development o f the Ghauri ballistic missile and its nuclear weapons programme is highly problematic and a source of conflict, particularly in relation to the United States and India. However, the role o f China in South Asia is beyond the scope of this paper. China also has political interests in developing close relations with the major petroleum exporters o f the Persian Gulf. One way to develop these relations is through the sale of advanced weapons and technologies not available from other sources. 8 ‘China’s Nuclear and Nuclear Related Dual-use Export Controls’, US State Department Fact Sheet, Washington DC, 4 February 1998. 9 Director of Central Intelligence Report to Congress, ‘The Acquisition o f Technology Relating to Weapons of Mass Destruction and Advanced Conventional Munitions’, June 1997, p. 5, cited in The Pro­

liferation Primer, International Security, Proliferation, and FederalServices Subcommittee, United States Senate Committee on Governmental Affairs, A Majority Report—January 1998 (http://www.fas.org/spp/starwars/ congress/1998.r/prolifbk/partO 1.htm).

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Chinas links with Iran arc both political and economic. They began during the Shahs regime and result, in part, from the perception that Iran could serve ‘as a bulwark against perceived Soviet expansionist aims toward the Persian G ulf... \ These links continued after the Islamic revolution, and during the Iran-Iraq War, China was one o f Iran’s ‘closest international partners’.10 As will be seen later, China is also supplying military technology for the Syrian missile and WMD programmes, including chemical weapons. Although the evidence regarding sales to Libya is uncertain, Frank Gaffney reports that a series of bilateral cooperation agreements and high level visits suggest that China ‘is helping to make the Libyan threat ever more formidable’.11 Although China sent its representatives to the early meetings of the Middle East* multilateral working group on Arms Control and Regional Security (ACRS), created at the Madrid Peace Conference in October 1991, they did not play an active role.12 Other states, including Russia, Canada, Australia and the members of the European Union, took the initiative for organising workshops and demonstration projects within the ACRS framework, but China did not become involved. Indeed, the export of Chinese technology (as well as Russian and North Korean systems) for the WMD and missile programmes o f countries such as Iran and Syria, which are not participating in the process, exacerbated the instability in the region and served to undermine the goals of the ACRS. Thus, China continues to be a major source of concern in the area o f arms control and proliferation in the Middle East. In the wake of the recent nuclear tests o f India and Pakistan, upsetting the nuclear equilibrium that had prevailed for the past twenty-four years (since the initial Indian test in 1974), Chinese leaders may be reconsidering their policies. It would seem that widespread proliferation o f missiles and nuclear weapons in the Middle East would not serve Chinese interests. The spread of such weapons to groups and states that may pose a threat to China, particular through Iran, may become a source of concern, leading to greater Chinese willingness to block destabilising transfers of technology to Iran and other rogue states in the Middle East.

CHINA AND THE NUCLEAR SUPPLIERS REGIME

The multilateral efforts to control the proliferation of nuclear weapons are based on a suppliers regime that was formed three decades ago. During most o f this period, and until very recendy, China was not a party to this regime, which consists primarily of the 1968 NPT, the Zangger Committee and the Nuclear Suppliers Group. In 1970, following the entry into force of the Nuclear Non-Proliferation Treaty, a group of 10 Bates Gill, 'Chinese Anns Exports to Iran, China Report. VoL 34, Nos 3 & 4, July-December 1998. 11 Frank J. Gaffney, Jr, ‘China Axms the Rogues’, Middle East Quarterly, VoL 4, No. 3, September 1997, p. 37. 12 For a detailed study o f the ACRS process, see Gerald Steinberg, ‘Arms Control and Regional Security in the Middle East’, Survival, Spring 1994, pp. 126-41; Bruce W. Jcntleson, ‘The Middle East Arms Control and Regional Security (ACRS) Talks: Progress, Problems, Prospects’, Policy Paper 26yInstitute on Global Conflict and Cooperation, University o f California, 1996.

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signatories met to consider the implementation o f the limitations on the transfer of' nuclear facilities (reactors, enrichment and separation plants) and related materials to non-nuclear weapons states, as specified in Article III, paragraph 2 o f the Treaty. This group came to be known as the Zangger Committee, and in 1974, the members adopted export guidelines covering a list of items (the ‘trigger list’, formally adopted in INFCIRC/209). The Zangger Committee has met twice a year, and the trigger list of export limited items is updated periodically. Following the Iraqi aggression, in 1993, additional enrichment technologies were added including electro-magnetic isotope separation (EM IS).1^ In addition, a major effort was made to bring in the remaining suppliers that were outside the regime, including China. In 1974, following the Indian nuclear test and other developments, the US gov­ ernment convened a meeting o f major nuclear suppliers in an effort to extend the scope of agreed limitations to include dual-use technologies in the nuclear sphere, not covered under the Zangger list. The Nuclear Suppliers Group, also known as the London Suppliers Group, included France, which was neither an NPT signatory nor was a member of the Zangger Committee.14 As a result of both the Zangger Committee and the NSG, the transfer o f technol­ ogy, facilities and materials slowed down in the late seventies and through most of the eighties, particularly to Asia and South America. However, the guidelines did not prevent Iraq from acquiring what was loosely described as ‘dual-use technology’ necessary to develop nuclear weapons. Indeed, in this area, the guidelines were largely ineffective and billions of dollars worth o f such technology was sold without any safe­ guards. In 1991, the NSG met again (after a hiatus of ten years) and adopted the list of technologies that had been added by the Zangger Committee, and in 1993, the NSG list was expanded to include uranium conversion plants and equipment.1^ Between 1970, when the NPT entered into force, China was one o f an increasingly declining number of non-NPT signatories. In the eighties, there were numerous reports of substantial Chinese assistance to the Pakistani nuclear programme.1^ This led to American pressure on China to change its policies, and in 1984, China publicly declared that it would not contribute to the proliferation o f nuclear weapons and would seek IAEA safeguards on its nuclear exports. However, China continued to provide weapons-related aid to Pakistan and exported materials and facilities for weapons production to other countries. The Iraqi uranium enrichment programme was apparently based on Chinese technology.17 However, there was little, if any, visible impact on Chinese behaviour, and the range of transfers grew, between 1985 and 1987, China began to provide technical assistance to Iran.18 In November 1991, 13 Spector, McDonough and Medeiros, op. cit., p. 180. 14 Leonard Spector, Nuclear Ambitions: The Spread o fNuclear Weapons, 1989-J 990 (Boulder, Colorado: Westview Press, 1990), pp. 433-36. 15 Spector, McDonough and Medeiros, op. cit., p. 182. 16 Spector, op. cit., p. 42. 17 ‘Iraq and the Bomb*, MidEast Markets, 11 December 1989, cited in Spector, op. cit., fn. 45, pp. 43 and 312. 18 Kenneth Katzman, ‘Iran: Military Relation with China1, CRS Report, 26 June 1996, p. ].

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China agreed to sell a 30 kw neutron source research reactor to Syria. Although the approval o f the IAEA was sought and received in March 1992, the details of the facility and its current status are unknown.19 In 1992, following the announcement of Frances decision to ratify the NPT, China also ratified this treaty, committing itself to seek IAEA approval and safeguards on any exports o f nuclear reactors and other major facilities covered under the NPT/LAEA system. However, Chinese policy regarding the transfer of dual-use nuclear technol­ ogy, both to NPT signatories, such as Iran, and non-signatories, such as Pakistan did not change suddenly. China has been a major supplier of technology for Iran’s civilian nuclear programme (following Russia). China is constructing a zero power reactor and a factory to manufacture zirconium cladding for nuclear fuel rods.20 It has also supplied nuclear technicians and equipment to assist in the construction of an Iranian nuclear plant near Isfahan that will be able to produce uranium products that can be used to make fissile material for nuclear weapons’.21 Following intense American pressure, a spokesman of the Chinese Foreign Ministry denied reports that China was involved in building an enrichment plant in Iran, and declared that China had never exported any sensitive reprocessing, uranium enrichment or heavy water production technology or equipment. He stated that ‘there isn’t any nuclear cooperation between China and Iran that is not under the safeguard o f the International Atomic Energy Agency’.22 On 11 May 1996, the Chinese government formally announced that it would not provide further assistance to nuclear facilities which were not subject to full IAEA safeguards.23 A year later in May 1997, Chinas State Council issued a statement entitled ‘ Circular on Strict Implementation o f Chinas Nuclear Export Policy, which covered the export o f nuclear and nuclear related dual-use items on an interim basis. In this detailed and unprecedented statement, the Council declared that this directive: 1. 2.

3. 4.

Applies to all governmental and non-governmental entities in China. States that nuclear materials, nuclear equipment and related technology, non­ nuclear materials for reactors, and nuclear related dual-use equipment, mate­ rials and technologies on China’s export list may not be supplied to or used in facilities not under IAEA safeguards. Covers technology in all forms, including exchanges of personnel and infor­ mation. Requires exporters of nuclear related dual-use items to non-NPT countries: (a) to seek prior confirmation from China’s Atomic Energy Authority of the

19 Allison Kaplan, ‘Huge Buildup o f Weapons Flooding the Middle East’, The Jerusalem Post, 16 June 1992, p. 14; see also Feldman, op. cit., p. 67. 20 Background Briefing by SeniorAdministration Officials (The White House, Office o f the Press Secretary, 29 October 1997). 21 Bill Gcnz, ‘Navy Finds that China is Top Illicit Arms Supplier to Iran, Iraq’, The Washington Times, 2 September 1997. 22 Non-Proliferation Review, Vol. 3, No. 2, Winter 1996, p. 109. 23 SIPRI Yearbook 1997: WorldArmaments and Disarmaments (Oxford: Oxford University Press, 1997), p. 351.

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5.

Gemid Steinberg IAEA safeguards status of nuclear facilities in the recipient country; and {b) to seek end-user certificates from the importing government along with assur­ ances that the relevant equipment or cooperation will not be re-transferred to unsafeguarded nuclear facilities. The associated control list (issued in June 1997) is substantively identical to the dual-use control list adopted by the Nuclear Suppliers Group (published in IAEA INFCIRC 254, Part II).24

In September 1997, immediately preceding a scheduled summit meeting between Chinese and American leaders» China issued more specific nuclear export control regulations beyond the dual-use technologies covered in the earlier declaration. These additions: 1. Provide that all nuclear exports are under the control o f the State Atomic Energy Agency which will examine all nuclear export applications and refer them to other appropriate agencies as necessary. 2. Include a control list substantively identical to the ‘trigger list* adopted by the Nuclear Suppliers Group (published in IAEA INFCIRC 254, Part I). 3. State that only units designated by the State Council are permitted to engage in such exports. 4. Give the Chinese government the right to suspend exports if the recipient country violates its commitments or there is a danger of nuclear proliferation. 5. Require recipient governments to provide assurances o f peaceful use,IAEA safe­ guards, no re-transfer to third parties without Chinese government approval, and physical protection of nuclear material. 6. Establish authority for taking criminal, civil or administrative actions against violators o f the regulations. When China joined the Zangger Committee in October 1997, its representative Ambassador Li Changhe outlined the Chinese government s new declaratory policy on nuclear related dual-use technologies. Exports, he declared, would be based on three principles: (a) peaceful applications only; (b) acceptance of IAEA safeguards; and (f) no transfers to third parties without the consent o f the Chinese government. Any assistance for nuclear explosives or related information would be forbidden and he added that the Chinese central government would ban the export o f an item not 2* INFCIRC 254 dates from July 1992, and consists o f guidelines for the transfer o f dual-use technology to non-nuclear weapon states for unsafeguarded nuclear facilities or in nuclear explosive activity. Such facilities would include enrichment and reprocessing plants that are outside o f the IAEA verification system. This document also prohibits transfers ‘when there is art unacceptable risk of diversion... or when the transfers are contrary to the objective o f averting the proliferation o f nuclear weapons*. Spector, McDonough and Medeiros, op. a t., p. 182. However, for states that have signed the NPT but are suspected of developing an illicit weapons programme, such as Iraq and, more recently, Iran, the limitations are minimal and less comprehensive than those under the NSG or Zangger trigger lists. 25 ‘Chinas Nuclear and Nuclear Related Dual-use Export Controls’, op. a t.

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on a control list if there was reason to believe that the transfer of technology could contribute to nuclear proliferation.26 While the implementation o f this policy was unclear following its announcement, formal dual-use export control regulations and a list of technologies to be covered were expected to be issued in mid-1998. In his opening statement to the Zangger Committee, the Chinese representative stressed that Chinas export controls include a catch-all* authority whereby exports which violate the export control principles, or pose a proliferation risk, whether or not they are on a control Jist, will be denied export licenses.27 This strategy seemed to be linked to Chinese President Jiang Zemins visit to Washington in October 1997, and the summit meeting with President Clinton. Nuclear technology was among the most salient issues on the agenda; the Chinese leader sought approval for the bilateral Peaceful Nuclear Cooperation Agreement that was originally signed in 1985 but did not take effect due to Chinas export policy and the June 1989 Tiananmen Square massacre. Under this agreement, US firms and institutions would be allowed to provide technology and assistance to the Chinese civil nuclear power programme. The Chinese declarations regarding nuclear exports (both with resp ea to the Zangger Committee and the pledge to end nuclear cooperation with Iran) led the Clinton Administration to agree to implement this agreement, In contrasty the US Congress continues to be very critical o f the administrations policy and many Congress members expressed dissatisfaction with the lack o f verifica­ tion regarding the Chinese pledges prior to the administrations decision to authorise the sale o f commercial nuclear technology.28 Critics note that the Chinese leadership continues its activities behind the facade that the technology being transferred to Iran is ‘o f a completely peaceful nature and is not at all military’.29 However, the US Congress did not intervene in the implementation o f the bilateral peaceful Nuclear Cooperation Agreement. Meanwhile, there was enough evidence that these declaratory policies would not lead to substantive changes. During the summit in October 1997, the US National Security Agency reportedly discovered that China had signed an agreement to sell Iran material that could be used for developing a nuclear weapon.^0 The mate­ rial, it was reported, included hundreds o f tons of anhydrous hydrogen fluoride, used for refining uranium ore into gas, and for increasing the concentration of fis­ sionable U-235. The US waited till February 1998 to confront China about the agreement. When it. did, Chinese officials argued that the material, also known as hydrofluoric add, was not on the list o f controlled nuclear substances maintained by the international arms control authorities. Earlier, China had reportedly agreed 26 Ibid. 27 Ibid 29 Bill Gertz, ‘Missiles in Iran o f Concern to State', The Washington Times, 11 September 1997. 29 Radio View* ‘Chinese Ties after Clintons "Defeat"’, FBIS-NES-95-119, Tehran, Voice o f the Islamic Republic o f Iran First Programme Network in Persian* 21 June 1995. *° ‘China had Deal to Sell Iran Material for Nuclear Weapon, Associated Press, 13 March 1998.

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to sell Iran a plant to produce uranium hexafluoride plant, but this was another agreement that was not implemented following intense American pressure.31 Senior Chinese officials once again assured their American counterparts that the sale would not occur/32

THE MTCR

The Missile Technology Control Regime (MTCR) was initially prompted by American concerns regarding the potential for ballistic missile proliferation among the outcast states in the Middle East such as Iraq, Iran, Syria and Libya, as well as in areas of tension, such as South Asia. Ballistic missiles were viewed as delivery vehicles for nuclear weapons and were thus a source of concern in the light o f efforts to curb nuclear proliferation. The spread o f ballistic missile capabilities in regions o f conflict, particularly the Middle East and South Asia, was seen as a major additional source of instability, increasing the radius of potential conflict as well as the lethality. During the late seventies, the US Arms Control and Disarmament Agency spon­ sored the initial examination of policy options. These later became the basis for negotiations between the Reagan Administration and the other members o f the G-7 (the group of seven major industrial states).33 In 1987, these negotiations resulted in what is officially termed a ‘non-binding voluntary arrangement’ that is ‘designed to limit the risk of nuclear proliferation by controlling the transfer o f equipment and technology that could contribute to the development and production o f nuclearcapable, unmanned delivery systems’.34 Under its original terms, the M TC R covered missiles capable of delivering a payload of 500 kg or more to distances o f or greater than 300 km. These parameters reflected the minimum weight of an unsophisticated nuclear warhead, and the ‘strategic distances in the most compact theatres where nuclear­ armed missile might be used’.3^ In addition, shorter range, smaller payload systems were readily available, and efforts to control the transfer of this technology were viewed as unrealistic. However, in the Middle East, these distances, and even smaller ranges, are indeed o f strategic significance, and missiles or other means o f delivery with ranges of under 300 km are classified as strategic systems. The first M TCR arrangement included an annex consisting of two categories which specified technologies to be controlled, based on equipment and materials ‘relevant 31 Jonathan Rynhold, ‘Chinas Cautious New Pragmatism in the Middle East*, Survival, Vol. 38, No. 3, Autumn 1996, p. 107. 32 'China had Deal to Sell Iran Material for Nuclear Weapon, op. cit. 33 Wyn Q. Bowen, ‘US Policy on Ballistic Missile Proliferation: The M T C R * First Decade (1987-1997)’, The Non-Proliferation Review, Fall 1997, p. 23. 34 United States Department of State Press Briefing (extract), ‘Missile Technology Control Regime*, 16 April 1987, in Current Documents, United States Department o f State (Washington, DC: United States Government Printing Office, 1987), p. 75. 35 Ibid.

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to missile development, production and operation.36 Under Category 1, items that were directly and clearly related to rapid missile proliferation were included, as well as related production facilities for these systems.3 Category II consisted o f ‘dual-use* technologies, whose application to missile production was possible.38 The proliferation o f chemical and biological capabilities led to increased concern regarding the potential use of ballistic missiles for delivering chemical and biological weapons (CBW), and in 1993, the M TCR limits were extended to cover delivery systems for all forms of weapons of mass destruction. In addition, the detailed listing of prohibited technologies was supplemented by an agreement that members would base their policies on a strong presumption to deny an export request if the technology in question is ‘intended’ for use in a system to deliver weapons o f mass destruction. Since chemical and biological warheads would be effective in missiles with shorter ranges and smaller payloads, this meant that additional systems below the initial 500 lcg/300 km limits were now formally included in the M TCR controls. The extended definition went beyond ballistic missiles to include remotely-piloted vehicles and other potential delivery systems for non-conventional weapons.3 As membership o f the MTCR grew to 29 by December 1997 and its scope wide­ ned, the ‘rogue suppliers’— China, Russia and North Korea— became a major source o f concern. During the eighties, China emerged as a major supplier of ad­ vanced weapons, including missiles, to the Middle East. In June 1985, the then Iranian parliament speaker Ali Akbar Hashemi-Rafsanjani visited Beijing and signed agreements regarding the sale o f missile technology* During 1987-88, China report­ edly assisted Iran in the construction of the infrastructure needed to design, build ard test ballistic missiles and to extend their range.40 In March 1988, it was reported rhat Beijing had sold a number o f long range ballistic missiles (2,700 km range DF-3 or CSS-2 IRBMs) to Saudi Arabia.41 Ten years later, as these missiles were believed to be inoperational, reports of Saudi negotiations with China for replacement systems were published. In 1989, Iran purchased several dozen CSS-8 surface-to-surface missiles (a converted SA-2 surface-to-air missile) from China, and the two states signed an agreement for the sale o f M-9 missiles (based on the Chinese DF-15, also known as the CSS-6 with a range o f 600 km), though these were never delivered. 36 United States Arms Control and Disarmament Agency, The Missile Technology Control Regime: Fact Sheet (Washington, DC: United States Arms Control and Disarmament Agency, 17 May 1993), p. 1. 37 Bowen, op. cit., p. 24; The Missile Technology Control Regime: Fact Sheet, op. cit., p. 1; and Richard Dean Bums, Encyclopaedia o fArms Control and Disarmament, Vol. Ill (New York: Charles Scribners Son, 1993), p. 1475. 38 Current Documents* p. 76, cited in Bowen, op. cit., p. 24. 39 Deborah Ozga, A Chronology of the Missik Technology Control Regime’, The Non-Proliferation Review, Vol. 1, No. 2, Winter 1994, p. 66; Aaron Karp, 'Ballistic Missik Proliferation’, in SIPRI Yearbook 1990: WorldArmaments and Disarmament (Oxford: Oxford University Press, 1990). 40 Katzman, op. cit., p. 1. 41 OPR (Riyadh), 19 March 1988, in FBIS-NES-&&-054, 'Statement on the Purchase of Chinese-made Missiles’, 21 March 1988, cited in Bowen, op. cit., p. 25. 42 Philip Finnegan, 'Saudis Study Missile Buy to Replace Ageing Arsenal’, Defence News, 17-23 March 1997, p. 40.

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The assessment of the degree of Chinese assistance for the production o f missiles in Iran, as distinct from the provision of complete missiles, is more difficult, partly because of the incremental nature of this technology transfer, and partly because there is extensive Russian assistance for these efforts. China reportedly provided materials, components (such as gyroscopes and accelerometers), engineering assistance and missile test technology to Iran, and is assisting Iran in the development of several short range solid fuel missiles (which could be used in longer range systems). Indeed, as most other states capable o f supplying missiles and related technology began to.restrict their exports under the MTCR, China (as well as North Korea and Russia) greatly increased their sales. In the case o f China, there are a number of factors that account for this surge of missile and technology transfers. As in the case of exports of nuclear technology, these factors include economic incentives, the furtherance of external political objectives, and domestic political/organisational fac­ tors. In particular, the fragmented political and military decision-making system in China was a major factor in allowing the ‘Chinese weapons export/import entities— which were responsible for selling missile technology— to function with relative •

*

.

i i

» 44

impunity. In December 1 9 9 0 , in response to these Chinese exports (as well as Russian plans to sell advanced technology to India, ostensibly for use in Indian space launchers) the US Congress passed the Enhanced Proliferation Control Initiative (EPCI). Under this legislation, the US government was required to impose sanctions on American as well as foreign ‘persons, companies, or any other entities that participated in MTCRprohibited activities.45 The Bush Administration opposed the 1 9 9 0 EPCI measure, citing ‘the need to maintain flexibility in US foreign policy and to balance competing national interests’,46 but it became law despite these objections. Shortly afterwards, the US government began to press Russia and China to con­ form to the M TCR regulations, and began to impose limited sanctions. There were intense contacts between Beijing and Washington over this issue, and in 1 9 9 2 , the Chinese government agreed in writing (in contrast to the earlier Russian oral dec­ laration) that it would comply with the M TCR guidelines. However, these were less restrictive requirements than those accepted by full members of the regime, as 43 Michael Eisenstadt, 4US Policy and Chinese Proliferation to Iran: A Small Leap Forward?’, Policywatcb,

253 (The Washington Institute for Near East Policy), 1997. 44 See John Lewis, Hua Di and Xue Litai, ‘Beijing’s Defence Establishment: Solving the Arms Export Enigma’, International Security, No. 15, Spring 1991, p. 97, cited in Bowen, op. cit.t p. 33. 45 Sanctions imposed for Category I violations are more stringent than those for Category II violations. Depending on the severity o f the violation, sanctions imposed include various combinations o f the fol­ lowing: and denial of certain or all types o f US export licenses; denial of certain or all import rights into the US; and denial o f certain or all contracting rights with the US government. See ‘Title XVII: Missile Technology Controls, National Defence Authorisation Act for the Fiscal Year 1991 ’, Public Law 101-510, 101st Congress, 1st Session, November5,1990, United States Statute at Large 1990 (Washington, DC: United States Government Printing Office, 1991), pp. 1389-2352, cited in Bowen, op. «>., p. 26. 46 Bowen, op. cit.t fh. 43, citing Michael R. Gordon, ‘Clash Erupts on Ways to Halt Spread o f Missiles', New York Times, 1 November 1989, p. A10; David Silverberg, ‘M TCR Proposals Expected to Ignite Friction in Congress, among Allies’, Defence News, 4 September 1989, pp. 31-32.

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they included only the initial M TCR Guidelines and Annex of 1987 and not the revisions.4^ Nevertheless, the Bush Administration agreed to lift sanctions imposed on Chinese institutions that had been involved in transferring M -l 1 missile technol­ ogy to Pakistan.48 However, there was evidence that Chinese policies had not changed, leading to renewed sanctions and more discussions. In 1993, evidence surfaced o f Iranian pro­ duction o f Scud-C missiles, apparently with Chinese and North Korean assistance. In 1994, the Clinton Administration agreed to lift sanctions in return for an explicit Chinese pledge not to export surface-to-surface missiles ‘featuring the primary param­ eters o f the MTCR*.49 This commitment is more explicit than the earlier commit­ ment, including a pledge not to export particular missiles to other countries. However, China still does not accept the revised guidelines and annex of the MTCR.^0 Thus, Chinese sales o f missile related technology to Iran, Iraq, Syria and Egypt continue, China has provided extensive assistance in the development of missile production facilities, particularly for the Isfahan plant (near the nuclear plant), which is Iran’s largest such plant, as well as in the Semnan facility for solid fuel fabrication. Although Chinese officials forcefully asserted that China did not provide assistance in the production o f medium range ballistic missiles to Iran, they did not explicitly deny involvement in the Isfahan plant and analysts note that the Chinese definition o f medium range* is different from the western understanding. Since the Chinese limited their pledge to ‘the primary parameters of the M TCR’, this may be seen as applicable only to Category 1 items (direct production facilities), and not to dual-use technologies. If this is the case, the US government received a very limited quidpro quo in return for lifting sanctions. Throughout this period, the revelations and the American government s responses indicate the degree to which Chinese policies continue to be a source o f tension in this relationship. 1.

2.

In January 1995, a US court found that export control regulations had been violated in the shipment of ammonium perchlorate, a highly explosive chemical used in manufacturing rocket fuel, from China to Iraq via Amman, Jordan.^1 In May 1995, a Central Intelligence Agency study concluded that China had ‘delivered dozens, perhaps hundreds, o f missile guidance systems and com­ puterised machine tools to Iran... \ Other sources maintained that rocket propellants ingredients were provided as well.*2

47 Export Controls: Some Controls over Missile-Related TechnologyExports to China are Weak, Letter Report, 17 April 1995, GAO/NSIAD-95-82, p. 1. 41 See ‘Imposition of Missile Proliferation Sanctions against Chinese and Pakistani Entities', Federal Register, Vol. 56, No. 137, 17 July 1991, p. 32601; Office of the Press Secretary, The White House, Fact Sheet: China Trade, 16 June 1991, pp. 1-2. 49 Michael McCurry, Office o f the Spokesman, United States Department o f State, August 25, 1991, China/Pakistan: M-l 1 Missile Sanctions, cited in Bowen, op. cit.t p. 31. 50 Export Controls: Some Controls over Missile-Related Technology Exports to China are Weak, op. cit. ** Report to Congress o fthe United States, The White House, Office ofthe Press Secretary March 21, 1995. 52 Katzman, op. cit., p. 1.

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3.

China reportedly assisted Egypt in upgrading its domestic missile production facilities, including an improved version o f the SA-67 SAM (known as the *Ayn al-Saqr),53 in improving the indigenously built Scud-B SSM , and the licensed production o f Silkworm Anti-Ship Missiles.*4 In 1996, China delivered equipment to Iran as pan o f a programme to modify and extend the range of HY-2 anti-ship missiles’,55 and telemetry equipment for sending and collecting data during flight tests.56 In late November 1996, Iran reportedly tested an indigenously upgraded Chinese Silkworm missile during naval exercises.57 In 1997, reports were published that Great Wall Industries were supplying key missile testing technology to Iran,58 and that Iranian and Syrian companies were cooperating in upgrading Scud-C missiles using technology purchased from China.59 According to a RAND report, Beijing granted Iran a license to produce Chinese versions o f the FROG and SCUD-B Soviet SSM s.60 There is evidence of Iranian development o f short-range ballistic missiles as pan of a joint programme with China involving rocket motors and test equipment. Iranian missile technicians reportedly visited China to observe a ground test of a 450 mm diameter rocket motor to be used in the NP-110 solid fuel mis­ sile. The missile programme also involves Iran’s use or acquisition o f Chinese X-ray equipment, which is used for examining solid fuel missile casings. The China Precision Engineering Institute New Technology Corp signed an agree­ ment with Iran’s Defence Industries Organisation for the sale o f gyroscopes,

4.

