Introduction
The Strait of Hormuz is the world’s single-most important energy corridor, forming a chokepoint between the Arabian Gulf and the Gulf of Oman. Globally, over one-sixth of oil and one-third of liquefied natural gas passes through the narrow strait. While most bottlenecks can be bypassed by using other shipping routes, the Strait of Hormuz has no practical alternatives. An incident at sea, intentional or inadvertent, could quickly escalate into a direct military confrontation, threatening oil supplies and commercial shipping. The strait has been the site of tensions in recent years, mainly between the United States and Iran, necessitating a foreign military presence that has increased the possibility of conflict.
China, the world’s largest oil importer, has become highly dependent on Gulf oil, which accounted for over 50 percent of China’s imports in the first quarter of 2022. In 2021, China imported a staggering $128 billion worth of crude oil from countries in the Gulf near the Strait of Hormuz, three times more than the United States and European Union (EU) combined. The U.S. Defense Department lists the strait as a “known focus area” for Chinese military planners. The Middle East, with its strategic position at the crossroads of Africa, Asia, and Europe, also represents a key node of China’s Belt and Road Initiative (BRI). Furthermore, the Gulf region is an area of significant opportunity for China in its global geostrategic competition with the United States, as, unlike Washington, Beijing enjoys close bilateral relations with countries on both sides of the Strait of Hormuz. As its interests in the region grow, China will become a principal stakeholder in the strait’s security. The China-brokered reconciliation between Saudi Arabia and Iran on March 10, 2023, reaffirmed this and contributed to Beijing’s efforts to defuse strains in the Strait of Hormuz and the broader region.
The Strategic Importance of the Strait of Hormuz
The Strait of Hormuz is around 155 kilometers long and 34 kilometers wide at its narrowest point. Some 21 million barrels daily (mbpd) of oil transited through this critical gateway in 2020, the year with the latest available figures. There are limited options to bypass the strait, and only Saudi Arabia and the United Arab Emirates (UAE) have pipelines that can ship crude oil beyond the Gulf. The U.S. Energy Information Administration has estimated that 76 percent of the crude oil and condensate that passed through the strait in 2018 went to Asian markets. China, India, Japan, South Korea, and Singapore were the main destinations, accounting for 65 percent of all oil shipped through the strait that year. In contrast, the United States imported around 1.4 mbpd of oil through the Strait of Hormuz in 2018, accounting for about 18 percent of total U.S. crude oil imports.
The strait’s shipping channels that can handle supertankers are only 2 nautical miles wide, forcing ships to pass through Iranian and Omani territorial waters. Iran has threatened on several occasions to close the passage, however to do so unilaterally would be a breach of international law due to Oman’s shared authority over the waterway. Nevertheless, the strait has remained a major flashpoint, dating back to 1987 and the so-called “tanker war” during the Iran-Iraq conflict, when Baghdad targeted Iranian shipping. More recently, the strait has become a primary zone of naval confrontation between Washington and Tehran, as the United States has accused Islamic Revolutionary Guard Corps (IRGC) speedboats of harassing its ships operating there.
Because the Strait of Hormuz is a global energy thoroughfare, its security is critical to the welfare of the global economy. Iran in particular has leveraged its position on the strait to deter the United States and its allies by attacking commercial and military vessels transiting the waterway. Escalating tensions between Iran and the West, especially as Tehran has advanced its nuclear enrichment program, have led to an increasing military presence in the strait. The U.S. Fifth Fleet, based in Bahrain, is particularly active there, where it is involved in mariner assistance, protection of infrastructure, piracy deterrence, and combat operations. In January 2012, the administration of U.S. president Barack Obama used a secret channel of communication with Iran to caution its supreme leader, Ayatollah Ali Khamenei, that closing the Strait of Hormuz would constitute a “red line” to which Washington would respond with force. This came four years after the Fifth Fleet commander had warned such a closure would be considered an act of war.
U.S. naval forces are involved in several multinational maritime task forces in the region. These include the thirty-four-country Combined Maritime Forces, based in Bahrain, and the eleven-country International Maritime Security Construct and its operational arm, Coalition Task Force Sentinel, also based in Bahrain. A nine-country European-led Maritime Awareness in the Strait of Hormuz force, proposed by France and based in the UAE, has become increasingly active in maintaining freedom of navigation in the strait since January 2020. Chinese and Russian warships have also taken part in joint naval drills with Iran in the Gulf of Oman, while Japan and South Korea have deployed warships to defend their commercial vessels. Speaking at the Munich Security Conference in February 2020, Omani foreign minister Yusuf bin Alawi highlighted Muscat’s concerns about the risk of a “mistake” due to the increasing number of naval vessels in the strait. Indeed, over the decades there have been several serious incidents caused by the U.S. or Iranian navies, such as the downing of an Iranian civilian airliner in July 1988 by the USS Vincennes. As the foreign military presence in the strait rises, any miscalculation could quickly lead to an escalation.
