Middle East Commerce: Advantage, China

Iranian President Hassan Roughani welcomed Chinese Premier Xi Jinping on a state visit in Tehran in January 2016.

The far and in between successes of American foreign policy in the Middle East, overwhelmingly focused on security, have not been followed up with establishing appropriate trade and commercial ties that would justify an active engagement in the region. Instead, Chinese and European firms stand to reap the largest gains of such US-led security successes, at the expense of US business.

The stark divergence of foreign policies couldn’t have been made clearer over the past week. Chinese President Xi Jinping concluded a five-day three-country tour of the Middle East, where he was able to boost China’s ties with regional, albeit competing, leaders — Saudi Arabia, Egypt, and Iran. Xi continues the implementation of his One Belt, One Road policy announced not six months following him assuming the Chinese Presidency in 2013. The essence of the policy is the expansion of Chinese commercial throughout Asia, particularly the countries of the Silk Road. It includes the establishment of the Asian Infrastructure Investment Bank (AIIB) — seen as a direct competitor to the World Bank dominated by US, European, and Japanese interests — and the Silk Road Fund.

Iranian President Hassan Rouhani also hit the road this week, starting a European tour today in Rome, Italy. Iran is expected to strike deals with European firms from different sectors, including energy, air transportation, and automobiles. Peugeot Citroën, a French carmaker, is expected to begin making cars in Iran through a joint venture. European aircraft manufacturer Airbus is also in the early stages of a 100+ aircraft delivery deal, while Italian oil refineries will begin importing Iranian oil.

Meanwhile, US companies are nowhere to be seen due to the continuing US trade embargo, precluding any US-based firms from doing business in Iran. Foreign-based subsidiaries of US companies may be able to enter the Iranian market, however the rules to do so remain ambiguous and uncertain. Even if those rules were clarified, who knows how they might change following the presidential election in November. What is certain is that US-led diplomatic efforts on the nuclear negotiations with the Islamic Republic succeeded and that the United States will reap very little commercial benefits, if any. If the US trade embargo on Vietnam, in place from 1975–1994, has taught us anything, it is that commerce continues with or without American businesses. The question that American lawmakers and leaders have to ask themselves is, is American leadership based on its military and security services, or is it based on its economic powerhouse. Today, it is advantage China.

This article was originally published in January 2016.