5.

6.

7.

8.

accelerometers and test equipment.61 China is reportedly discussing the sale or joint production o f a 300 km two stage solid fuel missile known as the M -ll. In September 1992, the Iranian embassy in Beijing announced an agreement on the purchase o f 500 M -ll missiles. However, this agreement was cancelled, modified, or postponed, apparendy in response to US pressure. This announcement coincided with President Bushs decision to sell Taiwan 150 F-156 combat aircraft (linked to Bushs re-election campaign), and thus, the initial response from Beijing may have been a reflection of pique with the US policy. China is also reported to be working closely with Iran in the construction of two missile systems with ranges up to 2000 km that could be fielded within two

53 Richard Bitzinger, Chinese Arms Production and Sales to the Third World (Sacramento, CA; RAND Publications, 1991), p. 10. * Ibid., p. 13. 55 Bill Gera, 'China Joins Forces with Iran on Short-range Missile’, The Washington Times, 17 June 1997. 56 G era, ‘Navy Finds that China is Top Illicit Arms Supplier to Iran, Iraq*, op. cit. 57 Kenneth Katzman, ‘Iran: Current Developments and US Policy’, CRS Issue B rief for Congress, 2 January 1997. ** Bill Gera, ‘Russia, China Aid Iran’s Missile Programme’, The Washington Times, 10 September 1997. 59 'Iran, Syria: Weapons Development Called Pan of Defence Pact’, Al-Sharq al-Awsat (London), 11 March 1997, pp. 1 and 4. 60 Bitzinger, op. cit.%p. 13. 61 Gera, ‘China Joins Forces with Iran on Short-range Missile’, op. cit.

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to three years. An Israeli intelligence report identified one Chinese company that is assisting Iran’s Sheehab-3 and Sheehab-4 (sometimes known asZelzal) missile programmes. The missiles are expectcd to have ranges of up to 1500 km and 2000 km, respectively, and a prototype could be ready in two to three years.62 In May 1998, China was reported to have transferred 1,000 tons o f special steel to Iran amid suspicion that it is being used, at least in part, for Tehran’s missile programme’. This steel may also be used for the construction o f centrifuge uranium enrichment plants for the Iranian nuclear programme, indicating the path adopted by Pakistan.63

As a result o f the Chinese export policy, there was increasing pressure from the American government for sanctions and other actions designed to force the leadership in Beijing to reduce or end these transfers. The Office o f Naval Intelligence (ONI) reported that the Chinese transfer o f military and dual-use technology to Iran allows Tehran to develop one of the most active WMD programmes in the Third World, and [it] is taking place in a region o f great strategic importance to the United States’.64 The ONI report also noted that China tried to ship chemicals for missile fuel to Iraq,65 and sold lithium hydride to Libya and Iraq, a chemical used in manufacturing nerve agents as well as for missile fuel.66 The CIA reported that China is ‘the most significant supplier o f WMD [weapons o f mass destruction] goods and technology to foreign countries*. This claim was supported by the fact that China was ‘the primary source o f nuclear-related equipment and technology to Pakistan and a key supplier to Iran’ in 1996.67 The Department o f Defence report on Proliferation o f Weapons o fMass Destruction (1997) was more ambivalent and diplomatic. The authors praised China for its .... willingness to adopt a more responsible supply policy by adhering to interna­ tional non-proliferation norms like the Nuclear Non-Proliferation Treaty (NPT), by ratifying the Chemical Weapons Convention (CWC), and by reaffirming to the United States its pledge to abide by the basic terms o f the Missile Technology Control Regime (MTCR) regarding ballistic missile sales. Nevertheless, the report goes on to add, \ .. the continued willingness o f Chinese firms to engage in nudear, chemical, and missile cooperation with countries of serious proliferation concern, such as Pakistan and Iran, presents security concerns in many regions where the United States has national interests at stake*.68 62 Gertz, 'Missiles in Iran o f Concern to State', op. cit. 63 David Makovsky, 'Missiles Feared as China Sends Steel to Tehran: Netanyahu said to have Raised the Issue in His Talks this Week with Beijing Leaden', Haaretz, 29 May 1998. M Gertz, ‘Navy Finds that China is Top Illicit Arms Supplier to Iran» Iraq', op. cit. 65 Ibid. 66 Bitzinger, op. cit., p. 13. 67 Gertz, 'Navy Finds that China is Top Illicit Arms Supplier to Iran, Iraq', op. cit. 68 The Regional Proliferation Challenge (Washington, DC: US Department o f Defence, 1997), p. 4.

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In the wake of this evidence, the US State Department was reported to be Very concerned*, and the Clinton Administration issued a number of diplomatic protest notes seeking to curb Chinese support for the missile programme. These protests seemed to have had no impact, and the Clinton Administration decided to refrain from imposing sanctions in order to prevent a crisis in the Sino -US relations. National Security Adviser Samuel Berger justified this decision, claiming that China has ‘moved toward the international community with respect to embrace of international regimes involving non-proliferation’, but admitted that ‘there are still some problems with their nuclear cooperation with Iran*.69 As in the case of nuclear exports, prior to the October 1997 Washington summit, the Clinton Administration pressed China to again pledge to ‘implement export controls, . .. and to halt nuclear and missile cooperation with Iran*. A few months later, the US Secretary of Defence William Cohen discussed these issues again during a visit to Beijing, and reported that the Chinese officials, including President Jiang Zemin, had agreed to stop the delivery of anti-ship cruise missiles and other missile related technology. The US government also publicised the earlier decision by China against transferring the single stage solid-fuelled M-9 missile to Syria.71 However, analysts cite CIA reports of Chinese sales of guidance equipment related to M -ll missiles to Syria.72 As noted earlier, China has pledged to abide by the M TCR (but not the broader revised guidelines and annex), but the Chinese are critical o f the fact that it only covers missile technology, which is the main Chinese export, while there arc no limits on the export of fighter aircraft technology, which is the major item o f American and European expons.74 In November 1995, Chinas Vice Minister ofioreign Affairs Liu Huaqi said, ‘Ballistic missiles per se are not weapons o f mass destruction, but rather a carrier vehicle. Likewise, fighter aircraft are also a carrier vehicle that can carry nuclear, biological, and chemical weapons... (Not)«limiting fighter plane exports is clearly double standard*.7^ Thus, it is clear that China is not likely to change its policies unless the costs of continuing the export of missile related technology far outweigh the benefits.7** In early 1998, the US government altered its policies in an effort to secure greater cooperation from China in limiting such dual-use exports of missile technology, partic­ ularly to the Middle East. The Clinton Administration reportedly offered cooperative ventures with China in commercial and scientific space activities if China accepted 69 Press Briefing by Secretary o fState Madeleine Albright and National Security Advisor Sandy Berger (The White House, Office of the Press Secretary, 29 October 1997). Steven Erlanger ‘US Says China Vows to Stop Sending Iran Anti-Ship Cruise Missiles*, New York Times 18 October 1997. 71 Reuters, ‘US Says China Cancelled Syria Missile Deal’, 16 October 1997. 72 Gaffney, Jr, op. cit.t p. 36. 73 Export Controls: Some Controls over Missile-Related Technology Exports to China are Weak, op. cit. 74 Bates Gill and Matthew Stephenson, ‘Search for Common Ground: Breaking the Sino-US NonProliferation Stalemate’, Arms Control Today, September 1996, pp. 17-18. 75 XiandaiJunshi (Beijing), 11 November 1995; in FBIS-CHI-95-246, 11 November 1995. 76 Gill and Stephenson, op. cit.t pp. 17-18.

70

,

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formal membership of the M TCR.77 However, according to Chinese sources, the US has opposed Chinas formal entry, apparently fearing that China would use its access to the technology provided by membership to acquire military technology.78 In addi­ tion, an investigation regarding the link between funds provided to the 1996 Clinton re-election campaign and pressures for approval for the sale of sensitive American satel­ lite equipment (from Loral Space & Communications) that could be used to improve Chinese missiles and MIRVs (and also be transferred to third parties) has compli­ cated all these US decisions.79 A change in the political balance and atmosphere in Washington could lead to increased American pressure and a return to sanctions with respect to Chinese willingness to transfer dual-use or missile technology to Iran and other states in the region. During this period, Israel also attempted to initiate bilateral talks on this issue with China. In 1991, before the establishment o f formal diplomatic relations, Defence Minister Arens visited Beijing and raised the issue of Chinese arms and technology sales to the Middle East. Following the ceremony formally establishing diplomatic relations in 1992 in Beijing, Foreign Minister David Levy met Chinese Premier Li Peng and Foreign Minister Qian Qichen and the first issue on the agenda was Chinas arms sales to the Middle East. In particular, they discussed the Chinese nuclear reactor sale to Algeria and the M-9 missile deal with Syria. The Israeli delegation was not convinced o f its success, and Levy noted the Chinese feeling ‘it is inconceivable that the US and Europe are allowed to sell (arms), and it cannot1.80 In October 1993, Prime Minister Yitzhak Rabin visited China, and many such issues were discussed, particularly the growing Chinese assistance for the Iranian nuclear and missile development programmes.8 In May 1998, Benjamin Netanyahu visited Beijing again, and after meetings with Prime Minister Zhu Rongji and President Jiang Zemin, declared that they had given him an absolute commitment’ that ‘they are not providing Iran with nuclear weapons technology and will not in the future* and that China would not provide Iran with materials that could be used to produce nerve gas.82 CHEMICAL AND BIOLOGICAL WEAPONS

Global non-proliferation norms and suppliers regimes are less developed in the areas o f chemical and biological weapons, as compared to nuclear and missile technology. However, in the past decade, these areas have received greater attention, beginning 77 Bill Gera, ‘US may Help China on Missiles’, The Washington Times (Internet edition), 18 March 1998; ‘Selling Missiles to China’, Editorial, The Washington Times, 23 March 1998 (which includes the text of the alleged N SC memo proposing this agreement). 78 Pan, op. cit., p. 39. 79 Jeff Gerth and John M. Broder, ‘The White House Dismissed Warnings on China Satellite Deal’, New York Times (Internet edition), 1 June 1998. 80 David Makovsky, ‘China—Israel Talks Today after Compact Signed’, The Jerusalem Post, 24 January 1992. 81 ‘China Shies Away from Major Role', TheJerusalem Post, 12 October 1993; Michal Yudelman, ‘Rabin, Zvilli to China: Stop Arming Inn', Jerusalem Post, 8 August 1993. 82 Amnon Baizilai, ‘Cl\ina to Netanyahu: No Nuclear Aid to Iran*, Haaretz, 27 May 1998.

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with the Australia Group, which formed the basis for a chemical weapons suppliers regime, and extending to the Chemical Weapons Convention, which came into force in April 1997. China has a very large chemical industry and, as in the case o f nuclear and mis­ sile systems, components and dual-use technologies, there is significant evidence of Chinese assistance for the chemical and biological weapons programmes of Iraq, Iran and other states of the Middle East. In 1996, US sources reported that Chinese firms were involved in providing technology to Iran's chemical weapons programme, and that China is ‘Irans principal source of chemical weapons precursors as well as production technology’.83 On 21 November 1996, The Washington Times, quoting a CIA report, said that China had recendy exported nearly 400 tons o f chemicals for a1 possible use in producing nerve agents. In 1993 the US stopped a Chinese ship headed for Iran, under the assumption that this ship was carrying chemical weapons related materials but subsequent search did not reveal any such materials. Other sources also reported Chinese assistance in terms of both infrastructure for building chemical plants and some of the necessary precursors for mustard gas ¡production at the Marvdasht centre in Fars Province and for the production o f poly-acryl corp for chemical weapons near Isfahan. Although China formally adopted a series o f export controls in December 1995 with supplements in 1997, analysts note that not all facets of the Chinese chemical industry’ are under close scrutiny or complete control of the central government in Beijing.85 US Deputy Assistant of State Robert Einhorn declared that Washington was deeply concerned ‘by the discrepancy between these positive steps and substantial information available to us that various Chinese entities h*vc transferred chemical precursors, chemical production equipment, and production technology to Iran, which we expect will use them in its chemical weapons programme, one o f the most active in the world today’. As in the case o f formal declarations regarding the adoption o f nuclear and missile technology export controls, in the case o f chemical materials and facilities, too, there is a wide gap between implementation and declarations.86 In May 1997, the US government imposed sanctions on Chinese companies for selling chemical weapons equipment and materials to Iran.87 Critics o f the US policy argue, ‘even this modest step was taken only when the administration needed to demonstrate concern about Chinas proliferation in the context of a congressional debate over the renewal o f most favoured nation status for China’.88 83 The Washington Post, 8 March 1996, A26, cited in Michael Eisenstadt, Iranian M ilitary Power: Capa­ bilities and Intentions (Washington, DC: Washington Institute for Near East Policy, 1996), p. 26. 84 Katzman, ‘Iran: Current Developments and US Policy’, citing The Washington Post* 8 March 1996 and The Washington Times, 21 November 1996. 85 Mitchel Wailestein, ‘China and Proliferation: A Path not Taken?’, Survival* VoL 38, No. 3, 1996, p. 161. 86 Testimony by Robert J. Einhorn, Deputy Assistant Secretary of State for Non-proliferation, Before the Subcommittee on International Security, Proliferation, and Federal Services, Senate Committee on Governmental Aflairs, 10 April 1997. 87 Bill Gertz, ‘Iran gets Chemical Weapons Help from China’, The Washington Times* 2 November 1997. 88 Gaffney, op. c i t p. 34.

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These reports continued in 1997, despite the entry into force of the CWC and international pressure to end assistance in this area. A US intelligence report included a reference to a Chinese supplied plant for ‘glass-lined equipment*, although there were other reports that the final delivery of raw materials needed for operating the plant as well as chemical weapons materials was temporarily stalled by the Beijing government. This dual-use factory was built by the Nanjing Chemical and Industrial Group, one o f three Chinese companies sanctioned by the Clinton Administration in May for selling chemical weapons equipment and materials to Iran. The report also identified a Chinese company named Q Chen as ‘a major supplier of glass-lined equipment and chemicals to Iran’s chemical weapons programme’ that was linked to Chinas North Chemical Industries Corporation (NOCINCO). ‘Chen and NO CIN CO have been major suppliers of IMACO since its emergence in early 1995*. NO CIN CO has been identified as having delivered several hundred tons of carbon disulphide, an ingredient in nerve agents.89

OUTLOOK FOR THE FUTURE

A number of factors explain China’s continuing sales o f dual-use and military tech­ nology linked to the proliferation o f weapons o f mass destruction in the Middle East. First, the pragmatic basis for Chinese policy means that arms and technology sales arc seen largely in terms o f economic and political benefits that accrue from them. In the Middle East, in general, and in the major oil producing states in particular (Iran, Iraq and Saudi Arabia), China, like many other states, uses these exports to ensure access to petroleum. The increased activity reflects, in part, that its growing dependency on imports o f oil will increase significantly.90 Furthermore, the Chinese government argues that its sales of weapons and technol­ ogy amount to a fraction o f the total flow to the region. Pan Guang noted,‘China’s arms constitute only a very small proportion o f the arms entering Middle East countries, far less than those from the United States, the former USSR, France, or Britain’.91 Beijing also views missile and WMD sales to radical states in the Middle East, such as Iran and Iraq, as a form o f retaliation against western arms sales to Taiwan. In July 1991, following the Gulf War, representatives from the five permanent members of the UN Security Council (and also the five major arms suppliers to the Middle East) met in Paris to consider agreed limitations and ‘rules o f the game’ on weapons and technology transfers. China formally supported this initiative, on the condition that the limitations be ‘comprehensive, balanced, and effective’.92 During a press conference held in July 1991 in Cairo, Premier Li Peng called for agreed limits on ‘all kinds of weapons’ and ‘without the practice o f exercising control over some particular 89 Gcrtz, ‘Iran gets Chemical Weapons Help from China’, op. at. 90 Pan, op. d t.t p. 38. 91 Ibid. 92 Ibid., p. 39.

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countries while relaxing control over other countries’.9^ A second meeting in October led to the proposal o f ‘Guidelines for Conventional Arms Transfers'.9* However, in the wake of President Bushs decision to sell 150 F-16 aircraft to Taiwan, China withdrew from this stillborn exercise. To the degree that past behaviour is an indication, China is likely to continue to combine an aggressive export policy, particularly with respect to dual-use technologies, and declaratory policies that-are designed to conform to US pressures. At times, and under specific conditions, the Chinese leadership may seek to slow down or prevent certain transactions, particularly when such exports are likely to evoke sanctions from the US government. However, in the past, these limitations have been temporary and narrowly confined to specific agreements, rather than pan of a broader reassessment of technology transfer and export policies. As before, the US government’s attention and pressures can be expected to be sporadic and inconsistent as commercial and political factors opposing sanctions tend to dominate in the long term. Thus, the Chinese government can continue to generally ignore, evade and wait-out sanctions, while continuing to receive the benefits o f arms sales and exceptionality in the context of the supplier regimes. In May 1998, India detonated five nuclear test explosions, including thermonuclear and low yield devises, and declared itself as a nuclear power. This was followed by a number of Pakistani nuclear tests, and declarations regarding the impact o f an ‘Islamic bomb’ on the Middle East. Pakistan, which received much o f its technology and facilities from China, is now seen by some as a potential source of similar assistance to Iran, thus continuing the chain o f proliferation. These events came as a shock to the nuclear non-proliferation regime and endan­ gered the future o f the regime. Suddenly, China has a nuclear armed rival in its neighbourhood. Among the reasons cited by India for its decision to go nuclear, was the Chinese assistance to Pakistan's nuclear weapons and ballistic missile programmes. Chinas immediate environment has become highly unstable, with the increasing like­ lihood of a nuclear exchange. Further, the possibility of an accelerated Iranian nuclear acquisition programme leading to widespread instability in the Middle East is also perceived by Beijing as contrary to Chinese security interests. It is possible that China may reassess the significance o f the non-proliferation and export control regimes, and realise that by exempting itself from these mechanisms, it is contributing to international instability and also endangering its own vital national interests. Policy makers in Beijing may realise that a nuclear Iran could eventually be a threat to China. In early June L998, the five permanent members o f the UN Security Council and the five recognised nuclear weapons states under the NPT called an emergency meeting in Geneva which was convened by the Chinese Foreign Minister. In contrast to the meetings of the P-5 after the 1991 Gulf War, these powers expressed grave concern and the pressures for increasing the strength o f the sanctions systems were 93 Press Releasefrom Chinese Embassy* Cairo, No. 011/91, 17 July 1991, cited in Pan, op. cit., p. 39. 94 Ian Anthony et al., ‘The Trade in Major Conventional Arms’, in SIPRI Yearbook 1992: WorldArmaments and Disarmament (Oxford: Okfbrd University Press, 1992), pp. 293-94.

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likely to lead to broader agreement, designed to prevent the chain o f proliferation from extending beyond Pakistan and India. In a broader sense, as the number of states that abide by the supplier regimes rises, the exceptional states will become increasingly isolated, and this has a growing cost. China, Russia and North Korea are the only states that permit the sale o f dual-use technologies and WMD components to the ‘rogue’ or outcast’ states o f the Middle East. This association with rogue states which are the source o f regional instability, supporting terrorism and opposing the Arab-Israeli peace process leads to the political isolation of the suppliers as well. In the case of Nordi Korea, the impact is minimal, since the regime in Pyongyang is an isolated rogue state itself. However, to the degree that China seeks international acceptance as a major and responsible power, such behaviour and policies are detrimental to long-term goals. Second, the ability o f the US government and the ‘China lobby’ to find ways to overlook Chinese violations o f export control and non-proliferation requirements may be declining. With each Sino-US summit, Beijing’s behaviour and not merely its declaratory policies are coming under increasing scrutiny. The Republican dominated Congress has been critical o f the Clinton Administration’s decision to implement the 1985 bilateral nuclear technology agreement while evidence shows that China has not been willing to end its sales of military and dual-use technologies.95 Additional violations o f global non-proliferation and export control norms are likely to bring increased use of sanctions through the legislative process and mechanism imposed on the Administration. In early 1998, Congressional critics of the Clinton Admin­ istrations unwillingness to impose sanctions on Russia for the export o f missile and nuclear technology to Iran began to consider additional sanctions on Russia, and the same pattern may be seen with respect to China. Finally, developments in the Chinese decision-making structure are enabling the central government to assess the costs and benefits o f such technology exports at an earlier stage, providing a potential for greater control over interests that seek to increase or maintain exports to the oil exporting states in the Middle East. The steady increase in the information available to the central government regarding negotiations o f questionable export contracts allows for intervention at a relatively early stage, particularly with respect to the construction o f facilities, such as production plants, that are built in stages over a relatively long period. The question is whether the government is willing to use this information and its ability to exert control. If the political and economic costs of supplying technology are high, China will reconsider its actions and policies in this sphere.

95 See, for example, Gaffney, op. cit.

China and Proliferation: Implications for India Ashok Kapur

China occupies a pivotal position in Indian foreign and military policies and further­ more, Chinas strategic relations with the Middle East/Persian Gulf and South Asian countries have a fallout on Sino-Indian relations. There is also a fallout on the future of regimes which are designed to control the proliferation o f nuclear weapons and missiles. To what extent do Chinese nuclear and missile supply attitudes and practices in regions o f conflict affect Indian security? Indian Sinologists usually tend to ignore this aspect o f India’s strategic calculation. Non-proliferation experts in the US have also been wholly preoccupied with the issue o f the Indo—Pakistan arms race and the possibility o f war between the two. American arms control specialists have a mindset that automatically locates ‘South Asia* in the traditional US South Asia policy where the goal is to develop an Indo-Pakistan military balance.1 Chinas pivotal position is clear from the diplomatic rivalry between the two since the fifties and the dispute over the Sino-Indian border which led to a limited war in 1962. Initially, Prime Minister Jawaharlal Nehru had proposed the theme that China and India were the co-giants or core states in Asian international relations, and the two countries, along with the USA and Soviet Russia, were the actual or potential powers in the world. Nehru sought Sino-Indian unity and repeatedly, in public statements, projected a false expectation about Sino-Indian friendship. The 1962 war shattered this dream. This was followed by a period of military modernisation in India and a clear public identification with the belief that China not only posed a physical threat to India because o f its geographical proximity and power, but also that the issue was not simply the distribution o f military power. Rather, it laid in the nature o f the enmity and the strategic dilemmas it created for India.2 In relation to China, the dilemmas were: (a) Should India rely on peaceful diplomacy and a belief that outside powers would protect a territorially non-expansionist India or should India rely on military diplomacy to protect its interests? ( b) Should India prepare to fight a war at a 1 Nuclear Weapons and South Asian Security (New York: Carnegie Endowment for International Peace, 1998). 2 For an examination o f Indian strategic diiemmas, see Ashok Kapur, ‘Indian Strategy’, in Y.K. Malik and A. Kapur, India: Fifty Yearso fDemocracy and Development (New Delhi: APH Publishing Corporation, 1998), pp. 341-72.

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time and place o f the adversary's choosing, that is, plan a military defence, or should it acquire the means to raise the costs o f foreign intervention so that the adversary would think twice about the costs o f war or intervention (coercion short of war)? Since the sixties, Indias political-military planning has leaned towards the deter­ rence mode. The premise was (is) that India must remain a status quo (non-territorially expansionist) country but to deal with foreign enemies (like Pakistan and China), and to manage its main secret adversary— the USA whose policies seek to contain and dis­ arm India and to injure its vital strategic interests— India had to acquire the means to function as a status quo power. Here, power required an ability to use or threaten the use o f violence and to deny the great powers a monopoly over violence and escalation. Since the eighties Sino-Indian diplomatic normalisation dialogue3 has been shaped in the context o f the Indian military build-up. This build-up enables the Indian armed forces to hold their position in the Himalayas against Chinese forces even though the latter have an advantageous terrain and logistical position in the Tibetan plateau. The normalisation process has led to positive but limited agreements and cooperation in the spheres o f science and technology, economic cooperation and trade, and military confidence building.4 Nevertheless, the Sino-Indian relationship is not completely stable because many hidden controversies affect this relationship. There are several important controversies including the fact that China does not accept that Sikkim and Arunachal Pradesh— two geo-politically important Indian provinces in the Himalayas— belong to the Indian Union. Two, the Sino—Pakistani provisional border agreement of 1963 en­ tailed Pakistan ceding to China areas claimed by India. Three, Sino-Pakistan military trade includes Chinese transfer of sensitive nuclear test data, verification of Pakistan's bomb design, M-l 1 and M-9 missile technology and nuclear reactor supply. China has a thirty-year old investment in Pakistan. Four, in the past, China opposed ‘Indian hegemony’ in South Asia and was also critical of Indian aims in the 1965 and 1971 Indo-Pakistan wars. At the same time, it sought a relationship with successive military regimes in Pakistan since the mid-fifties. In the 1971 war, Beijing supported the genocidal aims and policies o f the Pakistani army in its campaign in East Pakistan and opposed India as well as the mass movement that sought autonomy and liberation of East Pakistan. Chinas policy is motivated by its India policy and sustained by its Pakistan policy. The motivation was/is strategic, not ideological. The Maoist the­ ory of supporting indigenous liberation movements and the theory of revolutionary violence were cast aside in the Bangladesh liberation campaign. Five, China has developed a commercial and military presence in Myanmar (Burma) through Yunnan and also has a military presence in the Coco and Hyunghai Islands, which give China a military platform in the Bay o f Bengal. China has established a 3 Normalisation means to establish or resume relations, to achieve regularity in a relationship, to be free from disorder, to conform to a standard. 4 ‘Agreement on the Maintenance of Peace and Tranquillity Along the Line o f Actual Control in the India-China Border Areas Signed in Beijing on September 7, 1993’, official text. Agreement between the Government of Republic of India and the Government of the Peoples Republic of China on Confidence Building Measures in the Military Field Along the Line of Actual Control in the India-China Border Areas’, January 1997, official text.