Naval tensions between the United States and Iran have also escalated in the first months of 2023. On April 20, an Iranian naval commander claimed that a U.S. submarine had violated Iranian territorial waters and had been forced to the surface by Iran’s navy. Washington denied the story. A week later, the Iranian navy seized a Marshall Islands–flagged oil tanker in international waters of the Gulf of Oman. Iranian state TV claimed the tanker had ignored radio calls after a collision with an Iranian boat. Some sources claimed Iran’s actions may have been retaliation for the U.S. confiscation of an Iranian oil tanker bound for China days earlier. Another similar incident took place on May 3, when high-speed Iranian naval vessels surrounded the Greek-owned and Panama-flagged oil tanker Niovi, forcing it to head into Iranian territorial waters off the city of Bandar Abbas. China, whose economy relies heavily on the smooth flow of oil through the strait, has uneasily watched these episodes play out.
China’s Stake in the Security of the Strait
As China’s reliance on Gulf oil has grown, so too has its strategic interest in safeguarding security and stability in the Strait of Hormuz. Furthermore, the military presence of the United States and its allies in the strait has encouraged China to expand its influence in the region to protect its commercial interests. While Beijing and Washington share a desire to ensure the free passage of oil, China is acutely vulnerable to a disruption in oil supplies from the region, having surpassed the United States as the world’s top annual importer of crude oil in 2017. Guaranteeing a steady supply of oil is critical for China’s energy security.
In recent years, China has bypassed U.S. sanctions to import Iranian oil. Iran is China’s third-largest oil supplier after Russia and Saudi Arabia. Since the United States reimposed sanctions on the Iranian oil industry following the U.S. withdrawal from the nuclear deal with Iran in May 2018, Iran has heavily discounted its oil prices by at least 25 percent. Beijing is by far the largest importer of Iranian oil, as well as Iran’s main trading partner. It has benefited greatly from the U.S. embargo on Iranian oil, as well as from the more recent Group of Seven (G7) and EU price cap on Russian oil as a reaction to the Russia-Ukraine war. Moreover, the twenty-five-year comprehensive strategic partnership agreement signed by China and Iran in March 2021, involving sales of discounted Iranian oil to China in return for Chinese investment in Iran, has widened Beijing’s economic footprint in the region, while also potentially paving the way for a deepening of Chinese military influence.
On the other side of the Strait of Hormuz, China has carefully cultivated its ties with the six member countries of the Gulf Cooperation Council (GCC)—Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the UAE. While initially GCC oil and gas exports were the foundations of the relationship, China’s economic cooperation with these countries has rapidly expanded into sectors such as infrastructure, finance, telecommunications, space exploration, renewable energy, nuclear energy, and even arms manufacturing. In December 2022, China and Saudi Arabia signed a comprehensive strategic partnership agreement, which included thirty-four energy and investment deals across a multiplicity of sectors. Furthermore, in line with its BRI initiative, China has invested billions of dollars in ports in the Gulf, including the UAE’s Khalifa Port and Fujairah Port, Oman’s emerging Duqm Port, Iran’s Chabahar Port, and Pakistan’s Gwadar Port. Additionally, the China Petroleum Engineering and Construction Company completed the construction of the Habshan-Fujairah oil pipeline in 2012. The pipeline transports oil for 380 kilometers from Abu Dhabi through the UAE’s interior to Fujairah Port, thereby circumventing passage through the Strait of Hormuz. Chinese companies are also currently involved in building the UAE’s Etihad Rail network, which will connect Emirati ports with major trade and industrial hubs throughout the Gulf.
The U.S. Defense Department has suggested that China seeks a more permanent military presence in the region, listing the UAE as among the countries Beijing is considering for this. In 2021, Khalifa Port was at the center of a controversy when U.S. intelligence detected that China was secretly beginning the construction of a military facility there. Washington allegedly warned the UAE about the Chinese activities, and construction appeared to stop. Unlike the United States, China does not have a permanent military force in the region, however Chinese naval vessels have been involved in anti-piracy escort missions since 2008 and have docked at several regional ports. These port calls advance China’s military diplomacy while also allowing for the resupply of naval vessels operating in the surrounding seas.
Although China is seeking to establish a more robust regional military presence, it lacks the military experience and hardware to challenge the United States as the region’s security guarantor. Nevertheless, the perceived U.S. military withdrawal from the Middle East as it pivots to Asia has granted China an opportunity to gain a foothold in the region. The Joe Biden administration’s cold relations with Saudi Arabia and the UAE have resulted in a notable shift in policy from Riyadh and Abu Dhabi. No longer content with U.S. security assurances, the Gulf monarchies have increasingly engaged in strategic hedging in their bilateral relations with Washington and Beijing, opening the door to deeper Chinese diplomatic involvement. However, whether China’s growing diplomatic and economic influence in the region will translate into greater military influence will depend on the extent to which the United States upholds its security commitments to its GCC allies.
The Impact of the Saudi Arabia-Iran Reconciliation
In early 2023, China demonstrated its rising diplomatic influence when it sponsored a reconciliation between Saudi Arabia and Iran. The significance of the Beijing-brokered agreement cannot be overstated. Although it was no secret that Iran and Saudi Arabia had been seeking to deescalate tensions, following several rounds of talks facilitated by Oman and Iraq, the restoration of diplomatic relations between Tehran and Riyadh was not expected so soon, particularly while the conflict in Yemen remained unresolved.
