China shocked by Iran-Israel tension: War breaks out in the Middle East; China’s Rs 8 lakh crore at stake, everything from desalination to tech projects is in danger

The ongoing war in the Middle East may prove dangerous for China. In fact, China has invested heavily in the Middle East. Also, this region is a big market for its steel, electric vehicles and solar panels. China got a cheap source of oil in the form of Iran. It also found governments across the region that were eager to learn from China in renewable energy and technology. Amidst all this, China became dependent on the supply of oil and gas from the Middle East. When China’s trade rivalry with the US increased last year, it was unable to sell many of its goods in the US market, which was once China’s largest market. After this, the importance of the Middle East for China became even more evident. The United Arab Emirates (UAE) became the fastest growing market for Chinese cars. The demand for Chinese steel from Saudi Arabia and its neighboring countries doubled. China’s exports to the Middle East are projected to grow almost twice as fast as exports to the rest of the world in 2025. But now it is in danger. Despite China’s deep financial ties in the Middle East, it faces risks. China has called for an early end to the fighting. Traffic through the Strait of Hormuz has reduced due to Iranian threats. Chinese shipping giant COSCO has closed bookings through the region. Chinese investment is growing faster in the Middle East than anywhere else in the world. Dan Wang, China Director at Eurasia Group, said that from 2019 to 2024, China directly invested 89 billion dollars i.e. about Rs 8 lakh crore in the Middle East. These trade ties are now under attack as US and Israeli forces attack Iran and Iran retaliates against ports, ships, pipelines, desalination plants, data centers across the region. China’s loans and grants to the Middle East are set to double to 10% of the global portfolio in 2023, according to William & Mary Research Institute AidData. China is the main buyer of Iranian oil. It also operates three major crude oil pipelines, two of which transport oil from Russia and Kazakhstan. Yet the loss of Iranian supplies would force China to seek other sources. The discovery will be completed but the price will be much higher than the subsidized oil purchased from Tehran. Companies’ work halted due to tension. Many Chinese companies in the Middle East asked employees to work from home. On March 1, giant tech company Baidu talked about stopping robotaxi services in UAE. Chinese food delivery platform Kita has also indicated that services in the region may be suspended or limited. China is operating ports in Israel and the UAE Chinese banks are funding a major expansion of a liquefied natural gas (LNG) production facility in Qatar. Chinese state oil company Sinopec has a stake in its North Field East expansion project. Chinese investors have also provided funding to Israel’s Haifa Port and the Emirates’ Khalifa Port. Many terminals are owned and operated by Chinese companies. China is the largest investor in desalination plants in the region. Chinese companies have built infrastructure, electric grids and petrochemical plants in Iran. China is also the largest investor in desalination in the region. Power Construction Corporation of China has built projects in Saudi Arabia, UAE, Oman and Iraq. Major Chinese tech companies like Huawei, Alibaba, Tencent have offices in Dubai.



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