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long-range, low frequency facility in the Coco Islands indicating its use for submarine activities. These facilities enable China to monitor Indian missile tests as the Indian missile testing facility is located in Balasor, Orissa and missiles are tested in the Bay of Bengal. China also maintains radar warning capacity in the area. A memorandum of understanding (MOU) was signed between China and Myanmar which allows refuelling for Chinese naval vessels. Though this MOU has not been implemented thus far, it indicates Chinas strategic orientation and presence in the Bay of Bengal.* According to a well-informed study by MB Zinger, Naval Attache, US Embassy in Bangladesh: The threat that China could pose to India in the future is far more complex than in the cases of the United States and Japan, which are principally naval powers as far as India is concerned. China is both a land and sea power, Pakistan’s most powerful ally, and India’s chief competitor for leadership of the non-aligned movement. China also poses the principal nuclear threat against India. Although the US obviously has a far more powerful nuclear arsenal than China, India does not appear to consider it a threat. As Russia continues to reduce its strategic nuclear arsenal and its conventional forces, the Chinese will be free to rethink their strategic imperatives. They intend to continue developing their nuclear submarine force as well as their surface fleet. With the absence of Russian threat, China will redirect its naval focus towards the East and South. While Japan seems to present the obvious target for Chinas new military focus, because of its growing influence in East Asia, for several reasons I feel it will probably be India instead.6 Finally, not only does China see itself as a Pacific and Indian Ocean naval power, but it also opposes India’s claim to be an Indian Ocean power. It has an on-going programme to develop modern Chinese naval infrastructure which will enable it to project power into the South China Sea and eventually into the Indian Ocean. This move however, is most likely to face opposition from the US, Japan, Australia, India and the Association of South East Asian Nations (ASEAN) countries. China possesses nuclear and missile power and reports indicate significant development o f tactical nuclear weaponry and a refinement o f its military doctrine.7 Furthermore, Chinese threat perceptions reveal a preoccupation and an expectation that regional wars are likely. The authoritative Chinese Central Military Commission analysis of 1993, 4Can the Chinese Army Win the Next Wari' characterises India as the ‘largest potential threat’. The US is labelled an open adversary’ and ‘the No. 1 military power in the world’; Japan is called a resurgence powerful adversary’; Vietnam is labelled an ‘unpredictable 5 Personal interviews in New Delhi, Ottawa, Singapore and Washington, DC during 1994-97. 6 M.B. Zinger, ‘The Development of Indian Naval Strategy since 1972’, Contemporary South Asia (Abingdon), Vol. 2, No. 3, 1993, p. 354. 7 Eli Joffe, ‘People’s War under Modem Conditions: Doctrine for Modem War’, China Quarterly (London), No. 112, December 1987, pp. 555-71; David Shambaugh, ‘The Insecurity o f Security: The PLAs Evolving Doctrine and Threat Perceptions towards 2000 \ Journal o fNortheastAsian Studies, Vol. 13, No. 1, April 1994, pp. 3-25; V.K. Nair, ‘Chinese Nukes in Tibet: Bad Omen for India’s Security’, The Sunday Observer; 7—13 December 1997, pp. 1 and 4. Also see Nuclear Tibet, a report by the International Campaign for Tibet (Washington DC), April 1993.

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super-killer; and Russia is still powerful threatening force. Pakistan and other Middle Eastern-countries are not considered as threats to China and the threat perceptions concentrate on regional wars that may face China. The scenario focuses on points of tension and potential war in Chinas neighbourhood in the Asia-Pacific— from the Korean peninsula to Japan, Taiwan, South China Sea, Vietnam (and ASEAN nations) and India. This may be labelled as the inner circle of Chinas defence perimeter. Chinas preference for peace in its immediate defence and foreign policy circle, and inside China, refleas its need for a stable environment which is necessary for its internal economic, political and military modernisation. China has always avoided facilitating nuclear and missile proliferation in the Asia-Pacific It wanted a sample o f the atom bomb from Soviet Russia, but Moscow’s hesitation became a controversial issue in the Sino-Soviet dispute. China, however, has been careful not to offer nuclear aid to its immediate, potentially powerful and independent-minded neighbours and partners such as North Korea and Indonesia under Sukarno. Rather, its nuclear and missile aid has been targetted to reliable partners on Chinas periphery and beyond the inner defence circle who could foster Chinas regional interests. The 1993 Chinese report clearly identifies the nature o f the Indian problem. To quote: The India military is not as large as the Chinese one, but its quality may be superior. The Indians are obviously superior to the Chinese with regards to equipment for navy and airforce fighting capacity on the blue water, and military fortifications at the borders. At present, the direct threats o f the Indian military to China are mainly mediumrange missiles and fairly advanced fighter airplanes. The main reason for listing India as a potential adversary is that India’s strategic focus is still on the Indian Ocean and Southeast Asia. India has never changed its reconquest of Chinese territory and still occupies a large block o f Chinese terntory near Chinas Southwest border.8 From the foregoing discussion, it is clear that ‘peace’ in the Indian subcontinent is a negative peace, that is, war is not imminent; it is a temporary peace in the form of a ceasefire. It is not a ‘positive peace’, that is, it is not a sign o f complete stability or harmony. Rivalry between China and India is muted but not absent. Ceasefire does not preclude the use o f diplomatic (alliance building activity) and psychological warfare, military preparations, and building points o f pressure in regions of conflict such as the Indian subcontinent and the Middle East. In this broad, complex and evolutionary Sino-Indian strategic context, the importance of China’s nuclear and missile proliferation policies cannot be overemphasised. This discussion is divided into three parts. It begins with an outline of Chinas nuclear and non-proliferation policies which shows a contrast between the declaratory or rhetorical posture and a pattern o f practices and motivation that is revealed by its supply relationships with its Middle Eastern/South Asian partners. There is an * Can the Chinese Army ttfi/i the Next War? (Beijing: Central Military Commission, 1993), p. 6.

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evolutionary change as well as a duality in Chinas declaratory positions and its supply relationships with select partners in the Middle East/South Asian sub-regions. China’s declaratory and military (including nuclear and missile) policies have implications for global and regional (Middle Eastern and South Asian) strategic agendas. The next section on the nature of Chinas nuclear and missile supply relationships in the Middle East/South Asian sub-regions reveals that China is proactive; it knows how to exploit the loopholes in the non-proliferation and Missile Technology Control Regime (MTCR) and its supply relationships are politically and strategically moti­ vated and have a military content. China does not have a clear-cut non-proliferation policy and its supply relationships are driven by calculations o f mutual advantage or gain between the supplier and the recipient; the relationships reflect a bargain. Conversely, the supply bargain (proliferating activity) can be replaced by Chinese restraint (which is projected as an indication of its non-proliferation commitment and a sign of its learning curve). The Sino-Pakistan relationship is an example of the supply bargain. The Sino-Iran relationship is an instance where China first sup­ plies sensitive technology and materials, and then exercises restraint. Such restraint is either the result of Chinas inability to fulfil the supply bargain, or an agreement to exercise restraint because of a better bargain with another strategic partner. The supply bargain is between China and a regional player while the non-proliferation bargain is between China and the US. In each case, the bargain reflects a host of issues, the linkages/trade-ofis and the regional/international context that shape the negotiating opportunities and constraints. The last section deals with the impact of Chinas proliferation behaviour on Indian strategic calculations which are discussed in the context of the Sino-Pakistan relationship.

EVOLVING FRAMEWORK OF NUCLEAR AND NON-PROLIFERATION POLICIES

Chinas military and nuclear policies have evolved in four directions: 1.

2.

Its military doctrine has changed from fighting a people's war under Maoist principles to fighting a peoples war under modern conditions. This shift occurred after 1979 under Deng Xiaoping.9 The G ulf War in 1991 drew attention to Chinas deficiencies in high technology warfare and this reinforced its military modernisation drive.10 Chinas nuclear doctrine and nuclearposture have changed from its initial declara­ tory position which was announced at the time o f its first nuclear test in 1964. At that time China declared that it would not be the first to use nuclear weapons; it would not use them against a non-nuclear state; it sought nuclear arms to break the US and Soviet nuclear monopoly; it believed in

9 Joffc, op. d t.t pp. $56-62. 10 Shambaugh, op. cit, pp. 16-19.

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nuclear disarmament; it would use nuclear weapons solely for defence; and finally, the aim o f Chinese nuclear weapons was to deny military victory to any adversary. By 1976, China had acquired a small retaliatory force. It conducted many tests in the eighties— ICBM tests (1980), Multiple IndependendyTargetable Re-entry Vehicle (MIRV) tests (1981), Submarine Launched Ballistic Missile (SLBM) tests (1981), testing of geo-stationary satellite (1984) and it developed tactical atomic weapons (TAW) capability (1982). These tests signalled a fundamental shift in Chinas nuclear strategy— from using nuclear weapons for self-defence to their use in battle against the adversary's military targets. These changes in Chinese military and nuclear policies have occurred in the context of changing Chinese threat assessments that highlight regional threats in Chinas peripheries. David Shambaugh has drawn attention to the enlargement o f Chinas strategic frontiers’ 12 that now include the South China Sea and the Indian Ocean. While Eli Joffe describes this as a shift towards preparation to fight a peoples war’ and a nuclear war under modern conditions, Shambaugh describes it as preparation for an extended cold war under modern conditions that involve China and the US, Japan, Russia and other potential regional threats like India and Vietnam. As Shambaugh points out, (a) Apart from Japan and the United States, perhaps Chinas most pressing security concern is India. While the two nations continue to have territorial disputes and there exists a deep legacy of mistrust, China’s fears derive from what it perceives to be an Indian drive for regional dominance. India’s nuclear and naval ambitions are o f particular concern to Beijing (and vice versa) and to counter perceived Indian dominance over South Asia, China continues its strong diplomatic and military support for Pakistan, while cultivating a new strategic foothold in Burma.13 (b) However, in recent years, China is redefining its strategic frontiers and the principal shift is from continental to regional definitions. They also include defined spheres under the sea and in space. Today, China’s perceived strategic frontiers can be said to include the Indian Ocean and Malacca Straits to the Southwest, the South China Sea, the East China Sea m addition to its current territorial boundaries and claimed jurisdiction over the aforementioned territories. The redefinition of these frontiers has emerged gradually in recent years and since 1990s Chinese strategists have spoken o f the strategic value o f Southeast Asian shipping lanes and the Straits of Malacca for Chinas foreign trade. Since the late 1980s China has expressed concern that India should not be permitted to become the dominant power in South Asia or the Indian Ocean. The PRCs assertive claims over the Xisha and Nansha island groups in the South China Sea are proof positive of its inclusion o f these territories with its strategic frontiers. T h e strategically 11 Joflfe, op. dt.y pp. 562 and 564-66. 12 Shambaugh, op. cit., pp. 3 and 14-15. 13 IbuL%p. 13.

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3.

He further notes: ‘Contingency planning for renewed land engagements with India has been active for more than thirty years. This has involved the possible use of nuclear weapons, both of the battlefield tactical variety and possibly a Chinese surgical strike against Indian nuclear facilities’.1^ The enlarged strategic frontiers of China require power projection and war fighting capability that are credible in the conventional military, nuclear, missile and naval spheres. In the sixties, China denounced arms control as a fraud by the US and the USSR whose intent was to maintain their nuclear monopoly. It insisted instead on complete nuclear disarmament as the basis of international security. Initially, China insisted that any sovereign state had a legal right to develop nuclear weapons for self-defence. According to a Chinese expert, Chinese leaders insisted on the right of peace-loving countries to develop their own nuclear weapons in order to break the so-called nuclear monopoly and end the nuclear threats and nuclear blackmail carried out by major nuclear powers. According to Chinese leaders, nuclear monopoly and the corresponding behaviour of the nuclear powers had seriously endangered peace, security and stability in the world. Obviously, this posture continued to shape Chinas position during the 1949-62 period.16 During the sixties, the PRC took an ideological view o f nuclear weapons: On November 19,1963, in an open letter to the Soviet leaders that dealt with the issue of peace and war in particular, China said: ‘We have consistently held that socialist countries have to get and maintain nuclear superiority. Only then can we force imperialism not to dare to initiate nuclear wars and make our contributions to the complete prohibition of nuclear weapons’. The letter concluded with: ‘The more countries develop their own nuclear weapons, the more possible it is to prohibit nuclear weapons, and the more possible it is to delay a world war.’ This letter sounded like another argument for multilateral nuclear deterrence.17 By the mid-eighties, there was a change in China’s position on arms control: China now viewed it positively as a step towards disarmament. According to JofFe: The main reason behind it is doubtless Chinas desire to be regarded as a leading member o f the international community, equal in status to the super

14 Ibid., p. 15. 15 Ibid., p. 21. 16 Mingquan Zhu, ‘The Evolution of Chinas NuUear Non-proliferation Policy’»Non-Prolifention Review (Monterey), Vol. 4, No. 2, Winter 1997, pp. 41-43. 17 Ibid., p. 43.

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powers and involved in shaping the state of the world. But a contributing reason may be connected with Chinas new strategic doctrine. Confident o f their ability to deter a nuclear attack with their small nuclear force, the Chinese may feel that they are entitled to membership in the nuclear powers club, which they had hitherto derided, and implicitly want to be recognised as such.18 4.

The sixties also revealed a subtlety in Chinas attitude towards non-proliferation. In 1963 China denounced the Partial Test Ban Treaty and in 1968 the Nuclear Non-Proliferation Treaty (NPT) but at the same time it expressed support for non-proliferation. In 1963, it argued that nuclear weapons and the technical materials needed for their production should not be exported and imported under any circumstances. Again in 1968, it declared that it would avoid nu­ clear proliferation. By the early eighties, Chinas non-proliferation stance had crystallised at the United Nations: ‘We don't stand for, encourage, or engage in nuclear proliferation, said Chinas foreign minister. Later it published the three principles of its nuclear exports policy. These were: (a) they should serve peaceful uses only; (b) the International Atomic Energy Agency (IAEA) safeguards should be accepted; and (c) no transfers to a third country should be made without Chinas consent. During 1991-92, it agreed to follow the M TCR guidelines regarding transfer of M-9 and M -l 1 missiles.

By the nineties, China had completely abandoned its principled' opposition to the U S-U SSR nuclear monopolistic policies which emphasised arms control and non­ proliferation. Instead, it accepted the need to prevent proliferation by ‘any other country'.19 The framework oudined earlier emphasised the role o f conventional and nuclear armament in China’s strategic planning.lt also revealed a complete reversal from its apparent rejection o f arms control and non-proliferation to its wholehearted embrace in a declaratory sense in the eighties and nineties. The different facets o f China’s strategic posture are based on western, Israeli and Chinese assessments. Missing from these assessments is the pattern of China’s active participation with its regional allies in selective' nuclear and missile proliferation. This activity is in sharp contrast to its public embrace o f the non-proliferation norm. It is therefore necessary to outline the fifth aspect o f Chinese strategic posture.

A SELECTIVE PROLIFERATOR

The world is not based on a dean theory and practice o f non-proliferation. Rather, there is a rational, systematic and a complex system or pattern of behaviour that requires different strokes for different actors. The non-proliferation system is not 18 Joffe, op. cit.t p. 570. In 1984 China joined the IAEA, it accepted the NPT (1992) and signed the CTBT (1997), and supported the indefinite extension o f the NPT (1995). 19 Zhu, op. cit.t pp. 43-45.

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what it appears to be. It has elements of diplomatic, economic and psychological warfare when the nuclear weapon states and their allies use non-proliferation norms against their enemies. At the same time, the system relies on the classical principle that great powers compete against each other but if competition is not likely to succeed then they may cooperate and compensate each other, and at the same time, it is their right and duty, in the name o f world order, to intervene against the lesser/weaker powers and states if they are seen as rogues or pariahs.20 The characteristics o f different nuclear worlds have been discussed elsewhere;21 the following discussion o f Chinas selective proliferation activity in the Middle East/Persian Gulf and South Asia is consistent with my assessment of selective proliferation and selective non-proliferation. China is a selective nuclear weapons and missile proliferator. The pattern of its behaviour is similar to that of other nuclear weapon states and their allies who are both non-proliferators as well as nuclear/missile traders. Chinas nuclear and missile exports take place in the context of major legal loopholes in international non-proliferation and M TCR regimes, as well as loopholes in Chinas non-proliferation declarations made in the past (such as nuclear exports should serve peaceful uses only). Under the existing international treaties and national non-proliferation laws (such as those o f the US, the UK and Canada) nuclear and missile trade by the nuclear weapons states is legal, and in the case of a breach, the UN system and the international non-proliferation arrangements do not have the authority to police and punish the permanent members of the Security Council. As long as they accommodate aild compensate each other, they are not likely to blow the whisde against each other. The behaviour of the nuclear powers including China has four characteristics. First, the goal is to accommodate each others strategic(including nuclear)interests. This idea is entrenched in the fact that the old nuclear pariahs (for example, the USSR in the fifties, France in the forties to sixties or China in the sixties to seventies) are now respectable members o f the nuclear club. Second, the method is to develop and use regime rules to facilitate nuclear and missile trade. From the very beginning international safeguards were designed to provide a political and legal cover for nuclear sales. The regime rules of the NPT, the M TCR and other mechanisms like the Nuclear Suppliers Group, provide legal and political cover for this trade by and among the nuclear suppliers, that is, the nuclear powers and their allies. Third, among the nuclear powers, the process is to develop a basket o f issues with linkage(s) and trade-offs so that selective proliferation with friendly states/allies is faci­ litated, and selective non-proliferation is pursued with adversarial state(s). The list of friends/enemies o f each nuclear power is different— for example, Iran has been an ally o f China but it has been the U S’s adversary— in such a case, Chinese selective proliferation activity came into conflict with the US s selective non-proliferation aim against Iran. This required compensation and adjustment between the US and China. In Pakistan's case, both Chinese and American tolerance and/or support o f Pakistan’s 20 The distinction between ‘compensation and ‘intervention is the basis o f this statement, see M. Wight,

Power Politics (New York: Penguin, 1979), p. 186. 21 Ashok Kapur, ‘Rogue States and the International Nuclear Order, InternationalJournal* Vol. 51, No. 3, Summer 1996, pp. 420-39.

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strategic policy and its nuclear and missile programmes reinforce the convergent pattern o f American/western and Chinese selective proliferation behaviour. This convergence o f nuclear and missile supply activity is part o f a wider strategic Sino-US convergence, that became obvious in the 1971 Bangladesh war: to support Pakistan against India and to strengthen the former as a line of pressure against India. Added to this equation is the linkage between Chinas desire for US electronics and aerospace technology and equipment on the one hand, and the dependence of the US on China for trade and its impact on US jobs on the other hand. When the basket includes Sino-US trade, US jobs, inducing China towards arms control and military restraint vis-à-vis the US and its allies, the issue of Chinas proliferation goes down in the hierarchy o f policy problems*. This explains why evidence o f Chinas nuclear and missile supply to Pakistan is deemed to be inconclusive in the judgement o f the White House and the State Department even though the CIAs data is considered conclusive by many observers. American interests vis-à-vis China and Pakistan define its policy response to the evidence. The final characteristic concerns the right o f the nuclear powers to check weapons o f mass destruction o f states which are suspectedo í possessing such capability and ambition but which do not have a nuclearpower as a patron. Given these four characteristics, what is the scale o f Chinas selective proliferation activity in the Middle East/Persian Gulf and South Asia? Where is it involved and why? Where are the loopholes and ambiguities in its declaratory non-proliferation stance? What is Chinas style to explain or justify its selective proliferation activity? Due to constraints o f space, die answers to these questions are tentative and are illustrated by a discussion o f Sino-Pakistan and Sino-Iran relations. China developed a pattern of incremental involvement in the Middle East/Persian G ulf and South Asian regions that exploited the loopholes in the non-proliferation regime and developed opportunities to make friends with important but isolated re­ gional states and potential regional powers. It started this process during the Cold War period and it has continued ever since. During the Cold War, the US and Soviet schol­ arship and policy pronouncements highlighted the primacy o f the U S-U SSR bipo­ larity; but it is noteworthy that Chinese scholarship had a different sub-text. It recog­ nised the importance of multipolar tendencies in the context o f bipolarity and sought to develop multipolarity in the international system.22 Chinas quest for political and strategic space through the development of multipolarity in the international sys­ tem can be traced back to the fifties. Chinas participation in international conference diplomacy in the fifties and sixties (for example, the Bandung and Indo-China Confer­ ences) revealed its desire to develop multipolarity in regional and international affairs. Despite the intensity of the Sino-Soviet conflict in the fifties and sixties (or because o f it) and despite its isolation from the west, China adopted an independent stance vis-à-vis the communist East European governments and parties— in Soviet Russia’s backyard. China sought a presence in Africa in the sixties as a communist and an independent Third World country, again in competition with the USSR. In South and Southeast Asia, China maintained a presence, beginning in the early fifties, in 22 Huang Zhengji, ‘Prospecta for a New Multipolar World’, InternationalStrategic Studies (Beijing), No .4, December 1994, p. 1.

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competition with the west and the USSR. Chinas attempt to forge a relationship with Pakistan began in the mid-fifties.23 Pakistan was perceived as an avenue for the exercise o f Chinese influence in the Indian Ocean area as well as in the super powers backyard in the Middle East and the Persian Gulf. Chinas nuclear and missile supply policies are judicious from its point o f view and in terms o f its interests. They reveal a strategic calculation and are not driven by ideo­ logical considerations. For example, China has supplied missiles and/or nuclear equip­ ment and technology to Saudi Arabia (a monarchy, anti-democratic and an Islamic state), Pakistan (a military dictatorship at the time China established defence ties with it), and Syria (an autocratic regime). As a pan o f its strategic calculation it is involved in selective proliferation activity including nuclear and missile exports to two tradi­ tional conflict zones— the Middle East/Persian Gulf and South Asia— but it is careful in avoiding similar exports to its immediate security area, that is, Northeast Asia. Chinas proliferation activity commenced when it was, in the words o f the Russian Intelligence Service, in an ‘isolated position in the international sphere, in relation to the US-Soviet strategic arms reduction process.24 In such a context, it makes sense for an ambitious great power to establish a military supply relationship with regional powers in areas of conflict which are also isolated and/or insecure (Iran, Pakistan, Syria and Myanmar) in terms of their threat perceptions and in terms of their ability to acquire modern armament for defence purposes. Chinas approach creates multiple values for its regional and international influence. 1.

2.

3.

It gives China a leverage and a say in bilateral relations with the aid recipi­ ents as well as with third parties which are concerned about the capability and motivation in supply relationship. For instance, the Sino-Pakistan supply re­ lationship creates pressure on India, as does the Sino-Myanmar relationship. Chinas supply relationships with Syria and Iran create pressure on Israel. It gives China a voice and a leverage vis-à-vis the other international powers. A supply relationship with the adversaries o f the international powers is valuable as a bargaining leverage vis-à-vis the US and Russia if these two countries seek Chinas cooperation in exercising restraint in future supplies. Finally, the supply o f missiles and missile technology by China is especially sig­ nificant because missiles are less vulnerable to international supplierS’control regimes compared to military aircraft.

Chinas willingness and ability to offer delivery vehicles o f conventional and/or nuclear armament to select clients makes a mockery o f western suppliers ’control regimes. According to a Russian intelligence report, missile proliferation has many advantages: missiles are easy and simple to use; they arc cheaper compared to modern aircraft systems; they are militarily effective especially with improvements in range 25 In a seeret message to the Pakistan government in the mid-fifties, Beijing assured Pakistan that it expected a conflict of interests between China and India but not with Pakistan. Sec LF. Rushbrook Williams, The State o fPakistan (London: Faber and Faber, 1962), p. 120. 24 Russian Intelligence Service Report on the Proliferation of Weapons of Mass Destruction (Moscow, 1993), in FBIS, Summary and Excerpts prepared by the Committee on Government Affairs, United States Senate, Washington DC, 24 February 1993, p. 4.

China and Proliferation: Implicationsfor India

173

and accuracy; they are less vulnerable to countcr-measurcs compared to aircraft; they create an opportunity to exert politico-military pressure on immediate neighbours; they are a carrier for weapons of mass destruction (WMD); and they create a capacity for surprise attack.2^ Western non-proliferation theory and practice were developed in the sixties on the premise that the main threat was from nuclear weapons proliferation and arrangements such as the NPT, the Partial Test Ban Treaty (PTBT) and the Comprehensive Test Ban Treary (CTBT) were based on this premise. Chinas proliferation behaviour— its acquisition o f nuclear weapons capability and its nuclear and missile exports— has broadened the scope o f the proliferation issue in two ways: first, it affects both nu­ clear as well as other W MD and missile proliferation; and second, the expectation in the sixties was that i f the US and the USSR, the two principals of the nuclear age, agreed, the world nuclear order cbuld be stabilised. This expectation has been belied by Chinas behaviour. It has undermined the intellectual and the political basis or philosophy o f the US—Soviet international non-proliferation regime building activity. Chinas proliferation behaviour, despite the public hue and cry that it has joined the mainstream o f arms control, is actually subversive. It undermines the intellectual and political basis o f international non-proliferation because it has altered the scope of the non-proliferation agenda of the US and its allies. The view taken here is that Chinas so-called ‘isolation from the US-Russian strategic arms reduction process is actually not true. By insisting that it will stay out of a commitment to disarm or engage in arms reduction until the US-Russian nuclear arms levels arc further reduced and create a level playing field, China is putting pressure on both powers to reach a satisfactory political settlement with China. Pending an eventual settlement, it has created two levers against them: first, to develop Chinas nuclear and missile capability in the context o f Chinas growing strategic frontiers; and second, to develop its supply relations in regions which are peripheral to Chinas security but which are important for the interests o f the US, Russia, their allies and their enemies. Consequently, the implication o f this analysis is that^the real framework of Chinas policies is not the declaratory shift it publicises, that is, from the rejection of arms control to its acceptance but the real framework is to develop its bilateral relationships in important secondary zones o f conflict, to develop points o f pressure against its regional adversaries, and most importantly, to create situations which require the US and Russia to take China seriously, and to develop inter-dependent bargaining relationships with it. Chinas supply role is important because it creates a multiplier effect given the three following conditions: {a) several Middle East/Persian Gulf and South Asian countries are advanced in the missile sphere and have a base to absorb and develop foreign technologies in missile and space spheres; (b) the M TCR does not work, just as the CO CO M was a failure; (c) China, along with North Korea (and Israel) are major suppliers o f missile technology to the Third World. Table 1 should be studied in this perspective.

The data in

25 Ibid.* p. 30. 26 Ibid.* pp. 31 and 33-36 for a discussion o f shortcomings of international suppliers controls especially o f dual-use technology.

Ashok Kapur

174 TabU 1 Country Algeria

Date 1993

Egypt

1990 Iran

1987-91

Libya

1992 1993

Saudi Arabia Pakistan

1985-88 1991

Syria

Supply Item

Supplier

15 MW heavy water research reactor

China

Bilateral agreement on peaceful uses of atomic energy with China (and the USA, Russia, India and Argentina) Military cooperation regarding missiles 1996— technological and industrial aid for long-range Iranian missile development (includes M -11 technology) Scud-B production (280 km range) Help with several short-range missiles (eg, Oghab) Cooperation agreement Negotiations to secure CSS-2 missile (long-range) CSS-2 (long-range missile) M-l 1 missile Chemical weapons capability Ballistic missiles (Khatf 1 and Khatf2 modified version of M-l 1; the range is 80 km and 300 km respectively) M-9 (600 km range) M-9

China

China China

China China

Comment Algeria is not a member o f the NPT. It also has nuclear links with Argentina, Pakistan, Libya and Iraq

Also supplied Silkworm anti-ship missile

Brazil is also a missile supplier

China China China China

(and Germany)

China China

Sources: Russian Intelligence Service Report on the Proliferation o f Weapons of Mass Destruction (Moscow, 1993), in Foreign Broadcast Information Service\ Summary and Excerpts prepared by the Committee on Government Affairs, United States Senate, Washington DC, 24 February 1993, pp. 5-8, 47-49 and 62-63; Martin Navias, Ballistic Missile Proliferation in the Third World, Adelphi Papers 252 (London: International Institute for Strategic Studies, 1990); Y. Bodansky, ‘Iran’s New Ballistic Missiles’, Defence and Foreign Affairs Strategic Policy, May-June 1997, pp. 6-8. According to the CIA, China was also the primary source of nuclear related equipment and tech' nology to Pakistan and a key supplier to Iran. ‘Chinese Top Suppliers o f Deadly Technology’, The Globe and M ail (Toronto), 3 July 1997, p. A13.