China was labeled a “free rider” by Obama in 2014 and has faced increasing calls to share the burden in matters of global security, so its role in facilitating the agreement between Saudi Arabia and Iran was an important achievement. Should the agreement bring about a durable rapprochement between Riyadh and Tehran, Beijing will have shown that its influence in the Gulf extends beyond economic leverage. Although the statement issued by China, Iran, and Saudi Arabia made no specific mention of issues to be resolved by the Saudis and Iranians, the two sides expressed a “shared desire to resolve the disagreements between them through dialogue and diplomacy.” The restoration of diplomatic relations will mark the first step in the agreement, even if its impact on the conflicts in Yemen and Syria—especially after the recent Saudi reconciliation with Syria and Syria’s reintegration into the Arab League—remains unclear. So too does China’s involvement in the Saudi Arabia-Iran negotiation process and its latitude to pressure Riyadh and Tehran into making concessions.
The main test of the agreement’s effectiveness will be its impact on the conflict in Yemen. While Iran may have influence over Ansar Allah, better known as the Houthis, in limiting the group’s attacks against neighboring countries, its sway over local dynamics in Yemen may be more limited. Nevertheless, Saudi Arabia is determined to withdraw its forces from the increasingly deadly and costly conflict in the country, while Iran aims to reduce regional tensions as it faces continued domestic unrest and deteriorating economic circumstances due to U.S. sanctions.
Sanctioning Iran has been at the heart of the U.S. approach to security in the Gulf. It has simultaneously bolstered Iran’s regional rivals Saudi Arabia and Israel through arms sales and operational support. Although the 2015 nuclear deal had some success in curbing Iran’s nuclear enrichment activities, it had little effect on reducing disruptive Iranian activities in the Middle East. Furthermore, the U.S. withdrawal from the deal and the assassination in January 2020 of Qassem Soleimani, the commander of the Quds Force of the IRGC, only escalated regional hostilities. Despite Washington’s military influence in the region, it has faced difficulties in terms of building a unified bloc to counter China, gathering support for Ukraine in its conflict with Russia, and even convincing its allies to cooperate to reduce oil prices. China, on the other hand, despite not having a military presence in the region, has carefully balanced its relations with both Iran and Iran’s Arab rivals, allowing Beijing to play a mediating role that will ultimately benefit its regional economic plans.
Additionally, the authoritarian nature of China’s government and its policy of noninterference in the domestic affairs of other countries, particularly when it involves human rights, give Beijing a strong advantage over Washington in terms of cooperation with countries in the Middle East. Washington’s temporary freeze on arms sales to Saudi Arabia and the UAE and its suspension of the sale of F-35 combat aircraft to the UAE have pushed Riyadh and Abu Dhabi to seek alternative suppliers, including China. Nevertheless, although China has had some success in breaking into the regional arms market, it cannot yet overtake the United States as the region’s dominant supplier.
Despite Washington’s increasing focus on containing Chinese expansionism in the Indo-Pacific, Washington still views the Middle East, in particular the Gulf, as an area of strategic competition with Beijing. Through the so-called Abraham Accords, which led to the normalization of relations between Israel and several Arab countries, the United States intends to establish a coalition of regional allies to counter Iranian, Chinese, and, to a lesser extent, Russian interests in the broader Middle East. Washington still holds significant leverage in the region due to its military presence and the superiority of its arms. Although the Biden administration’s relations with Saudi Arabia and the UAE remain frosty, an authorization to sell advanced weapons, such as F-35 aircraft, to these countries could prove effective in demonstrating Washington’s commitment to its allies.
However, something has indeed changed in regional attitudes. As the Saudi Arabia-Iran reconciliation showed, the countries of the region themselves see advantages in not relying on one superpower but in exploiting superpower rivalries. This will continue, as nations in the broader Middle East find a new equilibrium among themselves after decades of conflict and U.S. domination. China will likely to be at the heart of this realignment.
Conclusion
A reduction in regional tensions as a result of the China-brokered agreement between Saudi Arabia and Iran could grant Beijing a unique role in the future security architecture of the region. However, Beijing understands that for now it cannot compete with Washington’s military dominance. Nevertheless, Chinese facilitation of the Saudi Arabia-Iran agreement showed that Beijing is building on its economic clout in the region to play a greater role in influencing regional security dynamics, as well building diplomatic bridges in areas of strategic importance, to protect its commercial interests.
The Saudi Arabia-Iran deal reflects only a part of Beijing’s wider ambitions in the Middle East. The success of the deal will have far-reaching implications not only for the region but also for the great power competition between China and the United States. To counter Chinese interests, Washington will continue to build on the Abraham Accords, prioritizing a normalization of relations between Saudi Arabia and Israel. This would allow the formation of a unified bloc of U.S. regional allies, potentially leading to greater security cooperation in confronting Iran while simultaneously containing the expansion of Chinese influence.