THE BLOG
01/25/2016 01:26 pm ET Updated Jan 25, 2017

China Is More International Than Ever. Here's Why That's a Problem.

Xi Jinping is known for a lot of things, but tightrope walking is not one of them. This week however he has embarked on a tour of the Middle East that has seen him stop in both Saudi Arabia and Iran, thus forcing him into a delicate balancing act as the two nations lock horns in their worst conflict in a decade.

Both nations are key oil suppliers to China and are crucial to Xi's core policy, the One Belt One Road development plan. This plan sees China investing in mass infrastructure projects, both land and sea, to link China with Central Asia, the Middle East and Europe.

Saudi Arabia suspended diplomatic relations with Iran at the start of January. The rift was sparked after the Saudis executed top Shia cleric Sheikh Nimr al-Nimr, alongside 47 others, for terrorism offences. This ignited protests in Iran that saw Molotov cocktails thrown at the Saudi embassy. Protestors cheered and ransacked the building as it burnt to the ground.

January's events are merely symptoms of a deeper malaise that stems from the differing strands of Islam practiced in the respective countries. The Saudis are Sunni Muslims while Iran is the largest predominantly Shia nation in the Middle East. Both nations are fighting proxy wars against each other in theatres throughout the region. In Yemen, Saudi Arabia is fighting against Houthi rebels, who are allied with Iran. In Syria, Saudi Arabia is pushing for the overthrow of President Bashar al-Assad, who is backed by Tehran. The suspension of diplomatic relations between the two nations means these battles are likely to only become more intractable.

China is the largest importer of crude from both Saudi Arabia and Iran. Chinese oil demand however is slowing. According to figures released this week Chinese total oil demand is set to grow about 3% this year, or 300,000 barrels a day, compared with around 5% growth in 2015.

China also appears to be diversifying supplies away from Saudi Arabia. Imports of Saudi Arabian crude by China rose just 2% in the first 11 months last year, compared with overall Chinese import growth of about 9%. Imports from Russia meanwhile jumped nearly 30%. Russia is China's second largest oil supplier.

This is not to say that China is going cold turkey on Saudi crude. More worryingly for Saudi however is Iran's commitment to start producing 500,000 barrels of crude a day. China is likely to be one of the primary recipients of this new oil coming on stream. China is at least partially responsible for the nuclear deal that has allowed Iran to step out from under the heavy yoke of crippling sanctions. Xi hopes to leverage this and previous warm relations with the nation to secure lucrative contracts going forward.

This will not sit well with the Saudis. It has always been China's avowed policy to put business first and not to interfere with the internal politics of sovereign nations. This is what has allowed China to become the top trading partner to unsavory regimes such as Jose Eduardo dos Santos's Angola and Mugabe's Zimbabwe.

For the Saudis China's claim that business is business is likely to wear thin if the contracts substantially bolster Iran. China and Iran are more closely aligned politically. China tacitly supports Russia and Iran's pro-Assad position in Syria, to which Saudi Arabia is diametrically opposed.

China is also likely to see Iran as a useful bulwark against the radical whabbism that underpins ISIS and Islamic fundamentalism worldwide. China has recently felt ISIS's sting, with the summary execution of Fan Jinghui and with three Chinese managers dying among the hostages in the Mali attacks. China has also seen an upsurge in violence in the restive province of Xinjiang from Uighur militants aligning themselves closer to global whabbism.

It is likely therefore that a result of these talks, whether now or in the medium term, will be to closer align Tehran to Beijing. Tehran has a vested interest in stabilizing Central Asia. This plays into Beijing's strategic aims in the region. Beijing shares borders with a number of Central Asian nations, including Afghanistan, and is intensely focused on ensuring that Islamic fundamentalism can be contained and not infect China through Xinjiang. It would not be surprising therefore if Iran were to become a member of the Shanghai Cooperation Organization, a group of Central Asian nations and Russia, focused on ensuring security throughout the region.

The One Belt One Road initiative will only be successful if Central Asia can develop and stabilize. Iran has a much bigger hand to play in this than Saudi Arabia. It will be ever harder therefore for China to remain neutral between these two parties.

Aside from raising diplomatic heckles, China recently caused a stir when it announced plans to build a base in the East African nation of Djibouti. On November 26, a spokesman for China's foreign ministry sought to downplay the strategic significance of the move. "In accordance with relevant UN resolutions," explained spokesman Hong Lei, "China has deployed more than 60 vessels in the Gulf of Aden and the waters off the Somali coast in 21 [anti-piracy] escort missions since 2008. In the process of escorting, we encountered real difficulties in replenishing soldiers and resupplying fuel and food, and found it really necessary to have nearby and efficient logistical support."

This sentiment was not shared by US AFRICOM commander Gen. David Rodriguez, who told The Hill that the "logistics hub" and airfield would let China "extend their reach" into Africa. The base, whatever its purposes, will provide China with a means to protect oil imports from the Middle East that traverse the Indian Ocean and provide China greater access to the Arabian Peninsula.

Shen Dingli, professor of International Relations at Shanghai's prestigious Fudan University, stated "The United States has been expanding its business all around the world and sending its military away to protect those interests for 150 years. Now, what the United States has done in the past, China will do again." For Mr. Shen, the building of bases is commensurate with China's increasing stature as a world power.

The base in Djibouti and the diplomatic travails that Xi is undertaking this week are symbolic of a wider shift in Chinese foreign policy. Previously China operated under the rubric of ensuring stable borders, having a foot in Asia, and facing the world (稳定周边,立足亚太,面向世界). This policy does not chime with the increasingly global China we see today.

China is the main export partner of 43 nations. In Africa there are now over one million Chinese living and working. As China's global footprint extends it becomes increasingly vulnerable. The evacuation of 83 Chinese and Sri Lankan nationals from Yemen earlier this year was emblematic of China's increasing exposure to threats overseas. Chinese workers have been killed in Zambia and have been taken hostage in Nigeria.

As China constructs its first overseas base and tries to navigate increasingly convoluted diplomatic waters it will find it hard to remain disengaged. China, with its own brand of state-fostered capitalism, should know more than most that economics and politics are inseparable. As One Belt One Road gets underway China is only going to become more exposed to threats and more embroiled in the messy politics of the international system. There is an ever-present risk of the belt becoming a noose.