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THE MEANING AND IMPACT OF CHINESE PROLIFERATION: CHINA-PAKISTAN CASE

Chinas behaviour reveals two tracks. The first one shows the skilled use o f semi­ transparent nuclear and missile proliferation in the development of its alliance politics in regional zones o f conflict; these zones are a part of its strategic frontiers but they are outside its immediate security zone in East Asia. It should be noted that China follows a policy of zero tolerance o f Taiwanese proliferation and has declared its intention to attack Taiwan if it goes nuclear. It also favours international restraints against North Korean nuclear proliferation and is concerned about Japanese militarism. But on the other hand, it tolerates proliferation in South Asia and the Middle East/Persian Gulf sphere. The second track reveals the skilled use o f non-proliferation in public interna­ tional conference diplomacy to enhance China s credentials as a responsible global power. By using both tracks, China is able to function simultaneously as a proliferator as well as a non-proliferator and to satisfy other policy aims, namely, to make a case for global and regional (sub-regional) multipolarity that includes China as an essential actor, while challenging the US-Soviet/Russian dominance o f the proliferation and the non-proliferation agendas. Chinas proliferation activities have created situations which have enabled it to carve and to enlarge diplomatic and strategic space for itself in regional politics and in the international system. At the same time, its nuclear aid has increased the diplomatic and strategic space o f its regional allies in zones o f conflict. To understand the meaning and impact o f Chinas innovative behaviour, it is es­ sential to examine the sub-rwtf that is revealed by its actions rather than to stress the official script about China as the new and important recruit to the American cause of non-proliferation, international safeguards and arms control. The latter view is a half-truth. The former tells the real story. The Sino-Pakistan relationship reveals the sub-text and this case is important because Pakistan has been, since the fifties, at the cross-roads o f the Persian Gulf/Middle East and South Asian international relations, and is a gateway for China to the Indian Ocean. We will now discuss the nuances of this case. The Sino-Pakistan nuclear and missile relationship is part o f a multipolar one in a subregion that involves both the US and India. During the Cold War, it involved the USSR as well, and following the end of the Cold War, Russia has entered the picture as a supplier o f military and nuclear equipment to India. The dense population of regional and international players with competing strategic interests and competing non-proliferation/proliferation strategies, creates a critical mass or a centre of gravity at the cross-roads of Central Asia, Persian Gulf/Middle East and South Asia. The Sino-Pakistan strategic relationship has a number o f aspects. A noteworthy point in the multipolar setting is that India does not fit into any o f China’s relationships with its neighbours. There are contradictory elements in the Sino-Indian relationship. On the one hand, their adversary relationship has a military character, but on the other hand, both actively seek accommodation and a strategic dialogue, and they cooperate in areas o f international environmental politics

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and bilateral confidence building measures (CBM) in the border areas. There are bilateral science and technology exchanges between the two, and China has expressed an interest in the Indian market. At the same time,.however, Indian nuclear, missile and naval developments place India at odds with Chinas strategic ambitions. The second aspect is that China has a strategic investment in Pakistan since the early sixties and is Pakistan’s most reliable strategic partner while the US is an unreliable otic. The Sino-Pakistan military supply relationship has rich political and strategic content as well as motivation; it had a small beginning when it was established in 1959-60, but now it has breadth as well as depth. Pakistan is not a threat to China while India is. Pakistan is also reliable in Beijings estimation and its motivation vis-à-vis India and the US is clear. The third aspect is that Indo-Soviet friendship and Sino-Soviet rivalry since the fifties reinforced Beijing’s mistrust o f Indian diplomacy and military strategy. The USSR’s collapse in 1989-90 diminished Beijing’s concern about the role o f the USSR in the subcontinent but at the same time there are limits to Sino-Russian cooperation27 and Russian military supply to India has been resumed. Traditionally, Soviet/Russian arms have been deployed by India against Pakistan and in the Indian Ocean, hence there is an element of proxy warfare through competitive arms supply by Moscow and Beijing in the Indo-Pakistan theatre. The fourth aspect is that the Reagan Administration helped Pakistan during the Afghanistan war in the eighties by turning a blind eye to Pakistan’s nuclear programme. It also promoted coalition building within Pakistan by facilitating the link up between the interests and the institutional and political base of the Pakistan Army and the Inter-Services Intelligence (ISI) as the agencies to fight Afghanistan and to develop a nuclear programme. In the light of this, the US lacks the moral or political authority to challenge Pakistani or Sino-Pakistani nuclear and missile proliferation. By repeatedly certifying that Pakistan did not possess a nuclear device, the Reagan Administration indicated that it accepted Pakistan’s denials positively. In the shadowy world of nuclear and missile proliferation, a plausible denial has a positive effect, and it was easy for China to assume the mantle of patronage of Pakistan’s strategic programmes where the Reagan Administration left. The fifth aspect is that the Sino-Pakistan strategic relationship is a partnership not only between two neighbouring states, but also between the core institutions in each state, namely, the PLA and the Pakistan Army and the ISI. The PLA was the only reliable institution in China after Mao broke up the Communist Party of China and disturbed the balance of Chinese politics and society by unleashing the Cultural Revo­ lution and the PLA grew in power and importance as a consequence of internal reasons. Following the Cultural Revolution, the PLA began to play a role in many sectors— politics, economic development, agriculture, internal and external peace and security management, and factional domestic politics. Following the introduction o f the pol­ icy of four modernisations under Deng Xiaoping, the PLA was cut down notionally 27 J. Anderson, The Limits o fSino-Russian Strategic Partnership, Adelphi Paper 315 (London: International Institute for Strategic Studies, 1997).

China and Proliferation: Implicationsfor India

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because military modernisation is the fourth or the lowest priority. In this context, the PLA adopted a commercial role (including partnerships with Taiwan companies) and was involved in nuclear and missile programmes. Like the ISI, the PLA also struck private deals with Pakistan. For instance, the Clinton Administration got China off the hook on the issue of magnet supply to Pakistan by claiming that the deal was in the hands o f PLA companies. The implication was that the PLA was acting autonomously although interviews with practitioners revealed that Pakistan-China relations are state authorised. The Reagan Administrations approach was to accept Zia-ul-Haq's denials positively, and the Clinton Administration is following the same approach by accept­ ing Chinas denials about aiding nuclear proliferation in Pakistan positively. The sixth aspect is that the Chinese authorities do not deny in private conversation that they have transferred sensitive missile technology and systems, as well as nuclear aid to Pakistan. The Chinese authorities have confirmed the missile supply but insist that it is within the M TCR guidelines and plays on the distance/payload issue in discussing M -11 missile supply. This is an academic point and according to the Indian assessment, China is taking Indian missile capability into account while formulating its missile and nuclear supply policy with Pakistan. Although China recently announced drafting legislation to regulate nuclear exports, there is ambiguity about dual-use equipment and materials and missile technology and equipment. Non-proliferation is not an objective in its regional policies in South Asia (or the Persian Gulf and the Middle East). Had it been an objective, the clandestine and weapons-oriented nuclear and missile programmes of Pakistan, as acknowledged by various Pakistani leaders since the eighties, would have placed Pakistan in conflict with China. This would be injurious to Chinas thirty odd years'strategic investment in Pakistan and it would also degrade Pakistan's value as an extension of Chinese nuclear and missile strategy vis-à-vis India and other powers with strategic interests in this important subregion. The absence of a strict Chinese non-proliferation law or policy explains why China does not heed Indian and the US (especially Congressional and CLA) sensitivity about its missile and nuclear supply into this delicate strategic neighbourhood and why it insists that Sino-Pakistan defence cooperation is normal (it is, by Beijings standards), and that it believes in peace and stability, and that India should solve the issue peacefully or cast it aside. Beyond that, China's motivation is not open to discussion, and China's counter-question is why Indians are suspicious about Chinese intentions on India.28 The final aspect is that the Sino-Pakistan relationship also entails Pakistani high technology transfers to China. It is not one-sided. According to a knowledgeable practitioner, ‘the PLA Air Force acquired in-flight refuelling technology from Israel, Iran and Pakistan for its fighters and bombers', and ‘the new Chinese fighter Jian-10 (or F-10) based on the Israeli Lavi and US F-16 designs, the latter [was] reportedly supplied to Beijing by Pakistan'.29

28 Interviews, New Delhi, December 1997. 29 Chong Pin-Lin, ‘The Military Balance in the Taiwan Straits’, China Quarterly, No. 146, June 1996, p. 587.

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To sum up, the Sino-Pakistan relationship reveals a long and durable history of selective proliferation in a multipolar and complex structure of regional and inter­ national power politics. This case is unique. It contrasts with the Sino-Iran supply relationship. There are reports that China has assured Israel that it will not supply the two nuclear reactors to Iran and will also stop all nuclear supplies to Iran.^Here its interests vis-à-vis Israel and the US appear to have priority over Iran, and the nuclear supply relationship with Iran is consequently negotiable.

30 Programme for Promoting Nuclear Non Proliferation, Nembrie/ (Southampton), No. 4 0 ,4th Quarter 1997, pp. 4 and 19.

China's Economic Relations with the Middle East: New Dimensions Yitzhak Shichor

Throughout the Mao era the contribution of the Middle East to Chinas economy and vice versa was marginal at best. For domestic and international reasons, Chinas economic relations with the Middle East were limited not only in form (to two main activities— trade and aid), but also in content. More important, in the fifties and sixties both were primarily motivated and manipulated more by political and strategic considerations than by economic ones, as China made efforts to prepare the ground for the ultimate establishment of official diplomatic relations with as many Middle Eastern countries as possible and for enlisting Middle Eastern goodwill and support against Chinas adversaries: the United States, the Soviet Union, or both. Chinas trade relations with the Middle East reflected the ups and downs of its domestic politics and foreign policy: when regional governments rejected its policies, the Peoples Republic of China (PRC) drastically and immediately retaliated by reducing trade, primarily its imports; when it urgently needed Arab support, it suddenly expanded commercial exchanges, especially imports, and was ready to deliberately create a negative trade balance. As Chinas economic policy became more ‘rational* following the end o f the violent phase of the Cultural Revolution, its trade with the Middle East, primarily exports, began to increase and by the mid-seventies, on the eve o f Maos death, trade nearly quadrupled creating a handsome surplus. This improvement, however, was impres­ sive in absolute rather than in relative terms. While its trade with non-communist countries has consistently increased since the late fifties, the share of its trade with the Middle East consistendy decreased from 7 per cent in 1957 to 5 per cent in the mid-sixties and further to 3-4 per cent in the mid-seventies.1 No less than trade, Chinese aid served as a political instrument and was at least equally manipulated. For one, Beijing often failed to implement its own aid offers once it realised that its policies had been rejected. For another, some o f the prospective recipients, primarily Egypt, were often reluctant to accept Chinas aid offers for (real 1 These and the following data are from Yitzhak Shichor, The Middle East in China's Foreign Policy 1949-1977 (Cambridge: Cambridge University Press, 1979), pp. 203-12.

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or mostly perceived) fears of subversion and interference, despite Chinas repeated assurances to the contrary. Less reluctant, the Yemen Arab Republic and the Peoples Democratic Republic of Yemen fully exploited Chinas relatively considerable aid of­ fers not only because o f their generous terms but also because the Chinese experts’, unlike the Soviets and the Americans, adapted themselves to the local way of life and standard of living. While in the case of these two countries Chinas economic aid offers were almost equal to those o f the Soviet Union and Eastern Europe, the value of Chinese aid offers to the Middle East in general lagged far behind both and accounted for no more that 8 per cent (as compared to 52 per cent offered by the Soviet Union and 40 per cent by Eastern Europe). The share of the Middle East in Chinas aid offers from 1956 to 1976 was 10 per cent (compared with 57 per cent to Africa and 28 per cent to Asia). Yet in some years, such as 1964 and 1976, the share o f the Middle East was over 30 per cent. The considerable de­ cline that followed was attributed to Maos death and the fall of the radical Gang o f Four. With the emergence of post-Mao reformers headed by Deng Xiaoping, Chinas domestic (and international) agenda was transformed to accord the highest priority to economic development, growth and construction, through an active and conscious integration into the global economic community. Inevitably, this policy affected Chinas economic relations with the Middle East in several ways.2 Most important, while in the Mao era Chinas economic relations with the Middle East were motivated primarily by strategic, political and ideological considerations and only secondarily by economic ones, since the late seventies Chinas economic relations with the Middle East have been motivated primarily by economic considerations and only secondarily by strategic and political ones. Consequently, some traditional activities which had high political value but low economic value (such as economic aid) have been drastically curtailed and practically abandoned; other traditional activities which have added economic value (such as trade) have been expanded and at the same time modified in terms of size, composition and partners; and new economic activities, unacceptable and unheard of earlier (such as labour export and contracted services, the acceptance of loans, joint ventures and two-way investments) have been launched. The purpose of this paper is to explore and analyse these new dimensions of Chinas economic relations with the Middle East; the significance o f this region in Chinas economy (and vice versa); and the possible strategic and political implications in a twenty year perspective.

2 Although the term Middle East (.Zhongdong) is frequently used by the Chinese, they also, often in official references, use the term West Asia {Xiya). There are variations as to the coverage o f these terms. Hie minimal coverage includes thirteen countries (Saudi Arabia, the United Arab Emirates, Kuwait, Oman, Bahrain, Qatar, Israel, Iraq, Syria, Jordan, Lebanon, Yemen and Palestine). The intermediate coverage adds Iran, Egypt, Turkey and Cyprus, and the maximal coverage is extended to include North and East African countries (Sudan, Libya, Tunisia, Algeria and Morocco). The latter definition is used in this paper, unless indicated otherwise.

Chinas Economic Relations with the Middle East: New Dimensions

181

MODIFIED TRADE RELATIONS

Trade has continued to play a dominant role in Chinas economic relations with the Middle East, though in a modified way. The expansion o f post-Mao Chinas diplomatic relations network in the Middle East3 and the emergence of new economic needs have directed Chinas Middle Eastern trade towards new export markets and new sources of import, revised the composition of Chinas Middle Eastern trade, and affected its dimensions and balance. PARTNERS

In-the late seventies and early eighties, Chinas principal Middle Eastern markets were the traditional regional economic centres of Egypt and Iraq and, to a lesser extent, Kuwait and Iran. In 1981 Saudi Arabia lifted a long-standing politically and religiously motivated ban on direct imports from the PRC, an artificial trade barrier that had been relaxed in the late or mid-seventies. While a small volume of Chinese goods entered Saudi markets indirecdy, since the early eighties Chinese exports increased dramatically and Saudi Arabia became one of Chinas most important Middle Eastern trading partners.* Most o f this export comprised low quality cheap goods consumed not by the small and affluent Saudi elite but by millions of Muslim pilgrims and migrant workers. By the mid-eighties regular shipping lines had been opened between the two countries and in 1989 they established commercial representative offices in each other s capital. Most o f Chinas actions were dictated not only by economic considerations, but also by political ones and its attempt to convince Riyadh to establish full diplomatic relations at the expense o f Taiwan paid rich dividends in July 1990.5 In 1982 Jordan, a small country with a population of less than 2.5 million, suddenly became Chinas most important Middle Eastern customer and its fourth 3 Chinas diplomatic relations with the Middle East expanded in three phases: the first, from 1956 to 1958, included seven governments: Sudan, Egypt, Syria, Yemen, Iraq, Morocco and Algeria. Tunisia established diplomatic relations with the PRC in early 1964 and the PDRY in 1969. The second phase, in 1971, included five governments: Kuwait, Turkey, Iran, Lebanon and Cyprus. The third, since Maos death, included eight governments: Jordan (April 1977), Oman (May 1978), Libya (August 1978), the United Arab Emirates (November 1984), Qatar (July 1988), Bahrain (April 1989), Saudi Arabia (July 1990) and Israel (January 1992). Undoubtedly, the expansion of Chinas diplomatic relations with the Persian Gulfcountries has upgraded its economic relations with the Middle East. In 1965 China recognised and established relations with the Palestine Liberation Organisation and in November 1988 it recognised, after some initial hesitation, the Palestinian State as declared at Algiers. Since then ‘Palestine' appears in Chinese statistics as a separate state. 4 ‘New Era in Saudi-Sino Relations?', Arabia: The Islamic WorldReview (London), No. 7, March 1982, p. 37; Stephen Timewell, 'China Renews Middle East Trade Drive’, Middle East Economic Digest (hereafter MEED), 12 August 1983, p. 40. 5 For a complete discussion o f these issues, see Yitzhak Shichor, East Wind over Arabia: Origins and Implications o f the Sino-Saudi Missile Deal, China Research Monographs 35 (Berkeley, CA: Center for Chinese Studies, Institute of East Asian Studies, University of California, 1989).

Yitzhak Shichor

182

export destination in the world, following Hong Kong, Japan and the United States. Jordanian imports from the PRC skyrocketed from practically zero to nearly US $1.3 billion in 1982 and to over US $1.5 billion in 1983, and continued to overtake all other Middle Eastern markets by large margins till 1988—89 (see Table 1).^ Obvi­ ously, this development had little to do either with Jordan itself or with economics, and had a lot to do with Iraq and with the military. In those years, Jordan was no more than a clearing house for Chinese arms transfers to Iraq. Following the end of the Iran-Iraq War, Chinas exports’ to Jordan nose-dived. If the average annual value of exports in 1982-89 was around US $1.05 billion, it plummeted to a little over US $80 million in 1990-96. While Jordan was an ephemeral economic phenomenon, since the early nineties the Persian Gulf and Southern Arabia have become Chinas main and long-term Middle Eastern markets.7 Saudi Arabia (which became one of Chinas most important Middle Eastern markets in the early eighties, a decade before the establishment o f diplomatic relations) and the United Arab Emirates (UAE) have absorbed over 50 per cent of Chinas total exports to the Middle East since the early nineties (over 75 per cent in 1995). A similar pattern is evident in Chinas imports from the Middle East. Till Table 1 China's Trade with the Middle East, 1976-96 (in million US $)

1976 Country 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17.

Exp Imp Exp

Total 514 Bahrain 35 Egypt . 41 Iran 85 Iraq 52 Israel 1 Jordan 13 Kuwait 68 Lebanon 25 Libya 62 Oman 6 Qatar 8 Saudi 16 Arabia Syria 33 UAE 45 Yemen AR 23 PDRY 1

1978

1977

1980

1979

1981

1982

Imp Exp

Imp Exp Imp Exp. Imp Exp Imp

158 20 57 3 11 7 8 —

664 57 47 59 79 2 20 118 28 50 7 13 30

187 17 38 3

340 54 65 69

207

44 8 -

93 22

-

37

41 -

46 75

61

3

33

8

-

6 10

-

482 69 37 135

184 57 31 49

803 215 121 124

344

33 -

136 -

39 -

157 50

42 -

—

68

-

136

-

63 54 57

37

8

940 230 149 200

159 -

-

2

146 47

-

16

168

12

-

97 59 128

115 19 4

9

Imp

Exp

2,731 272 14 254 61 41 89 120 8 1,287 109 29 167 11 8 180

5 22 21 50 10 4

71 78 323

-

39

-

2

Contd 6 Current US dollars are used throughout this paper. 7 Zhu Mengkui, ‘The G u lf s Trade with China Looks to Further Increase', Renmin Ribao (Peoples Daily), 4 May 1995, p. 7, in Foreign Broadcast Information Service; Daily Report: China (hereafter FBIS-CHI), 31 July 1995, pp. 65-66.

Chinas Economic Relations with the Middle East: New Dimensions 1983 Country 1 2 3 4 5

Exp

1984

1986

1985

Exp

Exp

Exp

2,742 294 2,435 280 1,764 194 2,109 11 23 8 18 7 8 19 205 68 167 50 98 6 130 267 84 8 155 50 8 35 11 128 55 7 151

7 8 9 10 11 12 13 14 15 16 17

1,516 99 29 47 10 6 149 166 68 81 53

1990 Exp

27 1,235 50 85 23 34 59 11 6 43 19 133 20 343 63 57 36

29 26 34 2 63 28 10 13

1991

1992

Exp

984 73 18 30 9 4 133 66 64 39 28

-

-

Exp

Imp

1987

18 1,031 19 73 22 30 41 10 36 5 22 134 6 320 21 90 25 2 21

1993 Exp

Imp

183 1988

Exp

1989

Exp

Exp

150 2,642 279 2,089 577 1,366 538 3 10 4 9 3 9 3 166 125 10 68 9 6 94 5 222 47 17 131 5 74 1 14 66 75 73 22 26

1,341 46 94 41 20 4 73 11 8 27 9 21 52 247 107 382 4 10 123 28 17 25 1

1994 Exp

Imp

723 131 29 56 7 7 230 184 185 27 37

39 75 -

36 67 48 195 4 71 -

1995 Exp

Imp

-

311 32 56 131 — 26 38 24 7 132 5 44 66 235 45 52 239 35 22 1

1996 Exp

Imp

1 1,430 477 1,569 810 1,969 1,046 2,555 1,676 2,931 1,368 2,437 2,190 3,484 3,062 2 9 11 • 1 10 2 39 6 14 17 4 14 19 29 6 4 3 127 85 1 200 24 175 440 276 15 408 13 3 4 292 43 336 101 310 266 182 293 21 403 278 227 386 399 5 33 71 1 1 1 2 1 5 1 1 6 13 39 77 76 142 107 186 120 189 101 7 76 34 49 48 26 40 71 77 89 17 92 16 113 23 8 60 65 43 19 88 12 191 36 102 3 111 105 125 9 47 29 62 1 106 141 79 103 10 36 3 87 90 65 46 121 45 30 3 72 57 56 33 11 8 125 10 400 8 447 11 561 482 14 18 413 828 15 12 6 25 6 80 8 69 11 42 10 48 10 90 21 49 13 337 80 444 387 138 127 579 119 674 353 734 748 840 553 134 14 4 4 77 2 120 2 75 162 2 2 156 149 3 246 41 15 408 69 6 106 862 37 1,101 543 711 120 1,078 68 16 74 2 74 74 71 112 . 255 108 344 106 570 85 149 Source: International Monetary Fund, Direction o f Trade Statistics (Washington, DC, various years).

1983 Chinas main sources o f import from the Middle East were Egypt, Syria, Iraq and Iran; the share o f Persian Gulf countries in Chinas imports from the Middle East gradually increased from around 56 per cent in 1984 to over 94 per cent in 1996. Saudi Arabia and Oman have accounted for some 50 per cent o f all Chinese imports from the Middle East in the nineties (two-thirds in 1991). During the 1984-96 period, Chinas imports from Saudi Arabia and Oman increased from US $28 million

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to US $840 million, and from US $2 million to US $828 million, respectively. In recent years, these two countries have been followed by Iran and Yemen as the main sources of Chinese imports from the Middle East. Not surprisingly, most of this import consists of crude oil. Since 1992, Israel has become Chinas new trade partner. Although indirect and invisible trade had existed before the establishment of diplomatic relations in 1992, two-way trade jumped from over US $50 million in 1992 to more than US $150 million in 1993, to nearly US $250 million in 1994, and to over US $300 million in 1995. Despite its impressive development,8 Sino-Israeli trade failed to reach the expected US $500 million mark in 1997 and, in fact, has stagnated since the mid­ nineties. The main reasons for this are the difficulties faced by small companies in penetrating the Chinese market and its bureaucratic barriers, and Chinas limited ability to provide commercial credits. DIMENSIONS

In 1996, Chinas trade turnover with the Middle East reached US $6,546 billion, a twelve-fold increase over 1978 (but still below the nearly fourteen-fold increase in Chinas total trade growth in those years). The value of exports was US $3,484 billion (ten times over 1978, compared to fifteen times Chinas total export growth), while the value of imports was US $3,062 billion (fifteen times over 1978, compared to 12.5 times total import growth). This means that in relative terms, China sells more and buys less from the Middle East. This is also evident from the share of the Middle Eastern trade in its total trade (see Table 2). From 7.3 per cent in 1982, it consistently declined thereafter touching 1.6-1.7 per cent in 1990 and 2.3 per cent in 1996, fluctuating around 2 per cent since 1989. Traditionally, Chinese exports to the Middle East were always more important than imports in absolute as well as relative terms. The highest share o f its exports to the Middle East in its total exports was in 1982 and 1983 (12.4 per cent in each, up from 4.4 per cent in 1981 and 3.4 per cent in 1978), undoubtedly reflecting Chinas growing arms sales during the Iran-Iraq War. This share gradually declined but rose again to 4.4 per cent in 1988. Since then, the average annual share of its exports to the Middle East in its total exports has fluctuated between 2.2 and 2.8 per cent. As mentioned earlier, this has always been much higher than the share of its imports from the Middle East which since 1978 has fluctuated between 0.3 and 2.2 per cent of its total imports with an annual average of 1.2 per cent. Chinas share in Middle Eastern trade is even smaller. Throughout these years, Chinese exports to the Middle East exceeded imports thereby creating a considerable surplus. This surplus, particularly accumulated during the Iran-Iraq War (nearly US $15 billion in 1982-88), began to shrink after the ceasefire. Chinas trade surplus with the Middle East reached US $1,563 billion in 8 MaXiuqing, ‘Woguohe Yiseliejingmaoguanxi defazhan (The Development of Sino-Israeli Economic and Trade Relations), Xiya Fcixhou (West Ash and Africa), No. 2, March-April 1996, pp. 42-47.

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Table2 The Share o f the Middle East in Chinas Foreign Trade, 1976-96 (in million US $ and %)

Year

Export

Share(%)

Import

Share(%)

Total

Share(%)

Surplus

1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996

514 664 340 482 803 940 2,731 2,742 2,435 1,764 2,109 2,642 2,089 1,366 1,430 1,569 1,969 2,555 2,931 2,437 3,484

7.4 8.8 3.4 3.5 4.4 4.4 12.4 12.4 9.8 6.5 6.7 6.7 4.4 2.6 2.3 2.2 2.3 2.8 2.4 2.3 2.3

158 187 207 184 344 159 272 294 280 194 150 279 577 538 477 810 1,046 1,676 1,368 2,190 3,062

2.4 2.6 1.9 1.2 1.7 0.7 1.4 1.4 1.1 0.5 0.3 0.6 1.0 0.9 0.9 1.3 1.3 1.6 1.2 1.7 2.2

672 851 547 656 1,147 1,099 3,003 3,036 2,715 1,958 2,259 2,921 2,666 1,904 1,907 2,379 3,015 4,231 4,299 4,627 6,546

4.9 5.8 2.6 2.2 3.0 2.5 7.3 7.0 5.3 2.8 3.0 3.5 2.6 1.7 1.7 1.8 1.8 2.2 1.8 1.7 2.3

356 477 133 298 459 781 2,459 2,448 2,155 1,570 1,959 2,363 1,512 828 953 779 923 879 1,563 247 422

Source: Adapted from International Monetary Fund, Direction o f Trade Statistics.

1994, but declined to US $247 million in 1995, and rose again to US $422 million in 1996. From 1990 to 1996, PRC’s exports to the Middle East increased 2.4 times, its imports (primarily oil) increased 6.4 times. Since the prospects of large-scale Chinese arms sales to the Middle East have diminished whereas its need for Middle Eastern oil will certainly increase, this trend will continue leading, within a few years, to an inevitable deficit in Chinas trade relations with the Middle East. COMPOSITION: ARMS AND OIL

Chinas traditional exports to the Middle East consisted o f foodstuffs, primarily veg­ etables and fruit, live animals, farm implements, iron and steel, basic manufactures (primarily textiles and silk) and machinery, tools, electrical and mechanical products, transport equipment, chemicals, clothing and footwear. Traditional imports from the Middle East largely consisted o f crude and manufactured fertilisers, small amounts o f petroleum and petroleum products, textile fibres and waste, and non-ferrous metals.9 In the post-Mao era, a large part o f Chinas trade with the Middle East has remained traditional’, yet this trade has undergone a quantitative and qualitative transformation 9 For details, see General Administration o f Customs» PRC (Ed.), China’s Custom Statistics (Beijing and Hong Kong quarterly), and Institute o f Developing Economies, Trade Statistics o f China (Tokyo, annual).

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not only because of the changing balance between the share of exported machinery and capital goods (which increased) and the share of exported light industrial goods and agricultural products (which declined), but also because of the inclusion of new commodities in Chinas exports (primarily arms) as well as imports (primarily oil). Under Mao, China used arms transfers as a means of promoting its politicostrategic, rather than economic interests. Until the late seventies Beijing had supplied free arms mainly to its buffer states (North Korea, North Vietnam and Pakistan whose share in Chinas arms transfers had reached 85 per cent). Consisting of light weapons and military training, Chinese arms transfers to the Middle East had been limited not only because of ideological and revolutionary reasons, but also because the US, the Soviet Union and their allies have maintained a near monopoly on the Middle Eastern arms market. By the late seventies, the situation, however, underwent a change. Political up­ heavals and continuing violence in the Middle East offered Beijing unprecedented opportunities for arms transfers which traditional suppliers could not or would not provide. Overturning Maos time honoured policy, the Chinese leadership seized this opportunity and began to perceive arms transfer as a legitimate commercial transac­ tion. Consequently, in the eighties the Middle East became Chinas principal arms market absorbing around 90 per cent of its military expons.10 While obviously contributing to Chinas defence modernisation, arms sales inflated the volume of Chinas exports to the Middle East and helped generate a huge trade surplus. The end o f the Iran-Iraq War, the collapse of the Soviet Union, and the spectacular dis­ play o f high-tech weapons in the US-led offensive in the Kuwait War considerably reduced the demand for Chinas low-tech and outdated weapons while introducing new and alternative suppliers. Since the early nineties, Chinese arms exports to the Middle East have been declining whereas Chinese oil imports have been steadily increasing. Shortly after the formation of the PRC, China began to import refined oil from the Soviet Union which never exceeded 3 per cent of its energy consumption.11 In 1962 China began to export oil in small quantities and in 1973 it became a net oil exporter. By 1985 Chinas oil and oil product exports reached the peak at over 36 million metric tons, valued at US $6.8 billion, or nearly 25 per cent of Chinas total exports.12 After 1985, however, Chinas oil exports began to decline reflecting not only the decrease in international demand for oil, but also the dramatic increase in Chinas demand for oil to meet the needs of its thriving economy. In 1988 the share of oil in Chinas total exports declined to 8 per cent and China became an enormous energy consumer second only to the US (see Table 3). 10 On China’s arms sales in general, and to the Middle East in particular, see R. Bates Gill, ChineseArms Transfers: Purposes, Patterns, and Prospects in the New World Order (Westport: Praeger, 1992); Yitzhak Shichor, ‘Unfolded Arms: Beijing’s Recent Military Sales Offensive’, The Pacific Review, Vol. 1, No. 3, October 1988, pp. 320-30. 11 Tai Hwan Lee, Politics o f Energy Policy in Post-Mao China (Seoul: Asiatic Research Centre, Korea University, 1995)» p. 210. 12 lin t, p. 212.

Chinas Economic Relations with the Middle East: New Dimensions

187

Table 3 Chinas Trade in Mineral Fuels, 1980-96 (in million US $ and %)

Import

Export Year

Value

Share in Export

Value

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996

4,280 5,230 5,310 4,670 6,020 7,130 3,680 4,540 3,940 4,320 5,240 4,750 4,693 4,109 4,061 5,335 5,930

23.5 23.8 23.8 21.0 23.0 25.9 11.8 11.5 8.3 8.2 8.4 6.6 5.5 4.5 3.4 3.6 3.9

200 80 180 110 140 170 500 540 790 1,650 1,270 2,110 3,750 5,818 4,034 5,127 6,880

Share in Import 1.0 0.4 1.0 0.5 0.5 0.4 1.2 1.3 1.4 2.8 2.3 3.3 4.4 5.6 3.5 3.9 4.9

Source: Almanac o f China's Foreign Economic Relations and Trade, 1997/98 (Beijing: China Economics Publishing House, 1997)» pp. 457 and 459.

Nonetheless, by the mid-nineties the PRC had become the world s fifth oil producer (following Saudi Arabia, the CIS, the US and Iran), with an output o f 157 million tons in 1996 and over 160 million tons in 1997. Though its oil production growth has been steady (2.4 per cent in 1997), it has been much slower than the overall economic and GDP growth (8.8 per cent in 1997), as well as the growth o f alternative energy resources (4.5 per cent of electricity in 1997).13 Since 1988 Chinas oil production increased by an annual average of 1 per cent while oil consumption increased by an annual average of 5 per cent. Consequently, if in 1976 the share o f oil in Chinas energy production was around 25 per cent (the highest since 1949), by 1992-93 it fell to 19 per cent (the global share is 43 per cent). Total industrialisation requires an annual energy output o f at least 3 tons of standard oil per capita as against its present production of 0.7 ton. Its eastern oilfields (primarily Daqing and Shengli) are nearing exhaustion after several decades o f exploitation while new ones (such as Liaohe, Tuha and the Tarim and Karamai Basin in the northwest) and offshore resources arc still being developed and are at present unable to augment domestic supplies. In short, Chinas domestic oil supply could not keep pace with its dynamic economic growth. While China is committed to oil export through long-term contracts, oil import has become essential and in 1993 it outstripped oil export and China became 13 'National Economy Performance in 1997’, Beijing Review, Vol. 41, No. 5-6, 2-15 February 1998, p. 27.

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a net oil importer.14 This trend will continue and is even likely to become more pronounced in the future. By the year 2000 the gap between Chinas predicted oil output (165-170 million tons) and consumption would be around 34-55 million tons; by the year 2010 the gap between predicted oil production (200 million tons) and consumption would reach 90-177 million tons. This shortfall will have to be covered by increased imports.15 As mentioned earlier, China has been importing small amounts o f oil regularly since 1950. In view o f the emerging shortages, imports o f oil and petroleum distillates (primarily diesel) and products increased from less than 800,000 metric tons in 1985 to over 3 million in 1986, to nearly 4 million in 1988, to 8.6 million in 1989 and further to over 10.5 million metric tons in 1991.1** In 1990, most of Chinas crudc oil imports (2.9 million metric tons) came from three sources: Indonesia (42.1 per cent), Malaysia (11.5 per cent) and Iran (10.3 per cent). Oil imports doubled in 1991 reaching 5.97 million tons and doubled yet again in 1992 reaching 11.36 million tons. In 1993 Chinas oil imports reached 15.67 million tons o f crude and 17.47 million tons of distillates, valued at US $5.3 billion. The excessive oil and oil product imports of over 33 million tons led to a bloated inventory. Consequendy, in 1994 Chinas total oil imports declined to 25 million tons, including 12.3 million tons o f crude oil (down 21.5 per cent), 60 per cent o f which was met by Oman and Indonesia.17 Most o f Chinas oil product imports come from Singapore. In 1995 Chinas total oil imports reached over 31 million tons, including 17.1 million tons o f crude oil.18 In 1996 China imported 22.6 million tons of crude oil, an increase of 32.3 per cent over 1995. The share of the Middle East in Chinas oil supply has been growing steadily and in 1996, for the first time, it accounted for more than half (53.5 per cent) of Chinas crude oil imports (see Table 4.) Chinas decision to increase oil imports from the Middle East, primarily from the Gulf oil producing countries reflects a number of considerations. First, this is not simply the richest oil producing region in the world, but the gap between its output and consumption is the widest. Crude oil produced in other regions is either hard to develop (such as in the Russian Far East), consumed locally (such as in the Pacific Rim countries), or earmarked for specific export destinations (such as in South America and the newly expanded oilfields of West Africa). Second, oil from the Middle East is cheaper. And third, China can offset at least some o f its expenditure on importing oil from the Middle East in general and from the Gulf in particular by exporting Ji Chongwei and Zheng Dunxun, * Wo guo chengwei shiyou jinjingguo mianlin de tiaozhan (China is Facing Serious Challenges While Becoming a Net Oil Importing Country), Guoji Maoyi (International Trade), No. 7, July 1994, pp. 23-24. 15 Shuang Zhou, ‘Chinas Energy Development Strategies’, Beijing Review, Vol. 41, No. 4,26 January-1 February 1998, pp. 9-12; ‘Imports of Oil Expected to Escalate’, China Daily, 3 October 1994, p. 2. 16 Lee, op. cit.t p. 271 17 James P. Dorian, Energy in China: Foreign Investment Opportunities» Trends and Legislation (London: Financial Times Energy Publishing, 1995), pp. 47-48. 18 See also Jonathan E. Sin ton, David G Fridley and James Dorian, 'Chinas Energy Future: The Role of Energy in Sustaining Growth’, in Joint Economic Committee, Congress o f the United States (Ed.), Chinas Economic Future: Challenges to US Policy (Armonk, NY: M JL Sharpe, 1997), pp. 247-48 and 259-60.

Chinas Economic Relations with the Middle East: New Dimensions

189

Table 4 Chinas Import of Crude Oil from the Middle East, 1993-96 (in rounded million tons and million US S)

1996 Origin

1994

1995

1993

Quantity

Value

Quantity

Value

Quantity

Value

Quantity

Value

Oman Yemen Iran Saudi Arabia Libya UAE Algeria

5.655 3.766 2.311 0.231 0.139

809.190 568.793 337.072 32.640 20.42

480.042 343.614 121.317 45.904 29.433 51.330 20.563

3.367 1.258 0.069 0.146

412.707 148.956 8.715 18.425

4.089 1.655 0.068 0.215

557.235 254.129 9.513 33.386

0.066 0.006

ME Total Grand Total ME Share Oil Products

1,092.204 2,356.427 46.3% 0.7%

4.913 12.346 39.8% 0.6%

-

-

-

-

3.653 2.473 0.931 0.339 0.208 0.368 0.130

12.101 22.617 53.5% 2.0%

1,768.114 3,406.548 51.9% 2.6%

8.310 17.090 48.6% 0.6%

-

-

-

-

9.397 0.909

0.572 -

92.825 -

699.109 1,573.401 44.4% 0.4%

6.599 15.671 42.1% -

947.088 2,323.412 40.8% -

Source: Adapted from Almanac o f Chinas Foreign Economic Relations and Trade, various years.

labour and construction services, by setting up joint ventures, by drawing Middle Eastern loans and investment, and by investing in the Middle Eastern oil production infrastructure.19 As mentioned earlier, a large proportion of Chinas Middle Eastern oil imports is from Oman, although its share has steadily declined from 62-68 per cent in 1993-94 to 44-47 per cent in 1993-96. Its second oil supplier is Yemen, whose share has increased from around 25 per cent in 1993-94 to 30-31 per cent in 1995-96. In 1996 Iran’s oil exports to China increased 2.5 times compared to 1995, making it Chinas third largest Middle Eastern supplier with a share o f 19 per cent. Related to its 1995 agreement to invest US $850 million in Iran, Chinas oil imports from Iran were expected to reach around 3.65 million tons (70,000b/d) in 1997, an increase o f 58 per cent; 5.2 million tons (100,000b/d) in 1998; and 10.4 million tons (200,000b/d) in the year 2000. These three countries— Iran, Oman and Yemen— already provide 97 per cent o f Chinas Middle Eastern oil. Compared to them, Saudi Arabia’s oil supply to China was insignificant till the mid-nineties, not only because diplomatic relations between the two countries had been established as late as in July 1990 but also because o f Chinas limited ability to refine the heavy Saudi crude. Both expressed their willingness to increase the volume of oil transactions. When !Ali Bin-Ibrahim al-Nu aymi, the Saudi Minister of Oil and 19 An Baojun, ‘Zhongdongshiyou shichang fazhan jinkuang ji kuoda wo yu haiwan guojia jingmao hezuo de sikao’ (Reflections on the Recent Situation and Development o f the Middle Eastern Oil Market and Expanding Economic and Trade Co-operation between China and the Gulf Countries), Xiya Feizhou (West Asia and Africa), No. 4, July-August 1996, pp. 63-65; Shen Qinyu and Wu Lei, ‘Shiyou jingmao guanxi de sikao jiaqiang woguo yu haiwan diqu (Reflections on Strengthening Chinas Oil Trade and Economic Relations with the Gulf Regions), Guoji Maoyi Wenti (Intertrade— Problems o f International Trade), No. 2, February 1995, pp. 9-12.

Yitzhak Shichor

190

Mineral Resources visited China in December 1995, he said that China had begun importing Saudi oil two years earlier and added ‘that Saudi Arabia is ready and ca­ pable of providing China with all its oil needs.’20 Indeed, in 1997 Chinas import o f Saudi oil reached 30,000b/d (about 1.56 million tons, almost seven-fold increase over the 1996 volume), and a letter of intent signed in June between Saudi Arabis Aramco and Chinas Petrochemical Corporation (SINOPEC) provided for further expansion.21 The recent economic, political and ethnic instability in Indonesia may lead to increased Chinese oil imports from the Middle East. Chinas growing needs would require not only an expansion o f its refinery infrastructure, but also a modifi­ cation and upgrading of existing refineries to adapt them to the expected growth in the import o f higher sulphur Middle Eastern crude.

LABOUR EXPORT AND CONTRACTED SERVICES

Despite its more rational economic policy, post-Mao China by no means renounced its time-honoured tradition o f providing Middle Eastern governments with economic aid. In 1996, for example, the aid programme included a government interest subsidy to Syria; interest free loans to Lebanon and Jordan; and free aid to Yemen and the Palestinian Authority (PA). Recent aid projects in the Middle East include repair of the Damascus Gymnasium; Habul River water conservancy project and expansion of al-Hama Woolen Mill in Syria; the Neian Dam and highway projects in Yemen; and donations of rice and sugar and technical assistance and personnel training to the PA. Nevertheless, since the late seventies Chinas aid offers to the Middle East (and to other countries) have been drastically reduced. Beijing has launched a new international economic activity—labour export and contracted (and later consultation) services. Regarded as complementary and sup­ plementary to aid, this activity has been motivated primarily by purely economic considerations.23 First, sending workers abroad helps alleviate Chinas problem of 20 SPA (Riyadh), 18 and 20 December 1995, in FBIS-CH1, 20 December 1995, pp. 10-11. Emphasis added. 21 Middle East Economic Survey (Nicosia) (hereafter MEES), Vol. 40, No. 24, 16 June 1997, p. A2 22 John F. Copper, ‘Chinas Foreign Aid Programme: An Analysis and Update*, in Joint Economic Committee, Congress of the United States (Ed.), Chinas Economy Looks toward the Year2000 (Washington, DC: US Government Printing Office, 1986), pp. 510-11; Bruce D. Larkin, ‘Emerging Chinas Effects on Third World Economic Choice', in Lillian Craig Harris and Robert L. Worden (Eds), China and the Third World- Champion or Challenged (Dover, MA: Auburn House, 1986), pp. 112-13. Data on Chinese aid offers can be found in the annual volumes of the Almanac o f Chinas Foreign Economic Relations and Trade. A large pan of Chinas economic aid now goes to Africa. 23 For an early discussion o f these issues, see Tang Zhixin, ‘Jiuyibu fazhan woguo duiwai chengbao yu laowu hezuo shiye (Further Develop the Cause o f Chinas Foreign Contracting and Labour Service Co-operation), Guoji Maoyi, No. 7, 27 July 1984, pp. 20-23, translated in Joint Publications Restanh Seniit, China: EconomicAffairs (hereafter JPRS-CEA), 17 December 1984, pp. 40-45. See also Zhang Feifei, ‘Preliminary Discussion on the New Way o f Exporting Chinas Labour Forces— Labour Export’, RenkouyuJingji (Pop­ ulation and Economics), No. 5, 25 October 1984, pp. 42-44, in JPRS-CEA , 13 May 1985, pp. 147-51.

Chinas Economic Relations with the Middle East: New Dimensions

191

rising unemployment. Second, it provides an additional and external source o f in­ come and contributes to raising the standard of living as well as to enhancing foreign exchange reserves. Third, since some of the projects are in cooperation with foreign companies, the experience gained by Chinese workers, engineers and foremen who are continuously exposed to advanced foreign technologies, equipment, and manage­ ment methods is invaluable for Chinas own economic development. Finally, such activity creates additional opportunities for further expanding Chinas economic rela­ tions, primarily the export of raw materials, commodities, equipment and tools, and also helps offset increasing expenditure on oil imports. As a part of Chinas overall economic transformation this new activity, which was launched in 1979 on a modest and experimental basis, and faced theoretical and practical problems, has been expanded by leaps and bounds. In 1996 around 250,000 Chinese managers, technicians and workers were employed in contracted engineering and other projects overseas through at least 600 formally authorised national and local Chinese companies which handle labour and construction contracts with overseas clients in 180 countries and regions, mainly in Japan, South Korea, Hong Kong and some Southeast Asian countries. By that time, 1.1 million Chinese had travelled overseas as contract labour.2^ The cumulative value o f these contracts between 1979 and 1996 was US $60.33 billion; in 1996 alone it was US $10.273 billion. From the very beginning, Chinas contracted labour export and construction ser­ vices focused on the Middle East (see Table 5). This was based on the Chinese realisation that the centre of the international labour market had gradually shifted in the seventies from Western Europe and North America to the Middle East. There were three main reasons for this: one, the large number of workers and skilled tech­ nicians needed for the exploitation of the abundant regional oil resources; two, the regional use of huge amounts o f petro-dollars accumulated especially since 1973 for large-scale economic construction projects; and three, the scarcity o f local person­ nel and technology needed for these enterprises. Therefore, the Chinese stated, ‘we consider the Middle East as the main direction of labour export not only because of such factors as geographical position, society, history, custom and tradition but more importantly because o f a series o f economic, social and population factors which play a long-term restrictive role/ Indeed, by the mid-eighties, over 62 per cent o f the combined value o f this new Chinese activity was concentrated in the Middle East: more than 83 per cent o f its labour export and nearly 58 per cent o f its construction contracts. Over 90 per 24 In fact, some of these contracts were to be paid in terms o f oil. Li Bida, ‘In First Half o f Year, China Signed New Contracts Worth almost $700 million for Contract Labour Overseas’, Guoji Shangbao (International Commerce Daily), 1 September 1986, p. 1, in JPRS-CEA , 13 March 1987, p. 44. 25 Xiao Shen, ‘Policy Nails down Labour Exports’, China Daily (Business Weekly)t 2-8 June 1996, p. 1. 26 Zhang Feifei, ofx dl.p. 150. See also Yang Haitao, ‘Cong guoji lacrwu shichangde bianhua kan fazhan woguo duoceng laowu chukou de kexing xing’ (Looking at the Feasibility of Developing a Multi-level Labour Export in View of the Changes o f the International Labour Market), Guoji Maoyi Wenti%No. 5, SeptemberOctober 1984, p. 38, in JPRS-CEA , 19 January 1985, p. 84. Wang Jianguo, ‘Zhongdong chengbao gongcheng shichang ji ying zhuyi de wenti’ (Problems o f the Middle Eastern Contract Construction Market and Issues to Note), Guoji Maoyi, No. 5, 1983, pp. 53-54 and 21.

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192

Table 5 China Foreign Engineering Projects and Labour Services Contracts with the Middle East, 1979-96 (in million US $ and %)

Country Iraq Kuwait Iran Algeria Yemen Libya Egypt Sudan Jordan UAE Tunisia Israel Morocco Syria Saudi Arabia Qatar Oman Bahrain Cyprus Turkey Lebanon

Years

Total

Engineering Projects

Labour Services

1979-91 1982-96 1984-96 1980-96 1979-96 1982-96 1979-96 1982-96 1980-96 1983-96 1984-96 1992-96 1985-96 1981-96 1990-96

1,949.20 1,269.37 1,237.06 930.23 822.48 768.38 442.90 318.72 315.99 258.75 184.51 181.43 118.92 113.26 40.05 28.89 19.65 11.41 9.20 8.71 5.69

1,173.41 991.72 1,088.55 890.92 786.26 482.58 440.44 295.34 297.46 208.26 183.79 15.80 109.22 109.37 27.55 27.47 11.64 9.31 3.30 3.96 1.62

775.79 277.65 148.51 38.59 36.22 285.80 2.46 23.38 18.53 50.49 0.72 165.63 9.70 3.89 12.50 1.42 8.01 2.1 5.90 4.75 4.07

9,034.80 57,760.22 15.64%

7,157.97 45,101.29 15.87%

1,876.83 12,658.93 14.82%

902.77 7,696.10 11.73%

750.15 5,820.51 12.89%

152.62 1,875.59 8.12%

1984-96 1981-96 1986-96 1984-96 1988-96

Total Middle East Grand Total Share of Middle East Total Middle East 1996 Grand Total 1996 Share of Middle East 1996

Source: Adapted from Almanac o f China's Foreign Economic Relations and Trade, various years.

cent o f Chinas overseas labourers were engaged in projects in three Middle Eastern countries— Iraq, Jordan and the erstwhile North Yemen. By 1985 Iraq became Chinas leading customer, accounting for nearly 30 per cent o f the combined value o f this activity: over 22 per cent of the value o f construction contracts and 63 per cent of the value o f labour export. It was followed by Yemen, Libya and Egypt.27 The initial Chinese success in securing construction contracts and in outbidding well-established and experienced international companies was not only because of Chinas lower tender offers but also because China as a rising Third World country was no longer perceived as a threat to the Middle Eastern governments and societies. While for China labour 27 Special instructions had to be formulated for the growing number o f Chinese workers in Iraq. See Tian Xue, ‘Fu Yilake laowu renyuan kuzhi’ (Guide for Labour Service Personnel Going to Iraq), Guoji Maoyiy No. 7,1983, p. 43.

Chinas Economic Relations with the Middle East: New Dimensions

193

export and construction services has been a new, attractive and meaningful activity generating considerable direct income in addition to other indirect fringe benefits, its impact on the Middle East economy in general, and the labour market in particular, remains marginal.28 Since the mid-eighties and early nineties, however, the share o f the Middle East in Chinas labour export and construction services has been declining steadily. For one, instability in the Middle East, especially the Iran-Iraq War, and even more so the Kuwait War, seriously disrupted Chinas economic presence. Following the Iraqi inva­ sion o f Kuwait in August 1990, China began to evacuate its 10,000 workers from both countries, its most important and profitable clients worldwide. In an early November 1990 official statement, Beijing admitted that as a result of joining the international sanctions against Iraq it was suffering a direct economic loss o f US $2 billion in trade, transport and civil aviation, and the loss amounted to $4 billion if Chinese labour services and other economic activities were also included. For another reason, the reduction in oil prices and the devaluation o f the US dollar eroded the income of the Middle Eastern countries and slowed down the pace of construction. Many Middle Eastern projects have already been completed and new projects have become less labour intensive and more technology intensive, thereby undermining Chinas relative advantage. Finally, as China’s international economic activity has expanded, new and more accessible markets for labour export and construction services have been opened, primarily in East Asia, dwarfing the Middle East. Compared to other Chinese international economic activities, the share o f the Middle East in labour export and construction services remained the largest, around 15 per cent from 1979 to 1996, but is gradually decreasing (see Table 5).

LOANS AND INVESTMENTS

Following its painful experience with the Soviet Union, Maos China neither received, nor was it offered, external loans and investments. This policy has been changed by post-Mao Chinas leaders who opened the Chinese market to international economic forces and began to integrate the Chinese economy into the world economy. As a part of this new policy, China has been willing to accept, and has been regularly offered, loans by foreign governments and international monetary institutions as well as foreign direct investments and joint ventures, unheard o f in Maos time. Comprising some o f the richest countries in the world, the Middle East has also offered China loans and 29 China is hardly mentioned in Osman H. Chowdhury, ‘Labour Migration to the Middle East: An Asian Perspective, Asian Profile (Hong Kong), Vol. 15, No. 1, February 1987, pp. 73-91. Chinese personnel accounted for less than 1 per cent o f the total number of foreign workers in the Middle East. 29 Xinhua, 1 November 1990, in FBIS-CHI, 1 November 1990, p. 1; China Daily (Business Weekly), 26 November 1990, p. 1. See also 'Beijing and the Gulf War*, China News Analysis* No. 1428, 1 February 1991, p. 4.

Yitzhak Shichor

194 Table 6

Middle Eastern Loans to China, 1991-96 (in million US $ and %)

Country

Total

1991

1992

1993

1994

1995

1996

Kuwait Israel

233.22 92.53

30.00 -

62.00 -

30.22 -

31.00 11.00

33.00 81.53

47.00 -

ME Total Grand Total ME Share

325.75

30.00

62.00

30.22

42.00 10,688 0.39

114.53 11,288 1.01%

47.00 7,962 0.59%

Source: Almanac o f Chinas Foreign Economic Relations and Trade, various years.

investments, though on a rather small scale, both in terms o f amount and in terms of the number o f contributing countries. One o f the earliest contributors, almost the only one, has been Kuwait. In the eighties the Kuwait Fund for Arab Economic Development (KFAED) offered the PRC around US $400 million in long term, low interest soft loans for construction projects (mosdy airports, highways, ports and industrial plants, in which private investors usually have no interest) in addition to several joint ventures that had already been set up. Unaffected by political developments in China, including the Tiananmen massacre, this contribution, among other things, later shaped Chinas negative attitude towards the Iraqi invasion of Kuwait. After the war, Chinese companies actively participated in the reconstruction and rehabilitation of Kuwait, helped to extinguish the fire set by the Iraqis to ten Kuwaiti oilfields, and undertook the renovation of Kuwait’s Mina al-Ahmadi Oil Refinery. Kuwait remains China’s leading Middle Eastern source of loans. During 1991-96 it offered the PRC US $233.22 million in loans, including a US $33.3 million loan given in July 1996 for the construction of a large irrigation project in Muslim populated Ningxia Hui, a small Autonomous Region in Northwest China, to be completed by the year 2001. Also populated by Muslim nationalities, the Xinjiang-Uygur Auto­ nomous Region used Kuwaiti loans for building a chemical fertiliser plant in its capital, Urumqi. KFAED loans were also used for a fertiliser plant in Qinhuangdao (Shandong Province), the Shaxikou hydro-electric station (Fujian Province), and for the country’s largest plywood plant in Changsha (Hunan Province). Providing US $92.53 million, Israel ranked second as Chinas Middle Eastern source o f loans during that period. While professing long-standing friendship with the PRC, other Middle Eastern countries offered Beijing token amount o f loans at best. The share o f Middle Eastern loans was no more than a fraction (0.5-1.0 per cent) o f the total amount of loans China received during the 1991-96 period (see Table 6). The marginal role of the Middle East in the Chinese economy is even more pro­ nounced in the case o f foreign direct investment and joint ventures. The share of Middle Eastern joint ventures is insignificant (0.2 per cent and less, see Table 7). Dur­ ing the 1992-96 period, in terms o f joint ventures the share o f the leading Middle Eastern states was (geographically, at least) marginal: Israel (in the lead with nearly US $80 million), Cyprus (US $42 million), the UAE (over US $37 million) and Turkey

Chinas Economic Relations with the Middle East: New Dimensions

195

Table 7 Middle Eastern Investment in China, 1992-96 (in million US $, %, and number o f agreements)

1996 Country Iran Iraq Turkey Cyprus Syria Lebanon Jordan Palestine Yemen Saudi Arabia Kuwait UAE Oman Israel Egypt Sudan Tunisia Libya Morocco

No

Value

2 -

1.10

9 3 2

7.75 0.58 0.18

-

1 1 3 1 3 10 -

9 -

-

-

1.92 0.20 0.96 0.40 0.06 2.63 -

22.37 -

3

14.43

>

10.08 -

-

1994

1995

ME Total 47+ 62.66 ME Share (%) 0.19 0.086

No

Value

3

0.95

-

-

6 10 2 -

No

Value

No

Value

No

Value

5

0.62

5 1 7

0.99 0.50 4.41

6

0.67

21 1 27 33 7 4 12 3 5 13 8 127 3 50 7 9 7 4+ 2

4.33 0.50 32.82 42.04 0.89 0.86 8.62 0.68 1.74 4.78 6.73 37.33 1.69 79.50 1.53 17.15 4.32 12.14 0.52

-

-

-

3 1 13 1 14 2 1

1.43 0.68 5.64 1.20 28.87 0.32 1.10 -

58 90.88 0.24 0.10

-

4 7 2 1 1 2

2.53 -

-

Value

-

2

1992-96

No

11.91 36.10 0.15

-

1992

1993

-

8.41 1.74 0.33 0.12 0.23 0.48 -

6 4 19 1 18 1 2

0.92 5.99 6.96 0.19 23.41 0.57 0.66

1 2

0.28 0.52

-

1 2 7 -

2 2

-

0.23 0.65 3.66 -

0.78 1.03

-

-

1 13

0.34 3.62

-

1 1

-

0.09 0.28

-

-

-

-

1

-

-

57 1 7 3 2 5 2

16.27 0.30 4.64 0.58 0.26 3.81 1.51

28

-

-

-

1.00 -

-

5.83

-

2 1 1 2 1

-

0.21 0.06 0.70 0.51 0.27 -

66 51.43 104 13.58 343+ 39.62 58 0.14 0.062 0.14 0.12 0.032 0.12 0.012

258.17 0.059

Sources: Adapted from Ding Yansheng (Ed.), 1994 China Foreign Economic Statistical Yearbook (Beijing: China Statistical Publishing House, 1995), pp. 262-73; and Almanac o f China's Foreign Economic Relations and Trade, various yean.

(nearly US $33 million). Though small in quantity, some o f these joint ventures have a potential long-term economic impact, especially in the field of oil. Designed to process light crude, Chinas existing refineries are unsuitable for pro­ cessing higher sulphur Middle Eastern crude. Since its import o f Middle Eastern oil has been growing rapidly and is expected to grow even faster» Beijing decided to upgrade five coastal refineries in cooperation with foreign partners. These include two Sino-Saudi joint ventures, one to build a new large scale refinery in Zhanhua (Shandong Province) with an oil refining capacity of 200-300,OOOb/d, and the other to increase the refining capacity by 100,OOOb/d o f an existing 170,OOOb/d refinery in Maoming (on the Southern coast of Guandong Province), both designed to process Saudi crude.30 Iran also agreed to participate in a US $250 million project to upgrade a refinery (with a 200,OOOb/d refining capacity) in Guangdong, designed to process Iranian crude. In 1993 the UAE was involved in a number o f large Chinese refineries and petrochemical projects, and Kuwait was engaged in a dialogue with China along similar lines. ** An Baojun, op. cit.%p. 65; MEES, Vol. 40, No. 16, 16 June 1997, pp. A2-A3.

196

Yitzhak Shichor

As mentioned earlier, in addition to offering loans to the PRC,Kuwait has also set up a number of joint ventures with the Chinese. An example is the partnership between the China National Offshore Oil Corporation, the Adantic Richfield Com­ pany (US) and the Foreign Petroleum Exploration Company under the Kuwaiti State Oil Corporation, for the exploration and development of the Yacheng 1 3 -1 gas field. Located 1 0 0 km south o f Hainan Island in the Yinggehai Basin, it is the largest in China— with a reserve o f 1 0 0 billion cubic metres and an annual output capacity of 3 .4 billion cubic metres, 2 .9 billion of which will be sent to Hong Kong— and is large by world standards. It should provide a stable supply of natural gas for at least twenty years. The total investment is US $ 1 .2 billion and Kuwait owns 1 4 .7 per cent o f the shares. This first large-scale Sino-foreign offshore gas venture was launched in 1 9 9 2 and it began operations in January 1 9 9 6 .31 In 1 9 9 5 China and Kuwait signed a protocol on establishing two oil storage facilities and extending pipelines at the cost o f US $ 4 0 0 million.32 It is in the area of oil production infrastructure that the most recent and innovative developments in Chinas international economic relations in general, and with the Middle East in particular can be seen. Aware of the urgent, and at the same time long-term need to pump more and more oil to feed their country’s rapid growth, in the early nineties Chinas economic planners proposed a number of policies designed to overcome the anticipated oil shortage. These included maximum utilisation of the existing oil resources; accelerating the development of additional oilfields; reforming State-owned oil enterprises; developing alternative energy resources; modernising and expanding oil refining capacity; launching energy saving campaigns; increasing oil imports and, most important, establishing Chinese oil bases overseas by investing and participating in the exploration and development o f oilfields and pipelines abroad ‘so as to guarantee our country’s long term and steady supply of crude oil import’ (quebao woguojinkou yuanshi de changqi wending gongying). Intended to develop China’s independent and external sources o f oil, this latter policy has been implemented slowly and persistently since 1 9 9 2 , in the Middle East and in other regions.34 Aimed at accumulating a total o f 1 9 0 - 2 0 0 million tons o f ‘share oil’ (fen eyou> that is oil from shared production by Chinese-owned foreign oilfields), this effort began to bear fruit in 1 9 9 7 when for the first time China included share oil* from other countries in its own crude production (rather than import).3^ Chinas investments in foreign oilfields (sometimes based on agreements with foreign 31 Xinhua, 10 January 1996, in FBIS-CHI, 16 February 1996, pp. 3 and 7. 32 Xinhua, 23 February 1996, in FBIS-CHI, 26 February 1996, p. 1 33 Ji Chongwei and Zheng Dunxun, op. cit.%p. 24. 34 The following paragraph is drawn from Ahmed Rashid and Trish Saywell, 'Beijing Gusher China Pays Hugely to Bag Energy Supplies Abroad', Far Eaitem Economic Review (Hong Kong), 26 January 1998, pp. 46-48. 35 Han Zhenjun, '1997: Chinas Energy Industry Blended into the Great Tide o f Market Economy*, Xinhua, 8 January 1998, in FBIS-CHIf 9 February 1998. 'Share oil’ is expected to reach 12 million tons by the year 2000.

Chinas Economic Relations with the Middle East: New Dimensions

197

oil companies in Italy and India) have been spread over a number o f continents and countries including Peru, Venezuela, Canada, Angola, Thailand, Turkmenistan, Kazakhstan and a number of Middle Eastern states. In May 1997, for example, China National Petroleum Corporation (CNPC) agreed to pay US $1 billion for 40 per cent share o f Sudans Heglig oilfield including a 1,540 km pipeline for carrying 250,000b/d to Port Sudan, a Red Sea terminal, reportedly to be built by a Canadian consortium, the Arakis Energy Corporation.^ Apart from their explicit economic implications, these endeavours reflect implicit and perhaps deliberate strategic and political considerations. In June 1997 the CNPC along with NO RIN CO (Chinas Northern Industries Corporation, an ordnance pro­ duction conglomerate) signed a 50 per cent production-sharing agreement to be im­ plemented in twenty-two years, pledging to invest US $ 1.26 billion in Iraq's Al-Ahdab oilfield (which has an output capacity of 80-90,OOOb/d and an estimated reserves o f 140 million tons).^7 This, however, was not enough, as China entered into negotia­ tions to acquire rights in at least four more Iraqi oilfields (Halfaya, Luhais, Rafidain, Suba) with a combined output capacity of 700,000b/d. The CNPC also expressed an interest in Iraqs Western Desert Block 5 (which borders on both Saudi Arabia and Jordan). Undoubtedly, these initiatives were undertaken in anticipation o f Iraq’s increased oil production and export once the UN sanctions were lifted. This explains why Beijing is interested in ending Iraq’s economic isolation and in maintaining sta­ bility in the Middle East. Beijing’s attempt to end the US-enforced economic isolation o f Iraq is being du­ plicated in Iran. In 1997, the CNPC negotiated with Iran’s National Oil Company for a joint venture for the development o f the Balal offshore oilfield, with an output capacity of 40,000b/d. While these talks were continuing, China promised to build two pipelines from Uzen (near the Caspian coast, Kazakhstan’s second largest oilfield with reserves estimated at 200 million tons, 60 per cent o f which were bought by the CNPC for US $1.3 billion in August 1997).^8 One pipeline would carry oil south along a 1,000 km route, across Turkmenistan and Iran all the way to the Persian Gulf and to the consuming centres in China and Europe. The initial agreements to build the pipeline were signed, in spite o f Washingtons visible irritation at Iran’s sus­ pected meddling in Central Asia and Beijing’s plans to consolidate the Central Asian continental bridge under its auspices. The other pipeline would carry oil east into Xinjiang along a 3,000 km route thereby not only increasing Chinas oil supplies but 36 Some o f this and the following information is drawn from MEES, Vol. 40, No. 13, 31 March 1997, pp. A3-A5; Vol. 40, No. 23, 9 June 1997, pp. A4-A5. The China National Petroleum Corporation is pan of the Sudan Project Consortium and the China Petroleum Engineering Construction Corporation was well placed to win the contract for building the new production facilities at Mughlad Basin oilfields as well as the pipeline. MEED, 2 January 1998, p. 25. 37 The minutes had been signed in November 199$ and initialled in August 1996. INA (Baghdad), in FBIS-CHIr, 20 November 1995, p. 20. ** Anthony Davis, ‘The Big Oil Shock: How China Beat the West in Central Asia and Helped Secure Its Future*, Asiaweek (Hong Kong), 10 October 1997, pp. 16 and 18.

Yitzhak Shichor

198

also creating additional jobs and wealth which could help mitigate regional discontent among the Muslim Uygur minority, fuelled by nationalist and religious grievances.^ Beijing committed itself to invest a total of US $9.5 billion in these projects.

CONCLUSION

For methodological reasons, Chinas international economic activities in and with the Middle East have been divided into trade, labour export and construction services, investments and joint ventures, etc. Though these activities have been separated, in practice they are often combined and complementary. An example is Chinas economic relations with Iran. In a series o f bilateral agreements, not direcdy related to oil, signed in mid-1995, China committed itself to invest a total o f US $850 million in a number o f projects including a cement factory, power installations and an underground station in Tehran, in return for an increase in Iranian oil deliveries to China.40 As a part of these projects, three Chinese companies competed with German, Italian, South Korean and Russian companies and secured a US $573 million contract for the completion o f Tehran’s subway system, including a 43 km electrified railway connecting Tehran and Karaj, which would be the greatest and longest subway system in the Middle East.41 This reflects Chinas new and multidimensional economic relations with the Middle East. The China International Trust and Investment Corporation (CITIC) organised over a dozen Chinese commercial banks and monetary institutions to provide a syn­ dicated loan o f US $270 million as buyers credit for the Tehran subway project. This is the first time that an overseas client has been offered Chinese credit as a means o f joint financing. It is the largest organised Chinese consortium in terms o f the number o f participating banks and the size o f financing, as well as the biggest project export deal to use such a method.42 In addition, the three Chinese companies involved in the project (including the pardy converted military ordnance conglomerate NORINCO) have to provide and manufacture the needed equipment and facilities, such as 218 passenger carriages, locomotives, trains guiding system, as well as electricity.43 Since the sale o f four 325 megawatt Chin?-made nuclear power reactors to Iran was aborted under American pressure, this is Chinas largest contract with Iran. 39 On this issue, see Yitzhak Shichor, ‘Separatism: Sino-Muslim Conflict in Xinjiang’, Pacifica Review (Bundoora, Victoria), Vol. 6, No. 2,1994, pp. 71-82. 40 Voice o f Russia World Service in Persian (Moscow), 2 June 1995, in Foreign Broadcast Information Service, Near East and South Asia (hereafter FBIS-NES), 6 June 1995, p. 63. 41IRNA (Tehran), 22 May 1995, in FBIS-NES, 24 May 1995, p. 49; Editorial, 'Chinaand Iran— Natural Trade Partners', Tehran Times, 22 May 1995, p. 2, in FBIS-NES, 31 May 1995, pp. 62-63. 42 Xinhua, 25 July 1996, in FBIS-CHI, 26 July 1996, pp. 44-45. 43 A China-built hydroelectric power station, with a generation capacity o f 10,000 kilowatts-hours was completed 128 km southwest of Tehran. Xinhua, 23 April 1996, in FBIS-CHI, 26 April 1996, p. 30.

Chinas Economic Relations with the Middle East: New Dimensions

199

These types o f economic activity, particularly Chinas growing dependence on Mid­ dle Eastern oil, have political and strategic implications. Though the role of the Middle East in Chinas economy is and will remain marginal in quantitative terms, its importance is and will become considerable in qualitative terms. Aware o f the vulnerability and instability o f this region, Beijing will inevitably, and perhaps un­ willingly, become more involved in the Middle East in general, and the Persian Gulf in particular. Moreover, as the Middle East (and Central Asia) become a major source o f oil urgently needed for Chinas accelerating industrialisation, ways will have to be devised to guard and guarantee the uninterrupted flow o f oil in Chinas new arteries, both on land and at sea.

The Middle Kingdom Meets the Middle East: Challenges and Opportunities D av id D ew itt

This brief essay aims to place the previous papers— each o f which has addressed a particular phenomenon or relationship involving China and one or another partner or issue linked to the Middle East— into the larger context o f international and regional affairs. It does so by identifying a few key issues in general, drawing attention to some factors that are likely to affect relations between countries o f the Middle East and Asia, particularly East Asia.1

TIES THAT BIND ALSO CONSTRAIN: MIDDLE EAST-EASTERN ASIA RELATIONS

The papers presented here address in detail many of the most significant bilateral relations and linkages between China and states o f the Middle East. Throughout the years o f the Cold War, with the significant exception of the post-1973 dramatic rise in the price o f oil to which Japan and South Korea felt particularly vulnerable, and the political interests o f China that led it to support Palestinian national aspirations and various radical regimes and groups, the Middle East o f this past half century had little, if any, d irect or sustained linkages with East Asia. The continuing political turmoil, interstate conflict and penetration by the then super powers made the region unattractive for the countries o f East Asia. For most o f Southeast and Northeast Asia, the countries of the Middle East offered comparatively little in the way of markets for their exports or finance for investment. For East Asia, this was an asymmetric relationship, with oil flowing from the Arab OPEC states to Southeast Asia and beyond 1 The term 'essay* is used to distinguish this contribution, which is more in the nature o f general commentary and synthesis, from the conventional research papen offered by the other authors. My task, unlike theirs, is to reflect on challenges and opportunities’ among the countries of the Middle East and East Asia, taking particular note o f Chinas place. I take the liberty of avoiding the conventional academic procedure of detailed referencing since so much o f the relevant literature is identified in the previous papers. I have approached this topic by assuming that the detailed analyses of various topics—especially military, economic and diplomatic factors— have been read and need not be repeated but only intimated.

The Middle Kingdom Meets the Middle East: Challenges and Opportunities

201

through the South China Sea northward to the ports o f Japan, Korea and Taiwan, as well as across to the Americas. The principal exceptions within the East Asian community to this general record o f benign neglect— so long as access to oil was assured—were Indonesia, Malaysia and China. Islamic politics have evolved as a significant issue for each. Malaysia has closely identified with a more aggressive strand within the Organisation of the Islamic Countries and both its foreign and domestic politics have employed the rhetoric of anti-Israel and anti-western positions. During the Suharto era, Indonesia was per­ ceived as an Islamic country with a more friendly face. Although ruthless in its repression o f those who challenged Suharto, his regime, and the consolidation o f the Indonesian nation-state, the Indonesian government was perceived as having moder­ ate views on Islam, tolerating a fairly diverse expression o f faith. Its connections with the Middle East have been more broadly based, being a leader within the neutral and non-aligned movement. Reflecting Suhartos strident anti-communism, Indonesia along with Singapore, Thailand and the Philippines (having its own Muslim issue in Mindanao) was more attracted to the Middle Eastern governments with western lean­ ings and less friendly towards those who courted relations with the then eastern bloc. Furthermore, having its own domestic oil reserves, Indonesia was far less vulnerable to the pressures o f petrodollar diplomacy.2 China has been the most important link between East Asia and the Middle East. Its substantial Muslim population, its borders with the Muslim states of South Asia and Central Asia including Afghanistan, and its proximity to and history with the Islamic forces moving northeast from what is now modem Iran ensured that events in the Mid­ dle East would carry some resonance within China. This was heightened by Chinas interest in using its position as a leading member o f the developing world to pursue its own diplomatic and strategic objectives, including serving as an alternative to either Soviet or American influence. Moreover, its relatively early diplomatic support for the PLO was but one of the Chinese government s forays into support for radical political movements to counter the weight of American or Soviet influence while shoring up its status as a global leader o f the developing world. At the same time, its vulnerabili­ ty to criticism concerning its Muslim minorities coupled with its distance from the region and its lack o f strategic military capabilities sufficient to provide an attractive alternative to Soviet or American largesse, tempered the profile o f Chinese actions on the Middle Eastern issues, including the Iraqi invasion o f Kuwait and the aftermath. Yet, over the past quarter century, as noted in the preceding papers, China has become an active and increasingly aggressive arms merchant to the region. From Iran through the Arab heartland as far west as Algeria, China has made a systematic effort 2 Space does not permit anything other than an acknowledgement that the complex relations involving South Asian states with both East Asian and the Middle Eastern countries deserve a far more thorough examination. The two papers in this collection which touch on India and Pakistan are a beginning. I would argue that in order to understand relations between these two important countries and the Middle East one needs to explore the multilateral aspects o f how the fluid relations o f Pakistan and India variously with the west, Russia and China altered their calculus o f decisions. As important as the Middle East might be to each, these are very much residual issues when compared to the more powerful roles of the former super powers and China.

202

D avid Dewitt

to enhance its diplomatic presence, to pursue opportunities for trade including but not limited to arms sales, and thereby to consolidate its position as a potential player in the Middle East. During the past decade, China is reported to have developed trade in military technology with Israel. Chinas military technology has also penetrated indirectly through its connections with North Korea, which in turn has established important bilateral ties and transacted military deals with countries such as Iran and Syria. Over the last few years, concern has been expressed about reports that China has been providing technology relevant to the development of weapons of mass destruction, including but not limited to delivery systems. Chinas transformation from being oil self-sufficient to an oil importer has signalled a new longer term interest in the Middle Eastern affairs. Whereas it is too early to suggest a greater willingness of Chinese officials to become more directly engaged in regional diplomacy, there is no doubt about the importance for China o f access to the Middle Eastern petroleum and gas. This may make China somewhat less able to exert influence over AOPEC states given the projections of Chinas energy needs, let alone a fully recovered Northeast and Southeast Asia twenty years or so into the future. On the other hand, it gives China a greater stake in ensuring relative political stability so that it has confidence in supplies and in the capacity o f those exporting countnes to manage not only the oil producing centres, but also the increasingly expensive pipeline system required for effective transportation from wells to the end user. Arms-for-oil has been a well-worn contractual relationship, a pattern which China appears to be increasingly interested in pursuing, although it will become incumbent upon it to act responsibly and hence to temper what some analysts believe to be a very dangerous trend o f unrestricted proliferation o f advance weaponry. 3 The importance of the newly independent Central Asian republics has not yet been fully realised. Enormous potential o f oil and gas reserves, gold, and other minerals are obvious incentives for global and regional investors. The competition for access is already creating local as well as regional tensions. Russia, Europe, China and the United States are actively engaged in the private sector and governmental activities aimed to provide favoured entry into the development potential o f this large region. For China and Russia, this area is of tremendous strategic importance not only for economic reasons,but also for classic concerns o f territorial and military security. The 1996 Shanghai agreements and border force reductions involving China, Russia and the three contiguous Central Asia republics o f Kazakhstan, Kyrgyzstan and Tajikistan were an outgrowth o f a negotiating process that started in earnest in 1989 with the restoration o f ‘full normalisation between China and the Soviet Union.4 In the light 3 There is an irony here. As China pursues its interests with the Muslim Middle East and Pakistan» the countries o f East Asia and especially Southeast Asia, as well as India, have come to fear what is perceived to be the inexorable expansion o f Chinas interests and capabilities into all areas immediately contiguous to Chinese borden. This fear thus includes both Muslim and non-Muslim countries o f Asia, creating crow-cutting cleavages within this bloc which struggle with finding ways to deal with their sense o f China as the looming threat and China as the new balancer to western influence and Russian impotence in Southwest Asia. 4 See Jing-dong Yuan, ‘Sino-Russian Confidence-Building Measures: A Preliminary Analysis’, Asian Perspective, Vol. 22, N o.l, Spring 1998, pp. 71-108.

The Middle Kingdom Meets the M iddle East: Challenges and Opportunities

203

of new policies pursued by the three republics, this area has assured a new importance, forcing China to address the inevitability of greater international presence and interest in this area to which they are so sensitive. It also brings Turkey more directly into its net o f strategic interests as a bridge to Europe, as a potential coalition partner in the wake o f Turkish unhappiness with its perceived unfair treatment by the European Union as well as its concerns with the implications of an expanded NATO, and as another ostensibly secular country with a large Muslim population.

THE SHADOW OF THE COLD WAR: PROVIDING THE CONTEXT

Both the contemporary study of international politics and the twentieth century prac­ tice o f international diplomacy have been dominated by the western world. At least since the turn o f this century, students and practitioners from Europe and North America generally assumed that the world as they viewed it, understood it and pre­ ferred it is the world that all should accept if not strive for. International institutions, international law and international practice reflect this. Although the initial years of the nuclear age negated some o f those platitudes and presumptions, and while the Cold War perverted and undermined much of what might have been possible through the new international institutions o f the United Nations, the dominance of the west, whether from London, Paris, Washington, or even at its edge in Moscow rarely abated. Even in the face o f the assertion o f independence by former colonies, neither much time nor attention was given to alternate views o f history, of politics, and o f a preferred world order. Rather, these newly independent states were required to fit into the hegemonic order o f Cold War politics, perhaps the most complete expression of the norths assertion o f interests and power over all. The Sino-Soviet split, though not then viewed as a challenge to the western way o f ‘doing business’ but rather a feud among communist brothers, eventually led to ascribing ‘Chinese characteristics’ to communism as well as to China’s foreign policy and international affairs. Coupled with the emergence and increased assertiveness of the ‘neutral and non-aligned’, we see in retrospect the evolution— albeit inchoate, weak, disorganised and internecine— of alternative models o f politics and economics; the age of development and the coming o f age o f the Third World.^ Government, politics, economics and interstate relations that were rooted in nonwestern history and traditions were being practised by regimes throughout the devel­ oping world. On reflection these civilisational differences are not merely the subject 5 Quite obviously, this compressed history is a caricature of events and ideas, and though it reads as if the countries o f the north who so dominated international affairs over the last few centuries were malevolent, it does not in any way suggest that one might have preferred life elsewhere than in the west had one the choice. Statistics continue to confirm the north-south split and it is difficult to find within national or U N documents on living standards data which suggest Otherwise. In objective and material terms, it is indisputable that opportunities for individual and societal accumulation o f wealth and of opportunity were the province o f the northern countries, most particularly around the North Atlantic.

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of scholarly dispute but rather reflea profoundly differing views o f very real and practical state-society relations; the operational code o f non-western norms and prac­ tices. Some countries in Asia, the Middle East and most o f Africa— that is, those places in which indigenous cultures were not overwhelmed and replaced by immi­ grant societies—did have historically embedded identities, cultures, modes of ex­ change and of governance which existed in uneasy tension along side that imposed by the conquering powers. By the end of the fifties the peoples and governments of the countries o f the Middle East and East and South Asia were asserting their independence from imperial and colonial experience. While Euro-American as well as Russian influence continued and in some areas was heightened in the context o f Cold War politics, overall this did not dampen though in many cases it did distort the domestic affairs o f these states. Most significantly, the competing and conflicting interests o f the principal Cold War antagonists intruded into the interstate affairs o f these regions, directly affecting the foreign policies and the domestic modes o f operation o f most countries. It is not difficult to trace the impact o f Cold War politics on either the Middle East or East and South Asia. This is well known and beyond the scope of this brief essay.6 However, it is important to restate the obvious. First, for much of this pe­ riod the governing regimes o f many of these countries focused on regime security, threatened by both dissent from within and external challenges. The processes of internal national consolidation and regime stability often employed tactics of fear and coercion. Second, for those regimes successful in maintaining fairly stable do­ mestic politics, primacy was given to economic development through not necessarily significant wealth redistribution. Third, both politics and economics were often ma­ nipulated by the regime in a supportive contractual arrangement with narrow elite interests as well as the military. This was fashioned through the rhetoric o f nationalist as well as leadership cult ideology and often tied to identity politics. Fourth, the need for external aid—such as technology transfer, military assistance, finance capital and market access—and intra-regional conflicts over borders, territory, resources, status, identity, or due to personal and/or historical animosities created the ideal conditions for the establishment of a contractual relationship between the developing country and the potential external patron. The former was able to meet the requirements for regime maintenance and secure advantage over erstwhile enemies while the latter was able to pursue dientalist regional politics. As is well known, much of the Cold War politics was played out on the stages of the Third World, with the Middle East, Africa and Asia being the principal theatres. 6 Note that most commentators and scholars agree that, by and large, the Cold War had a more direct and pervasive impact on the affairs of the Middle East than on East Asia. Although one might dispute this on a case-by-case basis, the primary point is that the politics o f Asia— East Asia dominated by China and Japan, South Asia by India—was so strongly influenced by the regional powers that the Cold War really affected the margins, albeit often significantly, o f intra-regional politics. Due to its history, strategic minerals, strategic location, absence of dominant regional hegemons, etc. and its proximity to both the Soviet Union and to Europe, the Middle East was significantly more vulnerable to and affected by Cold War issues.

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This establishment o f partnerships with extra-regional patrons for mutual benefit may well have contributed not just to wars or to the propping up of dictators, but also to political change and economic well-being that otherwise would not have been possible. Unfortunately, this counter-factual is difficult to substantiate empirically. Most evidence would suggest that indirect as well as more explicit interventions under the strategic umbrella of Cold War politics, both in times o f crisis and more generally in the day-to-day affairs of these countries, while bringing in various types of aid and investment were also accompanied by profound distortions in domestic politics, economics and social development. Moreover, they arguably derailed, pre-empted, or prevented the establishment of more positive inter-state relations and regional as well as inter-regional politics; again, however, a counter-factual rather difficult to substantiate empirically. The point, of course, is that just as the legacy of colonialism and imperialism affected affairs during the Cold War period, so too one cannot discount the lingering impact of Cold War politics on the affairs within and between states in the Middle East and Asia today. It is in this light that we will consider the emerging characteristics o f Chinas relations with the countries o f the Middle East and, more generally, relations between the two great, pluralistic and turbulent regions o f the world, Asia and the Middle East.7

UNCERTAIN TRANSITION: THE LEGACY OF THE COLD WAR

One o f the more remarkable expectations arising from the destruction o f the Berlin Wall and the collapse o f the Soviet Union was the so-called peace dividend. Although the decade since has witnessed a reduction in absolute numbers of nuclear warheads and there is some evidence that global arms expenditures have been on the decline, it also has led to the confirmation o f an increased number o f nuclear weapons capable states and a diffusion o f Russian-made weapons through barter and what in other industries is known as price dumping. While the Missile Technology Control Regime has combined with conventions concerning the different types o f weapons o f mass destruction to establish global norms and introduce more comprehensive proliferation management procedures, in fact both warheads and delivery technologies are now more accessible to a greater number o f actors. A large number of states, not simply 7 While Northeast and Southeast Asia can be viewed as sub-regional divisions within East Asia (that is, those areas o f East Asia influenced by Confucianism and linked with its historical antecedents and its spread throughout the region), Central and South Asia stand somewhat apart both in terms o f history and legacy, and o f course have long and somewhat different relationships with the empires, peoples and cultures o f the Middle East. The impact of the visual positioning o f the Pacific Ocean and East Asia in the centre of a two-dimensional representation o f the world rather than the more conventional placement o f the Atlantic Ocean is a stark reminder o f how deeply embedded the place o f a Euro-centric, North Atlantic view o f the world and its history really is. It even is worth noting that the names of these ‘non-western’ geopolitical regions are the detritus of European imperialism, indicating as they do a positioning in the east/west-north/south axes o f points derived from Western Europe.

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those that already have but also those that wish to have, regularly dissemble rhetoric from practice that it is not clear that today we are in fact any less vulnerable to global or regional strategic confrontation. More worrisome may be the evident ability of men and women to devise methods to discriminate, violate, dehumanise and murder tens of thousands o f their own fellowmen without using sophisticated military technology. Furthermore, in spite of the end o f the Cold War, there is little evidence to suggest that the international community is any more prepared now than before to cooperate and adopt measures to stop such wanton acts. The Great Lakes region of Africa, the Sudan, Algeria, Chechnya, the former Yugoslavia, Afghanistan, Iraq, Somalia, Nigeria, Sri Lanka and Myanmar arc but some of the more egregious examples. Early warning measures and preventive diplomacy, held out to be the cooperative post-CoId War answer to mid­ crisis military intervention, have not materialised.8 In other words, the elimination of the bilateral strategic umbrella o f the Cold War and its concomitant Soviet-American rivalry does not seem to have had a marked impact on the politics o f peace and war in most parts o f the world. Even Europe, the frondine o f the NATO-W TO confrontation, has been mixed with post-Maastricht Europe and an enlarged NATO auguring well for peace and prosperity, but with the shadows of large pans o f the former Soviet Union and Eastern Europe in turmoil if not all-out war. On the more positive side, one must acknowledge the efforts—even where there have been setbacks— to deal with the Israeli-Palestinian protracted conflict (although for now the process resulting from the Oslo accords is relatively moribund), Northern Ireland (still on edge), the former Sino-Soviet border areas, the Korean peninsula, the northern territories or Kurtle Islands, the South China Sea, Southern Africa, West Africa, the Horn of Africa, and even parts o f the Balkans.9 Perhaps, more significant are the numerous occasions where states and their citizens, once constrained by Cold War politics from undertaking particular initiatives o f trade, commerce, or diplomacy, now more freely engage and cooperate in areas of common interest or for mutual benefit. A somewhat perverse example is the willingness o f the Russian government to allow and even to encourage the sale of advanced military hardware and technology 8 The multinational cffon in the wake o f Iraq’s invasion o f Kuwait led by the United States and sanctioned by the United Nations was an anomaly both in terms of the characteristics of the conflict and the conduct of the states party to the international response. Besides, in spite of fairly clear signals and intelligence early on prior to Iraq’s invasion, as well as the mobilisation o f many within the diplomatic community, through to the unfolding o f the conflict from the early bellicose threats from Iraq until the decisions leading up to Desert Storm, nothing seemed to deliver either a diplomatic solution or preventive intervention. 9 Unfortunately, while there has been some optimism concerning each of these sites o f conflict, many o f them have slipped back into turmoil. For example, Sudan, Ethiopia and Eritreia continue to be plagued with civil war and their peoples must cope with severe and life-threatening disruptions including starvation; the Palestinian-Israeli process is stalled which is also undermining the emergence o f what some had hoped would be a new regional security dialogue involving Israel with an increased number o f Arab states; and the Kurds continue to face uncertainty in their ongoing struggles with the governments o f Iraq, Syria and Turkey. We also should note that other sites o f protracted conflict which were relatively unaffected by the Cold War although oftentimes with ties to Cold War acton and often employed in Cold War rhetoric— such as both inter-state and domestic violence in countries o f Central and South America—continue as points of instability.

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on the open market, especially where hard currency or other particularly advantageous terms o f trade are available. A more positive development is the relative increase in the ability o f people to travel, to work abroad, and to invest; the transfer o f western nonmilitary technology as well as some dual-use technology to the former eastern bloc states; and the increased activism o f many international organisations, UN agencies and international financial institutions. On the softer side o f politics and security, what the UN and others have referred to as ‘human security7, it is evident that the end of the Cold War has led to a new openness, with governments and non-governmental organisations increasingly pre­ pared to cooperate in addressing concerns of quality of life, including but not limited to human rights, welfare rights, access rights, and the multiplicity o f factors which contribute to a dignified existence. Peace building, now a part of UN humanitarian activity in war tom societies, is both an indicator o f the grave problems that persist and also o f the willingness o f a greater number of parties to participate in providing assistance and in accepting the loosening o f the terms for intervention. There has been a partial breakdown in the old barriers of intellectual and political discourse as well as economic exchange. Basket three o f the old Conference on Security and Co­ operation in Europe has been generalised and taken life through an energised, albeit still frail and cumbersome, UN system working cooperatively with a vocal, aggressive, and increasingly confident transnational civil society.10 Clearly, no .stable patterns or trends have emerged that differ significantly from the recent past with one obvious and important exception: the permeability o f bound­ aries. This includes in particular the breakdown of barriers across the old Cold War boundaries as well as the increased willingness of the international community to accept or even promote not only humanitarian intervention but also action which prevents the possible escalation o f conflict.11 While this has contributed in some 10 One might well consider the ‘Ottawa process* which led to the recent anti-personnel land mines treaty an expression o f this new willingness by governments and civil society to cooperate, in this case on a fairly ‘hard’ security issue. Not only is it unlikely that such an accord would have been passed, but it is also difficult to imagine anything approaching this process of officials and private citizens working together on such an issue. Elsewhere one also sees the growing albeit cautious acceptance of what has become known as ‘track two diplomacy* involving experts from the academic, non-governmental organisations, and private sector communities working with officials in their unofficial capacities. This process has been employed for many years quiedy, but has now taken on a particular public place in the discourse on security, especially on issues o f recognised importance but where governments oftentimes fed somewhat constrained initially to address such issues in official forums. Both the Middle East and the Asia Pacific have been the focus o f significant track two efforts for over a decade. 11 Although the issue o f intervention, whether humanitarian or especially in a ‘preventive* mode, remains contentious there is much more discussion and decision-making both within the UN and through other forums (such as the NATO, the EU and other regional organisations) involving a more diverse and inclusive cluster o f countries. Another factor which is a very real and noticeable post-Cold War change: the dramatic increase in the number of newly independent countries. That alone creates many more opportunities for bi­ lateral interactions, both positive and negative. These newly sovereign states are very protective o f the rights and privileges that come with this new status, yet they also are among the more likely targets for various forms o f external assistance as well as sanctioned intervention. This increasingly diffuse and complex international system makes international norms and rules, as well as international institutions, that much more important.

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eases to former Cold War actors on opposite sides of the divide finding the means to establish more positive bilateral or even regional relations with both former allies and former enemies— Vietnam would be one example, and o f course Poland, Hungary, the Czech Republic and the Ukraine— the examples are few. However, what has not happened with the end o f the East-West divide is reduction in inter-state animosities among contiguous or proximate countries within regions having a local history o f antagonism and rivalry. The Middle East and South Asia, along with much o f Africa, conform to this unfortunate pattern o f behaviour. East Asia seems to be the obvious positive exception.

THE SEVEN YEARS OF FEAST, THE EARLY YEARS OF FAMINE? EASTERN ASIA AND THE MIDDLE EAST IN THE NINETIES

In May 1989, Mikhail Gorbachev visited China to participate in the first Sino-Soviet summit in thirty years. Six months later on 9 November, the Berlin Wall came down. For the first time in over fifty years one could envisage travelling from capital to capital in the northern hemisphere without encountering spontaneous hostility. Not that many strategic, security, political, economic, or ideological differences were resolved or suspicions allayed; rather, there was a palpable decrease in the degree o f tension, anxiety and imminent confrontation. Opportunities for cooperation seemed plausible and the idea of a ‘Vladivostock-to-Vancouver corridor encircling the globe no longer a dream. Falling between these two momentous events was the June 1989 Tiananmen Square massacre, a sober reminder of the profound differences that persisted between the west and the east. Yet even this did not significandy undermine the fundamental changes which were known to be underway. The international response to this Chinese outrage was condemnatory, severe, but measured. The focus o f rebuke from most western states was on human rights ànd démocratisation, the emerging backdrop for much of the politics of the first post-Cold War decade. However, trade, commerce and investment with China was only slightly disrupted, although military cooperation was curtailed between many western countries and China until quite recently. Diplomatic relations in fact intensified, and as the post-Cold War world began taking shape, China entered into not only expanded bilateral relations but also took a new initiative to participate actively and responsibly in multilateral forums. By the middle o f this decade, in spite of continuing human rights criticisms, it was evident that the ASEAN policy of constructive engagement* o f China had come to be adopted, formally or otherwise, by most countries o f the world. A year after Tiananmen, the August 1990 Iraqi invasion o f Kuwait confirmed two facts: that the use o f force remained a serious and viable option for some states and that this was a test o f whether the post-Cold War world could respond to such events in ways substantially different than would have been expected a year earlier. It

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tested the tensions between global norms, new post-Cold War interests, and old Cold War partnerships. Ultimately, in spite o f individual efforts by Russian and Chinese diplomats along with UN officials and representatives from the Arab, Islamic and western communities, a unique coalition o f forces was forged that defeated the Iraqi aggressor. Moreover, the fact that the subsequently enforced sanctions which have not yet been fully revoked were not supported by all members of the Desert Stornrj coalition reinforces the importance o f realising the implications o f the narrow and temporary basis o f post-Gold War coalition politics. Though the coalition that defeated Iraq was transitory, brought together by a complex assortment of diverse interests, it revealed that it was no longer likely that extra-regional powers would fight each other in a Third World location; regional blocs should not be presumed to be cohesive; states were not prepared automatically to align with one power over another but would exert their own interests; any coalition that might form around a particular set of convergent interests could quickly dissolve in response to other interests; and that the United States was well ahead in its ‘revolution in military affairs’, having demonstrated the enormous power projection, targeting and destructive capabilities o f its military. The first seven years of the post-Cold War era had been a feast for most parts of East Asia, and even much of South and Central Asia. Similarly, throughout the Middle East even with the problems of Desert Storm the first half of this decade augured well for political as well as economic development. However, during the last days o f these seven years, famine has struck. Throughout most of East Asia, from China to Indonesia, years o f double-digit annual economic growth rates, performance legitimacy that provided some o f the conditions necessary for social and political stability, and the relatively low levels of military activity created the basis for national, regional and international developments within this diverse region. Démocratisation, the emergence of an increasingly vibrant civil society, and a clear sense o f national planning began taking shape in many countries o f the region. APEC along with the ASEAN Regional Forum provided new frameworks for political, economic and security regional and sub-regional dialogue and decision-making, while an enlarged ASEAN moved towards the consolidation of a stable and prosperous Southeast Asia. Since the conclusion of the Paris peace accords of October 1991 which held out hope for a transition to democracy and peace in Cambodia, there evolved in Southeast Asia an increasingly positive vision of the future of this region. Economic progress was being matched by successive, movements on political and security issues. This sub-region was viewed increasingly 12 The two most enduring observations fromthis early post-Cold War conflict are likely to be, for the developing world, that if violence is to be used by the state against its own civilians or another state, it is best to do so in a manner that will avoid extra-regional intervention; and for the Russians and the Chinese, the realisation o f the gap between their own military technologies and those possessed by the United States and, to some degree, by its key NATO allies requires a dramatic reconsideration o f its own military doctrines and approach to weapons development. For some informed, measured, but provocative speculation concerning the issue o f strategic global power politics, see 'Russia and China’, The Economist, 26 April 1997, pp. 19-21; ‘The Next Balance of Power’, The Economist, 3 January 1998; pp. 17-19; ‘As China Rises, Must Others Bow?’, The Economist, 27 June 1998, pp.23-25.

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as an attractive site for foreign direct investment. ASEAN, so long derided as merely a duster of small states wishing to forge an anti-communist identity, emerged as a vehicle that could facilitate political stability, security and economic development, firmly embedding ‘the ASEAN way as a code for a process of regional consultation on issues of security and development. Northeast Asia, the locus of the great powers of East Asia, is a sub-region of such size, diversity and presence that it in fact did not have any history of or pretence for a regional expression. The three countries—China, Japan and Korea— have some related socio-cultural phenomena (such as Confucianism, written script and the lunar calendar, dispersed by trade, war and migration) and a history of warfare, dominance as well as subjugation so strongly embedded as to preclude internally constructed common motivations for a shared regional identity. Each stood on its own, with significant political, economic and military assets to warrant recognition and en­ gagement on their own merits. The politics o f communism, the Sino-Soviet split, nationalism, and the Cold War US containment policy affected each of these distinct communities differently, eventually resulting in Japan and South Korea finding their place within the special security arrangements with the United States; North Korea creating its own unique polity with close though often strained relations with both China and the Soviet Union; and China striking an independent position, finding its way between the early days of a pro-Moscow policy, the past three decades inde­ pendent o f and often hostile towards either super power, and more recently exploring ways to manage both strategic partnership with Russia and a more positive, normal, and indeed active engagement with the United States. The protracted conflict of the divided Korean peninsula, the ongoing process of Chinese consolidation including Tibet and the border areas with South and Southeast Asia, with the incorporation of Hong Kong and Macau but not Taiwan or areas claimed within the South China Sea, and the relocation o f Japan within the western economic and security umbrella having still unresolved territorial disputes with China, Korea and Russia, together have combined to reinforce the strategic importance of North Pacific and Northeast Asia. Throughout these years, American forward positioning in the Pacific theatre— both north and south— was undertaken in the knowledge o f the enormous Soviet military installations including SSBN in the Far Eastern provinces. The end of the Cold War and the breakdown of large sectors o f the former Soviet military has left maritime Asia-Pacific more fragmented. Only the US has armed forces with a fidl regional reach. Russia retains strategic forces in the Sea o f Okhotsk while actively pursuing CBMs and force reductions along its borders with China. The abiding concern remains one of China*s potential in developing significant power pro­ jection capabilities to move effectively beyond its immediate borders. While Japanese potential should the political and security climate change remains an issue o f mythical quality, and North Korean adventurism a worry, the Chinese blue water fleet is the primary regional military concern for Southeast Asia, the Chinese land and air forces are a worry to the continental powers, and the growing Chinese nuclear and missile capabilities have become a matter o f concern to the United States, Russia, and the

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west. The recent Indo-Pakistan nuclear testing tit-for-tat is unlikely to do anything other than heighten the concern about Chinese intent. The dramatic rates of growth and overall economic performance in both North­ east and Southeast Asia throughout the past two decades have been replaced almost overnight by the financial crisis that hit the East Asian economies in the fall of 1997. Efforts towards democratisation so evident in the Philippines, South Korea and Thailand now face the daunting task of continuing without the stimulant o f a rapidly expanding economy. Nevertheless, the resilience afforded by democratic processes and institutions, coupled with assistance from international financial institutions, seem to provide some cushioning, with all three countries successfully negotiating national elections without resort to intimidation or the prevention of accession. Singapore, Hong Kong, and to a lesser extent Malaysia fared somewhat better in the early days of the East Asian recession, though how this process will affect their centralised and guided or soft-authoritarian forms of government is still not clear. Indonesia, a re­ gional leader as well as a leader among both developing and Islamic states, is facing a crisis. Even optimistic scenarios that envisage President Habibie successfully tran­ siting from government to be replaced by a leader and cabinet unscathed by Suharto connections or cronyism, having the confidence of the business elite, the military and the public, expect a three to five year period before Indonesia is able once again to sec real growth rates and to encourage reinvestment by both the international community and its own ethnic Chinese citizens. Today,only China seems to be reasonably resilient to the perturbations o f the un­ folding financial crisis, though it too will experience some effects on its rates o f growth. So far China has acted responsibly in not devaluating its currency and continuing to encourage investment while developing fiscal and monetary policies to avoid an over­ heated economy. That could change unexpectedly and have dramatic implications. Japan continues to falter without signs o f an emerging political or economic leadership that is able and prepared to address domestic restructuring so necessary to kick-start the ailing East Asian economies. Simultaneously, Russia continues to struggle, once again requiring in excess of $20 billion in support from the World Bank. In such an environment of economic turmoil and uncertainty, the ability to project and hence to plan with any confidence is undermined. Does this create a climate of opportunity or does it impose severe constraints on countries in the Middle East which are in effect dependent on the economic well-being of others so that they have markets for their oil, agricultural and other export products, as well as foreign tourists, which have become a vital part o f the economic life of much of the region? So long as the United States, Western Europe and China are resilient to these profound economic shocks, the Middle East should be able to weather these economic crises. It is evident how important China is becoming in the global marketplace. This alone gives greater weight to the development o f Chinas relations with countries in the Middle East, although the implications may not be evident for a decade or more. In the Middle East, at the turn of the decade the creative opportunities unleashed by the Madrid and then Oslo processes which opened the way to new forms of political and security arrangements and encouraged economic plans including regional development strategies have become a target of the complex intransigencies which

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bedevil Israeli-Palestinian relations as well as intra-Arab and intra-Islamic politics. The old games of Soviet-American interests have played little part in this. The US and Russia, as well as individual European states and the European Union, have expended considerable effort and resources to fulfil the early expectations for a new era of peace and prosperity in the region.13 Middle East inter-state relations, domestic political, economic and social affairs o f the core Middle Eastern states, and the activism of non-state actors (such as factions within the PLO, Hamas and other Islamic organisations) have derailed much o f this effort. Moreover, the price o f oil has fluctuated and the long hoped for recovery o f a premium price per barrel has not occurred. Divisions within the OPEC (both the Middle East sector and overall) have undermined efforts to better manage supply, thus making it more difficult for the Arab OPEC states to pursue both domestic develop­ ment and sponsorship of other Arab states as well as politically popular causes. The disillusionment with secular politics, the disappointment with promised but unful­ filled economic growth and concomitant improvements in individual and community well-being, and the disenchantment with the west and the dividends— including a Palestinian state—which were expected at the end o f the Cold War have made Islamic fundamentalism and rejectionist politics more attractive. The expectations of the young— now a majority in the Arab world— regarding economic and political advancement have been undermined, spawning radical poli­ tics, Islamic fundamentalism, and an uneasiness among elites. From Morocco and Algeria to Saudi Arabia, from Lebanon and Syria to Yemen, the Arab world is as diverse as ever but perhaps less unified. The Netanyahu government in Israel provides once again opportunist politics for the Arab leaders to direct the frustration of their citizens towards an external force. Aside from anti-western rhetoric still voiced by militant Islamists, anti-Zionist rhetoric and the call for a Palestinian state may still be some of the factors that bind the late twentieth century Arabs together. That Israeli-Palestinian politics should still offer the strongest unifying element to much o f the Arab and even Islamic world speaks volumes not only about the ongoing significance o f Israeli-Arab affairs to those both within and outside the region, but also about the inherent frailties within the Arab world. A quarter century of oil diplomacy with the accrued profits and resulting domestic as well as foreign investment and opportunities for infrastructure and human resource development still has not led to widespread benefit to the peoples o f the Middle East to allow for more self-assured and resilient politics. The famine in the Middle East has set in; the politics of hope, whether oil or Oslo based, has been eroded. It is unlikely that even a combination of an Israeli-Palestinian settlement and a modest increase in oil revenues along with a stable output level will be sufficient to change this part o f the world in the near future. Neither the Arab League nor the Islamic Conference have succeeded in overcoming national, state and personal animosities. The exceptions to this bleak scenario may be found in areas immediately contiguous to the two zones of conflict, Israel and the Gulf: the former combining a new political stability and a well educated population with proximity to 13 China has been a marginal actor in these efforts in spite o f its long standing connections with many of the Arab states, the PLO, Iran, and recently with Israel.

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Western European markets and investment; the latter becoming a high technology and transport hub combining oil revenues and investments with both locals and expatriates well educated and connected to a recovering Asia. However, much needs to take place within the leadership of the major countries in these sub-regions for these two growth areas to emerge. The model of the East Asian growth triangles and special economic zones is not entirely inappropriate, but even these emerged only when extraordinary efforts were undertaken to reassure and to establish trust and confidence. Moreover, unlike in the Middle East, these economic zones did not involve countries which denied the fundamental existence of the other or challenged the legitimacy of the governing regime.

THE MIDDLE KINGDOM AND THE MIDDLE EAST: PROBLEMS AND PROSPECTS

This brief and general overview so far begs the question: what are the factors sufficient to sustain a significant Chinese interest in the Middle East and why should Middle Eastern countries consider China a worthy partner? Population, energy and strategic environment are the basic factors which propel China towards more active involve­ ment in the region. These ultimately are conditioned by Chinas desire to become a central player in international politics, to move beyond its own borders into areas in which it will be seen as an actor o f equivalence to the traditional world powers. At relatively little cost but with the potential o f substantial gains— access to oil, sales of military equipment, enhanced international presence— the Chinese leadership must view the turbulent and unsetded Middle East as a long-term investment (though with immediate benefits in terms of military sales and oil purchases) o f relatively low risk since so little of China has been invested. The Middle East also provides context to work with (and to observe) Russia, Western Europe and the United States in a region o f far less immediate strategic or prestige value to them than it is to others. If managed carefully and incrementally, this should afford China an opportunity to advance its own stature without risking assets or issues of greater importance and o f much higher cost. So far, China has been able to establish bilateral ties with the principal actors— both state and non-state— within the region regardless o f their own loyalties and conflicts. Chinas involvement in the Middle East, however limited, also benefits and is benefited by its growing ties with Central Asia. It broadens its potential source o f oil; it widens its purchase on links with the Islamic world; and it might offer it some influence with those, such as in Afghanistan and Pakistan, involved in the trafficking o f drugs, an increasingly serious problem for the Chinese emanating from Southwest, South and Southeast Asia. In the Middle East, on the other hand, the inherent frailties o f every country in the region move/ individual governments to seek erstwhile friends and allies, at times without much concern for the spill over o f such deals. Although some countries

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(notably Israel, Turkey, Iran, Saudi Arabia, Egypt and Jordan) are more sensitive than others to the nuances of strategic or tactical partnerships, the domestic pressures faced by each Middle East state create sufficient demands that linkages with external actors that might afford various types o f assistance and access are to be sought after. Weapons, dual-use and other advanced technologies, development assistance, and support for political, religious, or ideological interests have been paramount in securing friends and allies, however transitory. There is no denying the continued strategic importance— both an asset and a burden— o f many parts o f the Middle East, even with the end of the Cold War, and this clearly is recognised by the leaders of the Middle East. While oil continues to be the single most publicly identified strategic asset o f the region, other negative attributes of the Middle East— political unrest, willingness to employ arms against citizens as well as neighbours, inability to overcome the problems o f demography and poverty, capacity to compel international involvement either to prevent, pre-empt, terminate, or assist in conflict, and most significantly, the apparent interest o f some to purchase or produce weapons o f mass destruction— offer a myriad of ways that partnerships can be secured for mutual benefit. For countries of the Middle East, China is an attractive partner holding out substantial promise to satisfy at least some of the needs o f the various regimes. As China provides arms or labour or technology to one it counters with similar or complementary assets for others. Just as was the case of Russia, Britain, France and the United States in the past, China, now finds the region compelling and seems quite prepared to deal with all concerned. And, just as in the past with other great powers, the Middle Eastern regimes seem to have little difficulty finding ways to make best use o f this newly invigorated interest and apparent willingness o f the Chinese to satisfy many partners at the same time. The bottom line does not seem very complicated. In the uncertain transition o f the post-Cold War era, China is emerging as a major global power. Most analysts concede that even at differential growth rates, the west and particularly the United States is so far ahead in terms of efficiency, technological innovation and military capacity that China will not be able to challenge western strategic dominance in the near future. Yet they also agree that China will soon be a formidable global player, whether as a friend or foe. We are now witnessing the stretching of Chinas limbs, and the oil rich and strategically vulnerable Middle East is an attractive place to reach for. China has much to gain at little cost, while providing many o f the countries o f the Middle East with yet another important source o f external assets. It is too early to say whether the Sino-Middle East relations will retain their marginal importance to each other and to international affairs, but it is clear that there is a potential— through oil, arms and diplomacy— for something more. The challenges and the opportunities are likely to be many.

Select Bibliography

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Joffe, Ellis. 'Chinas Strategy and the Middle East’ in Avigdor Levy (Ed.), The Arab-Israeli Conflict: Risks and Opportunities (Tel Aviv: Stratis, 1975), pp. 69-74. Khalil, Joseph E. ‘Sino-Arab Relations', Asian Survey, Vol. 8, No. 8, August 1968, pp. 678-90. -------- . Communist Chinas Interaction with theArab Nationalists Since the Bandung Conference (Jericho, NY: Exposition Press, 1970). -------- . 'Communist China and the United Arab Republic’, Asian. Survey, Vol. 10, No. 4, April 1970, pp. 308-19. Kumar, B.K ‘Nuclear Nexus between Peking and Islamabad: An Overview of Some Significant Developments*, Issues and Studies, Vol. 21, No. 8, August 1985, pp. 140-50. Kumaraswamy, P.R Israels China Odyssey Delhi Papers # 2 (New Delhi: Institute for Defence Studies and Analysis, 1994). -------- . ‘The Star and the Dragon: An Overview of Israeli-PRC Military Relations*, Issues and Studies, Vol. 30, No. 4, April 1994, pp. 36-55. --------. 'The Military Dimension of Israel-China Relations, China Report, Vol. 31, No. 2, April-June 1995, pp. 235-49. -------- . ‘Israel, China and the United States: The Patriot Controversy’, Israel Affairs, Vol. 3, No. 2, Winter 1996, pp. 12-33. Laytner, Anson. ‘China’s Israel Policy Reviewed*, Middle East Review, Vol. 21, No. 4, Summer 1989, pp. 54-60. Lee Deng-Ker. ‘Peking’s Middle East Policy in the post-Cold War Era*, Issues and Studies, Vol. 30, No. 8, August 1994, pp. 69-94. Li, Zhu. ‘A Brief Introduction to Middle Eastern Studies in China’, British Societyfor MuUlle Eastern Studies Bulletin, Vol. 11, No. 2, 1984, pp. 172-75. Ma’oz, Moshe. Sovietand Chinese Relations with thePalestinian Guerrilla Organisations,Jerusalem Papers on Peace Problems # 4 (Jerusalem: Leonard Davis Institute for International Affairs, 1974). Malik, J. Mohan. ‘Peking’s Response to the Gulf Crisis’, Issues and Studies, Vol. 27, No. 9, September 1991, pp. 107-28. Masannat, George Suleiman. ‘Sino-Arab Relations’, Asian Survey, Vol. 6, No. 4, April 1966, pp. 216-26. Medzini, Meron. ‘China and the Arab-Israeli Conflict’, International Problems, Vol. 13, Nos. 1-3, January 1974, pp. 323-34. Melman, Yossi and Sinai, Ruth. ‘Israeli-Chinese Relations and Their Future Prospects’, Asian Survey, Vol. 27, No. 4, April 1987, pp. 395-407. Mingquan Zhu. ‘The Evolution of Chinas Nuclear Non-Proliferation Policy’, Non-Proliferation Review (Monterey), Vol. 4, No. 2, Winter 1997, pp. 41-43. Pan Guang. The Development o f Jewish and Israel Studies in China, Truman Occasional PaperNo, 2 (Jerusalem: Harry S. Truman Research Institute for the Advancement of Peace, 1992). -------- . ‘China’s Success in the Middle East*, Middle East Quarterly, Vol. 4, No. 3, December 1997, pp. 35-40. Reich, Bernard and Huang, Alexander. China) Arms Sales to the Middle East: The Case o f Saudi Arabia (London: Institute of Jewish Affairs, 1989). Sam*o Elias. ‘The Arab States and China’s UN Representation’, Middle East Forum, Vol. 48, No. 2, Summer 1972, pp. 43-54. Segal, Gerald. ‘China and Israel: Pragmatic Politics’, SAIS Review, Vol. 7, No. 2, Summer-Fall 1987, pp. 195-210.

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Tian Zhongqing. *01102 and the Middle East: Principles and Realities’, Middle East Review, Vol. 18, No. 2, Winter 1985/86. pp. 7-15. Yasmeen, Samina. ‘The China Factor in the Kashmir Issue’, in Raju C.G. Thomas (Ed.). Perspectiva on Kashmir (Boulder, CO: Westview, 1992), pp. 320-24. Yodfat, Aryeh H. ‘The Peoples Republic of China and the Middle East*, Asia Quarterly, No. 3. 1977. pp. 223-36; No. 1. 1978. pp. 67-68; No. 4. 1978. pp. 295-308.

About the Editor and Contributors

Editor P R Kumaraswamy is currently a Research Fellow at the Harry S. Truman Research Institute for the Advancement o f Peace, The Hebrew University o f Jerusalem, Israel. He was previously associated with the Institute for Defence Studies and Analysis (IDSA), New Delhi. Dr Kumaraswamys previous publications include Israels China Odyssey and India and Israel Evolving Strategic Partnership.

Contributing Authors John Calabrese is a scholar in residence at the Middle East Institute, Washington, D .C and adjunct professor at The American University in Washington, D.C. Among others he is the author of Chinas Changing Relations with the Middle East (New York, 1991). David Dewitt is Professor of Political Science and has, since 1988, been serving as Director of the Centre for International and Security Studies, York University, Toronto. He is the author or contributing editor of eight books and many articles dealing with Canadian foreign, security, and defence policy, regional security and con­ flict management in the Middle East and in the Asia-Pacific; and arms control, nuclear proliferation, and international security. Dr Dewitt attended the Third Review Con­ ference of the NPT, co-directed Canadas North Pacific Cooperative Security Dialogue, co-founded the Canadian Consortium on Asia-Pacific Security, and currently serves as co-chair of the Canadian Member Committee of CSCAP (the Council on Security Cooperation in Asia-Pacific), and as chair of the Executive Committee for PISA, the Program for International Studies in Asia based at the Elliot School of International Affairs, George Washington University. Bates Gill is Senior Fellow in Foreign Policy Studies at the Brookings Institution, and Director of the Brookings Center for Northeast Asian Policy Studies, Washington, D.C. A specialist in East Asian foreign policy and security issues, his research focuses largely on nonproliferation and military-technical questions, especially with regard to China. He is the author of two books related to Chinese arms imports and exports, as well as numerous articles on Chinas nonproliferation policy, defense industrial base, and other defense issues.

About the Editor and Contributors

221

William W Haddad is Professor of History and Director o f the Program in Asian Studies at California State University, Fullerton. He is editor of Arab Studies Quarterly, the largest circulation journal in English devoted exclusively to the Arab world. Though trained as an Ottomanist and an Arabist, Haddad is fluent in Japanese and currently teaches Japanese history. Among his publications are Nationalism in a Non­ national State: The Dissolution o fthe Ottoman Empire; TheJune 1967 War after Three Decoder, and ASEAN and the Fukuda Doctrine. Mary Foeldi-Hardy is a graduate student in history at California State University, Fullerton. Her fields of interest are primarily the Americas and Europe. As pan of her academic responsibilities as a graduate student, she lectures periodically on Latin America and the French Revolution. Upon graduation, Ms Hardy plans to become an academic so that she can pursue her twin passions: the discovery of knowledge and love o f travel. Ashok Kapur is Professor of Political Science at the University of Waterloo, Ontario. He served as a member o f the United Nations Committee to suidy Israeli Nuclear Armament in 1980-81. A prolific writer, Dr Kapurs publications include India’s Nuclear Option: Atomic Diplomacy and Decision-Making; International Nuclear Pro­ liferation: Multilateral Diplomacy and Regional Aspects; The Indian Ocean: Regional and International Power Politics; Pakistan's Nuclear Development (edited); Diplomatic Ideas and Practices o f Asian States; Pakistan in Crisis; The South Asian Nuclear NonProliferation Debate: Issues, Interests and Strategies o f Change; and Foreign Policies o f India and Her Neighbours (with A J. Wilson). His current research deals with the security structures in the Asia-Pacific (including the Persian Gulf and Central Asia) and the changing patterns of relations in the region. His forthcoming book is on India’s nuclear weapons capability. Mehmet Ogutcu works as a principal administrator at the OECD/IEA secretariat in charge o f co-operation and policy dialogue with Asia-Pacific and Latin American Economies. Prior to this, he served in the office of the Prime Minister o f Turkey, and was with the Turkish diplomatic service in Ankara, Beijing, Brussels and Paris. He is the author of numerous books and articles on Asia-Pacific, China, energy geopolitics, Islam and the West, and Turkeys new diplomatic orientation. Barry Rubin is Senior Resident Scholar at the BESA Center for Strategic Studies, Bar-Uan University, Israel, and editor of the Middle East Review o f InternationalAffairs (MERIA). His books include, among others: Revolution until Victory; The Transfor­ mation o f Palestinian Politics; and Caldron o f Turmoil and Paved with Good Intentions. Yitzhak Shichor is Michael William Lipson Associate Professor o f Chinese Studies at the Departments of East Asian Studies and Political Science, and Senior Research Fellow at the Harry S. Truman Research Institute for the Advancement of Peace, The Hebrew University of Jerusalem. A former Dean o f Students, he has written widely on Chinas Middle Eastern policy and military modernisation and is currently engaged

222

About the Editor and Contributors

in a number of book-length studies including Chinas defence conversion, Chinas Middle East policy after Mao, and reform and reaction in Xinjiang. Since 1997 he has been on leave as Academic Head of Tel-Hal College. Gerald Steinberg is Professor of Political Studies, Senior Research Associate at the BESA Center for Strategic Studies, and Director of the Program on Conflict Resolu­ tion at Bar-Uan University, Israel. He received his doctorate in international relations from Cornell University, and has lived and worked in Israel since 1982. His research and teaching focus on security studies, proliferation, and arms control in the Middle East. He is a consultant to the Israeli Foreign Ministry, and has participated in work­ shops o f the International Atomic Energy Agency and UNIDIR. His articles have been published in Nonproliferation Review; Survival; Armed Forces and Society; and Security Dialogue. Samina Yasmeen is a senior lecturer in international politics at the Department of Political Science, the University of Western Australia. Her doctoral thesis investigated the nature o f Chinas relations with Pakistan from 1969 to 1979. She has worked at the Legislative Research Service (Parliament o f Australia) and as the Executive Director of the Indian Ocean Center for Peace Studies. She specialises in geopolitical developments in South Asia, and teaches courses on Islam’s role in world politics, and strategy, diplomacy and international conflicts. She has published articles in a number o f journals including Survival, Asian Survey, and the Australian journal o f InternationalAffairs.

Index Afghanistan» 120; Pakistan-Iran difference over, 103, 106; United States* assistance to, 176; Soviet invasion, 97, 103 Africa and West Asia Department, Foreign Trade Ministry, China, 57 Afro-Asian Conference, Bandung, 1955, 23-25,43 Aksai Chin: Chinese claim over, 94 Al-Ahdab oil field, Iraq, 64-65, 197 Al'Hama Wooden Mill, Syria, 190 Albright, Madeleine, 125 Algeria: Chinese arms sale, 157 Algiers Declaration, 1988, 48 Ali Bin-Ibrahim al-Nu’aymi, 189 American Jews, 32 Anglo-Chinese agreement, 27 Annan, Kofi, 66 Anti-Ballistic Missile Treaty (ABM), 142 anti-ship cruise missiles, 121-25 Arab-Israeli conflict, 15, 17, 21, 27, 43-45; Chinese policy, 48; peace process, 115, 161 Arab League, 212 Arabs: Israels support, 12 Arafat, Yasser, 13, 26, 48-50 Arakis Energy Corporation, Canada, 197 Aram co, 190 Arens, Moshe, 28, 157 Arms Control and Disarmament Agency (ACDA), 35 Arms Control and Regional Security (ACRS), 145 Asia-Pacific Economic Cooperation (APEC). 209 Asian Development Bank, 87 Association of South East Asian Nations (ASEAN), 164, 209-10 Atlantic Rich Field Company, United States of America, 196 Atomic Energy Authority, China, 147 Atomic Energy Council, Iran, 133 Australia Group, 136-37, 158 Aziz, Tariq, 64 Baker, James, 126 ballistic missiles, 125-28, 143, 150-51, 156

Baluchistan: Iraqi-Soviet aided insurgency, 102 Bandung Conference. See Afro-Asian Conference, Bandung, 1955 Begin, Menachem, 34 Beijing Conference on Women, 1988, 98 Berger, Samuel, 156 Berger, Sandy, 136 Bhutto, Benazir, 98 Bhutto, Zulfiquar Ali, 96, 102 Biological Weapons Convention (BWC), 138, 144 Brookings Institute, 19 Bush, George, 126, 151-52, 154, 160 Cairo: diplomatic relations with China, 44 Central Intelligence Agency (CIA), 153, 155, 171 Central Treaty Organisation (CENTO), 92 Chang Kai-shek, 49 chemical and biological weapons, 151,157-59 Chemical Weapon Convention (CWC), 17, 112,117, 136-37,139,144,155, 158-59 Chenjian, 133-34 Chen Jinuha, 40 Chi Haodan, 130 China: communist ideology, 22; Cultural Revolution, 45, 179; export policy, 155; Foreign Ministry, 131, 135, 147; foreign policy, 203; trade, 168; Gulf policy, 104; human rights, 40; India relations, 95-97, 100-102; — , stand on Kashmir issue, 92-97, 101; Iran, 114;— » military sales, 111-12; — , trade, 110; Israel, relationship, 115; pro-Jewish position, 13; Kazakhastan oil deal, 113; Myanmar, memorandum of understanding, 164; nuclear test, 166; oil production and import, 186-89; Pakistan, relationship, 166; — , arms trade, 144, 163, 172, 176-78; proliferation, 175-78; State Council, 147; South Asian policy, 93, 96-101, 106; Soviet Union, relations, 93, 95, 97, 118, 179-80; — , conflict, 171, 210; Syria, arms supply to, 156;

224 United States relations, 113-14, 116-17, 156-57, 170-71, 179 China Aerospace Corporation, 130 China International Travel Services (CITS), Tel Aviv, 28 China International Trust and Investment Corporation (O T IC ), 198 China National Oftshore Oil Corporation, 196 China National Oil Company (CNOC), 63 China National Petroleum Corporation (CNPC), 64-65, 113 China Precision Engineering Institute New Technology Corporation, 154 China Precision Machinery Import and Export Corporation, 130 Chinese Central Military Commission, 164 Chinese Peoples Association for Friendship with Foreign Countries, 32, 40 Christopher, Warren, 133 Clinton, Bill, 32, 114, 125, 149, 153, 156-57,159,161, 177 Cohen, William, 125, 156 Cold War, 20, 29, 34-35, 52, 56,98, 109, 139.142,171,175, 200, 203-10, 212, 214 communism, 11, 22, 24 Communist Party of China, 31, 109, 176 Comprehensive Test Ban Treaty (CTBT), 17, 139, 173 Conference on Disarmament (CD), 134 Conference on Security and Cooperation, 207 Confidence Building Measures (CBMs), 100, 176, 210 Cornell University, Israel, 39 Council for the Promotion of Israel-China Relations. 39 D’Amato, Alphonse, 114 Dalai Lama, 40 Damascus: and China, diplomatic relations, 44 Damascus Gymnasium, 190 Dead Sea Works, 32 Defence Industries Organisation. Iran, 154 Deng Xiaoping, 23, 26, 31, 34,47-48, 54, 166, 176, 180 Desert Storm coalition, 209 dual use technology, 144, 146, 160-61, 214 Egypt. China, relations, 109; —, aid, 179; — , defence cooperation, 104, 154;

Index — , labour export, 192; — , trade, 181, 183; Israeli invasion, 44 Einhorn, Robert, 136, 158 Eisenberg group, 33 Eisenberg, Shoul, 34 Eitan, Rafael, 31 Elbit, 32 Eko Holdings, 32 Electro-magnetic isotope separation (EMIS), 146 Enhanced Proliferation Control Initiative (EPCI), 152 European Union (EU), 145, 203 factionalism, 53 Fernandes, George, 106 Fifth World Confidence of Historical Gty, Xian, 1996, 38 Foreign Petroleum Exploration Company, Kuwaiti State Oil Corporation, 176 France: Iraq's oil concessions, 65 Gandhi, Rajiv, 100 'Gang of Four’, 48, 180 Geng Biao, 48 Gorbachev, Mikhail, 19, 208 Great Wall Industries, 154 Gulf war. Set Iran-Iraq war Gulf Cooperation Council (GCC), 56, 110 Hacohen, David, 23, 24n. 12 Hebrew University, 19, 40 hegemonism, 52, 109 Heglig oil field, Sudan, 197 Heikal, Mohammed, 46 Herzog, Chaim, 34n. 50 Hindi Chini Bhai Bhai, 93 Hong Kong: China, labour from, 191; — , trade relations, 182; economic performance, 211; and Israel, mutual visa exemption, 31 Hu Yaobang, 48 Hua Guofeng, 47-48, 119 Huang Hua, 97 Hussein, Saddam, 14, 16, 56, 58, 104, 109,115 Husseini, Faisal, 38 ICBM tests (1980). 167 imperialism, 21, 26, 42, 52 India: and China relations, 15> 92-97, 100-02; nuclear test, 91, 96, 145-46, 211; ’ Soviet friendship, 176

Index Indo-Pakistan war, 1965,94-95, 163; 1971, 95-96, 102, 163 Indo-Soviet Treaty of Friendship and Cooperation, 95 Indonesia: oil to China, 188 Inter-Services Intelligence (ISI), Pakistan, 176-77 International Atomic Energy Agency (IAEA), 99, 130-35, 143, 146-48, 169 International Institute for Strategic Studies (IISS), 127 Iran: China, relations, 114; — , military deals, 110-12, 178, 202; — , oil to, 188; — , trade relations, 181, 183-84; arms assistance from North Korea, 153; Pakistan over Afghan issue, 103 Iran-Iraq war, 61, 105, 114, 119, 121, 138, 145,159-60» 166,193 Iraq: and China relations, 14, 19; — , economic, 197-98; — , weapon export. 37, 55; Communist Party, 53; dual use technology, 146; invasion over Kuwait, 16, 104, 114-15, 208; revolution in, 52-53; United Nations sanctions, 66; — , Security Council, 59; and United States, 59-60, 66; weapons aspirations, 16 Irfsdian project, 127-29, 131, 153 Islamic Conference, 212 Islamic Republic of Iran: and China, 14, 16; — , military ties/arms sale, 14, 17, 55; Iraq war, 13, 16, 54-56; invasion over Kuwait, 15, 55-57 Israel: and China relations, 13, 115; — , investment in, 194; — , military ties, 13, 17; Defence Ministry, 35, 39; Palestinians and Arabs, 12, 206; multilateral negotiations, 13; Taiwan, trade with, 32; United States of America, pressure from, 23; Zionist philosophy, 22 Israel Academic Centre, Beijing, 28 Israel Academy of Social Sciences, 28 Israel Chemicals (ICL), 32 Israel Foreign Trade Risk Insurance Corporation (IFTRIC), 33 Israd-Jordan peace process, 115 Israel Labour Party, 31 Israeli Academy o f Sciences, 49 Israeli-Egypdan Camp David peace agreement, 26 Japan: China, labour from, 191; — , trade relations, 182

225 Japan Socialist Party, 93 Ji Peiding, 57 Ji Pengfe, 98 Jiang Zemin, 32, 58, 61, 100, 109, 112, 125, 149, 156-57 Joint Working Group on the Boundary Question, 100 Jordan: China, labour export and economic aid, 190; — , trade relations, 182 Kazak Aktyubinsk oil field, 65 Kazakhstan: trade with China, 85 Khan, Ghulam Ishaq, 98, 104 K}ian, Mohammad Ayub, 94 Khomeini, Ayatollah, 120 Knesset, 47 Ku Klux Klan movement, 2 In. 4 Kuwait: China, recognition by 53; trade relations, 181; invasion by Iraq, 16, 57-58, 60, 104, 114-15, 193-94, 208; United States led offensive, 186 Kuwait Fund for Arab-Economic Development (KFAED), 194 Kuwait Petroleum Company (KPC), 63 Lebanon: Chinese labour export and economic aid, 190 Lee Tengui, 39 Lehgari, Farooq, 98 Levin, Daniel, 24n. 12 Levy, David, 29-30, 3 In. 37, 38, 157 Li Chaxighe, 148 Li Lan Chin, 38 Li Lanqing, 31, 135 Li Luye, 31 Li Peng, 100, 105-06, 113,115, 157,159 Li Shuzheng, 31 Li Weihan, 42 Li Xiannin, 98 Libya: Chinese labour export, 192; nuclear weapons, 143, 145 Liu Huaqi, 156 Liu Shaochi, 44 London Suppliers Group. See Nuclear Suppliers Group Loral Space & Communications, 157 Malaysia: China, oil to, 188; economic performance, 211; anti-Israel position, 201 Mao Zedong, 15, 19, 25-26,44, 46-48, 95, 109, 119,179-81,190,193; principles, 166

Index

226 Madrid Peace Conference, 1991, 115, 145 Mandela, Nelson, 22n. 6 McCurry, Mike, 114 Merhav, Reuven, 27-28 Middle East Peace Conference, Madrid, 1991,49 Missile Technology Control Regime (MTCR), 17,19, 111. 113. 117,126-27,139, 144, 150-57, 166, 169-70, 173, 177 Mina-al-Ahmadi Oil Refinery, 194 Morocco: China, relations, 44 Multilateral Investment Agreement, 101 Multiple Independendy Targecable Re-entry Vehicle (MIRV) tests, 1981, 167 Mutual Defence Assistance Pact, Washington, 92 Nanjing Chemical and Industrial Group, 137, 159 Nasser, Gamal Abdul, 24, 44, 46 National Iranian Oil Company (NIOC), 63 Nehru, Jawaharlal, 162 Neian Dam, Yemen, 190 Netanyahu, Benjamin, 30-32, 37-38, 41, 115,135.157, 212 non-aggression treaty, 93 North American Free Trade Agreement (NAFTA), 89 North Atlantic Treaty Organisation (NATO), 95, 206 North Chemical Industries Corporation (NOCINCO), China, 137, 159, 197-98. North Industries Corporation, China (NORINCO), 64 North Korea: China, relations, 165; — , arms deal, 37, 202; Iran, arms assistance to, 127-28; missile technology, 173; nuclear weapon programme, 139; proliferation, 175 Nuclear Non-Proliferation Treaty (NPT), 14, 17. 19, 111. 117. 130, 138-39,142-43, 145-47. 155. 160.169-70, 173 Nuclear Suppliers Group (NSG), 143, 145. 148 Office of Naval Intelligence (ONI), 155 Olmert, Ehud, 38 Oman: China, oil to, 188; —, trade relations and export, 183 Operation Desert Storm, 14, 16. 28 Organisation of Islamic Countries (OIC). 105. 201

Organisation of Petroleum Exporting Countries (OPEC), 54, 200, 212 Oslo agreements, 115. 206. 211 Ottawa process, 207n. 10 Paris peace accord, 1991, 209 PLA. See Peoples Liberation Army PLO. See Palatine Liberation Organisadon Pakistan: Afghan war, 176; China, relations with, 12. 14, 170-72; — , arms diplomacy, 12, 15.121. 126. 144. 172. 176-78; — , proliferation, 175-78; foreign policy, 92; nuclear test, 91, 145, 176, 211; Syria, arms sale, 126; United Sûtes, relations, 92, 170- 7 1 ; loans 98 Pakistan Aeronautical Complex, 15 Pakistan International Airlines, 94 Pakistani Ordinance Factories, Wah, 15 Palestinians, 12, 21; rights restoration, 27 Palesdne Communist Party, 43 Palestine Liberadon Organisadon (PLO), 12, 26, 44-48, 50-51, 176-77, 201, 212; Israel agreement, 50 ‘Palesdne Solidarity D ay, 45 Palestinian Authority (PA), 190 Panchsheel* 93 Partial Test Ban Treaty (PTBT), 169, 173 People's Liberadon Army (PLA), 34, 176-77 Peoples Republic of China: foreign policy, 54 Peres, Shimon, 28-32, 37 Persian Gulf. 14, 32. 122, 139. 144, 175; China, economic involvement, 52, 55; — , supply of energy resources to, 19; — , foreign investment by, 16; — , support to militancy, 108; proliferation activity, 170-71; — , trade, 182—83; Iran's position, 117-18, 120, 125; Soviet penetration, 54, 145 Petrochemical Corporation, China (SINOPEC). 190 Philippines; anti-communism. 201 Popular Front for the Liberation o f Oman, 108 Q Chen, 137, 159 Qasim, 53 QianQichen. 3 2,61,65, 105-06, 113,115, 125, 133. 157 Rabin, Yitzhak, 30. 3 2.37.157

Rada Electronic Industries, Israel. 32 Rafsanajani, Hashemi, 105, 132. 151

Index

227

RAND, 154 Raphael Israeli, 108 Rashid, Amir Muhammad, 65 Reagan, Ronald, 122, 150,176-77 Richardson, Bill, 61 Royal Dutch-Shell, 85 Russia; China, relations, 139; dual use technology, 144; Iraq’s oil concessions, 65; peace, efforts for, 212; United States sanctions, 161

Strategic Arms Reduction Talks /Treaty (START). 142 Sufott, Zev, 30 Suharto, 201 Sukarno, 165 Syria: China, ballistic missile deal, 121, 14; — , economic aid, 190; — , joint ventures/trade, 183, 195; — , weapons and technology export to, 37, 111, 147, 156-57, 202

Sadat, Anwar, 27 Saddam HusSein. See Hussein, Saddam Sano, Israel, 32 Saudi Arabia: China relations with, 16, 56, 104; — , military sales, 17; — , oil to, 188-90; — trade, 18 L—83; Taipei, relations, with, 14 scepticism, 15 Shah of Iran, 12, 14 Shalhcvet, Yossi, 28 Shanghai agreements, 1996, 202 Sharansky, 40 Sharett, Moshe, 23-24 Sharif, Nawaz, 91, 98, 104-06 Shohat, Avraham, 33 Shuqeiri, Ahmed, 44 ‘Silkworm’, 121-23, 154 Simla agreement, 101 Society for the Protection o f Nature in Israel (SPNI), 40 South Asian Treaty Organisation (SEATO), 92-93 Singapore: anti-communism, 201; economic performance, 211 South Korea: China, labour from, 191 Soviet Indian Ocean strategy, 103 Soviet Union: Afghanistan, invasion, 97, 103; and China, 46, 53, 118, 139» 162, 164-65, 171, 202-03; — , pro-Indian stand, 94; — , Israeli relations, 36-37; disintegration, 19, 50, 52, 56, 109, 186, 205; international non-proliferation regime, 173; and Iraq, relationship, 53-54; Jewish sate, support for, 43; nuclear monopoly, 168-69, 201; United States relations, 92, 206 Soviet-Iraqi Treaty o f Friendship and Cooperation, 1972, 53 Stockholm International Peace Research Institute (SIPRI), 35 Strategic Arms Limitation Talks (SALT), 142

Taipei: Israel, ties, 38-39; Saudi Arabia, 14 Taiwan: China, relations with, 11-12, 18, 29, 38-39; — , prolonged political isolation by, 22; — , trade, 181; Israel, trade, 32, 38 Thailand; anti-communism, 201 Tiananmen Square massacre, 56, 115, 149,208 TRACERA project, 84 transit trade treaty, 1996, 98 Turkey. China, investment in, 194-95; economic trends, 79-80; energy fundamentals, 80-81; and European Union, 203; foreign policy, 82-83 Turkish Airlines, 83 Turkish-EU Customs Union, 83 Turkish Southeastern Anatolia project (GAP), 86 US Arms Control and Disarmament agency, 150 US-China summit, 1997, 117, 121, 124, 135,161 US-China Peaceful Nuclear Cooperation Agreement, 1985, 130, 135 US National Security Agency, 149 United Arab Emirates (UAE): China, trade relations, 182, 194-95 United Nations, 25, 27, 51, 96, 101, 108, 112, 203; China, place of, 12; humanitarian activity, 207; membership, 118; resolution to expel Iraq from Kuwait, 115; — , on Palestine, 24 United Nations Conference on Trade and Development (UNCTAD), 28 United Nations Security Council, 12, 15-16, 19-20, 50, 55-61,64-66, 78, 109, 159-60; and Iraq, 59; Resolution 678, 56, 104, 106; Resolution 986, 57 United Nations Special Commission on Iraq (UNSCOM), 60-61, 106

228 United States o f America: China, relations with* 19-20, 73,113-14, 116-17,156-57, 162, 164-65, 170-71; — , India relations, 164; —, arms to Iran, 121-22, 126, 130-32,135-40, 147,149,154-55;— , Israeli relations approach, 36; — , military sales to, 49; — , arms to Pakistan, 144, 146; — , trade, 182; Commerce Department, 80; Containment policy, 210; Defence Department, 111, 136, 155; imperialism, 26; international non-proliferation regime, 173; Iran, relations, 110; — , military assistance to, 118-19; position on Iraq, 59-61,66; policy on Kuwait, 109; State Department, 35, 156, 171; North Korea's; — , weapon programme, 139; nuclear monopoly, 168-69; Soviet Union, rivalry, 206; —, sanctions on 161 Uygur Turks, 84-85 Vajpayee, Aral Bihari, 91 Vietnam: Cambodia, invasion of, 119; Chinas campaign against, 26; war, 11; violence, internal, 11 Vishay Intertechnology, 32 Wassenaar arrangements. 144 weapons of mass destruction (WMD), 111, 117,143-45,155-56,161,173

IruUx Weizman, Exer, 3 0 ,3 In. 3$ World Bank, 87 World Treaty Organisation (WTO), 206 Wu Xueqian, 28 Xinjiang-Uygur Autonomous Region, 194 Yad Vdshem, 40 Yang Fuchang, 28 Yang Shangkun, 49,98, 105 Yelsdn, Boris, 37 Yemen: China, relations, 44, 180; — , labour export and economic aid from, 190, 192; — , oil to, 188-89; — , trade, 183-84 Zak, Moshe, 29 Zangger Committee, 135, 140, 145-46, 148-49 Zhao Ziyang, 48, 98 Zhou Enlai, 23, 44, 93-94, 118 Zhu Rongji, 157 Zia ul-Haq, 97-98, 177 Zinger, M.B., 164 Zionist philosophy, 21; anti-Zionist rhetoric, 212 Zou Jiahua, 3 In. 37

China has evolved a complex Middle East policy in recent years which is now an integral part of its great power aspirations Comprising original contributions from well-known scholars, this absorbing volume examines China's relations with key players in the region as also the impact of its Middle East policy on interactions with the USA and the UN among others. Among the issues discussed are: ♦ The methods China has adopted to gain economic and diplomatic leverage in the Middle East, particularly through military sales to and cooperation with important countries ♦ The challenge posed to China's arms exports to the Middle East by its recent endorsement of non-proliferation ♦ The importance to China of the oil-rich Persian gulf region as a source of energy; as a market for Chinese labour; and as a source of foreign investments in China. ♦ The impact of China's Middle East policy on its relations with other countries such as Turkey. Pakistan and India ♦ The manner in which China has succeeded in pursuing its interests without alienating the regional powers while negotiating the conflicts and disputes between the major players. Providing well-grounded analyses of China's strategic, political and economic stakes in the Middle East, this volume will attract a wide readership. It will be of particular interest to students and scholars of international relations, Middle East and China studies, political science, diplomacy and strategic studies

P.R. Kumaraswamy is currently a Research Fellow at the Harry S. Truman Research Institute for the Advancement of Peace. The Hebrew University of Jerusalem. Israel. He was previously associated with the Institute for Defence Studies and Analysis (IDSA) Dr Kumaraswamy's previous publications include Israel's China Odyssey and India Israel: Evolving Strategic Partnership. Contributors: John Calabrese/David Dewitt/Bates Gill/William W Haddad/Mary Foeldi-Hardy/Ashok Kapur/P R Kumaraswamy/Mehmet Ogutcu/Barry Rubin/Yitzhak Shichor/Gerald Steinberg/Samina Yasmeen Jacket design by Suraksha Gajwani

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