Author: Oliver B John, Astrolabe Global Strategy
In a move widely hailed in the Persian Gulf and cautiously welcomed by the United States Administration, senior Chinese, Iranian, and Saudi security officials agreed to re-establish diplomatic relations between Riyadh and Tehran.
Although Saudi Arabia and Iran have been quietly discussing ways to reduce tensions since at least 2021, China’s active role in brokering the agreement is particularly significant. This was likely the first time that China has leveraged its diplomatic ties to the region to resolve a major international political dispute. Given the ongoing geopolitical competition between Washington and Beijing, some observers ask whether China is positioning itself to replace the United States as the major external power in the region.
On 10 March 2023, Saudi Arabia and Iran concluded five days of discussions hosted by China, agreeing to restore diplomatic relations within two months. They also agreed to ground their relations on the principles of respecting sovereignty and non-interference in internal affairs. Delegates from the three countries ‘expressed their keenness to exert all efforts towards enhancing regional and international peace and security’. The Saudi and Iranian foreign ministers met in Beijing on 6 April to follow-up on the discussions.
Although the agreement represents a potential reduction in tensions, it is vague on the concrete steps Riyadh and Tehran will take, leaving room for speculation. Reports suggested that Iran would curtail its support for Houthi attacks on Saudi territory, a key Saudi goal. A statement by Iran’s mission to the UN, that the agreement would ‘accelerate the ceasefire, help start a national dialogue, and form an inclusive national government in Yemen’ seems to confirm this view.
The Houthis quickly denied that the Iran–Saudi deal would affect their actions since they are not ‘subordinate’ to Iran. On 16 March 2023, the Iranian Foreign Ministry also denied that the agreement covers Yemen, leaving open the question as to what, if any, commitments the Iranians might have made.
China has a clear incentive to push for a diplomatic solution to these tensions. Roughly 50 per cent of its imported oilcomes from the Persian Gulf region — Saudi Arabia was its largest single supplier in 2021. It also imports around 7 per cent of its liquid natural gas from Qatar and recently signed a long-term supply contract. Stability in the region is crucial to China’s energy security, and reducing tensions between Iran and Saudi Arabia and helping them resume formal diplomatic ties could increase that stability.
China was well positioned to mediate the dispute, as it is the largest oil export market for both Saudi Arabia and Iran, and accounted for over a quarter of Saudi crude oil exports in 2021. Since the United States reimposed sanctions on Iran’s oil industry in 2018, the country’s exports have dropped sharply, but this supply likely now goes to China. China’s strong relationships with both sides gave it a diplomatic edge over the United States in brokering the deal.
Although the United States had been encouraging its Gulf partners and allies to reduce tensions since the Biden administration took office, the United States had no real prospect of orchestrating such a high-level meeting.
Amid ongoing US–China competition, many observers questioned whether China’s diplomatic success represented a further decline in US regional influence or a drift in US–Saudi relations. While Chinese officials denied they were trying to fill any regional vacuum, they were happy to let others draw this conclusion. They emphasised their ‘historic role’ in brokering the deal as a ‘reliable mediator’ and stressed the importance of using dialogue to settle regional disputes, in contrast with the United States’ opposition to the Iranian regime.
Riyadh also maintained that China was not seeking to replace the United States in the region and confirmed that they briefed Washington before the negotiations and announcing the agreement. Saudi officials stressed that they view both Washington and Beijing as important partners and that they hoped not to be put in the middle of any ‘conflict between the two powers’.
Although China is still not challenging the United States as the preeminent external security guarantor for the region, it appears to be expanding its regional diplomatic influence. By demonstrating the effectiveness of Chinese diplomacy, Beijing encourages Saudi Arabia and other US regional…
Getting Vietnam’s economic growth back on track
Vietnam’s economy grew 8% in 2022 but slowed in 2023 due to falling exports and delays in public investments. The economy’s future depends on structural reforms and reducing dependency on foreign investment.
Vietnam’s Economic Roller Coaster
After emerging from COVID-19 with an 8 per cent annual growth rate, Vietnam’s economy took a downturn in the first half of 2023. The drop was attributed to falling exports due to monetary tightening in developed countries and a slow post-pandemic recovery in China.
Trade Performance and Monetary Policy
Exports were down 12 per cent on-year, with the industrial production index showing negative growth early in 2023 but ended with an increase of approximately 1 per cent for the year. Monetary policy was loosened throughout the year, with bank credit growing by 13.5 per cent overall and 1.7 per cent in the last 20 days of 2023.
Challenges and Prospects
Vietnam’s economy suffered from delayed public investments, electricity shortages, and a declining domestic private sector in the last two years. Looking ahead to 2024, economic growth is expected to be in the range of 5.5–6 per cent, but the country faces uncertainties due to geopolitical tensions and global economic conditions.
Thailand’s post-pandemic economic recovery still trailing behind
Thailand’s economy is struggling to recover from the impact of the COVID-19 pandemic, with slow growth in GDP and GDP per capita. The government has implemented short and long-term policies to address economic challenges.
## Thailand’s Economic Slowdown
Thailand’s real GDP and GDP per capita have yet to outpace pre-pandemic figures, unlike other ASEAN countries. The Thai economy was severely affected by the pandemic, causing a slow economic recovery. The country’s large informal economy and dependence on tourism made it particularly susceptible to the impacts of the pandemic. While economic growth in 2023 was driven by activities in the travel sector, the manufacturing sector continued to contract, and merchandise exports continued to decline.
## Government’s Economic Policies
The new government’s short-term economic policies include providing a one-time digital cash payment to approximately 50 million residents, debt relief measures, and efforts to cut energy and electric train costs. Long-term economic measures consist of new free trade agreements, green industry projects, and a land bridge project. However, these measures have faced criticism from Thai economists due to significant fiscal implications and rising public debt-to-GDP ratio.
## Challenges in International Trade and Industrial Policies
Thailand’s new government is looking to boost international trade through free trade agreements. However, concerns are raised regarding the effectiveness of FTAs in driving global value chains and boosting trade. Additionally, industrial policies that emphasize domestic value added are being reconsidered in light of evidence that it runs counter to development from engaging in global value chains. The success of Thailand’s economic growth goals will depend on how supply-side constraints are addressed and resolved.
The United States and China’s complex cooperation and rivalry continue
The US-China relationship in 2023 had complex economic and technological dynamics. While trade remained substantial, there’s also intensified technological competition, as both countries seek to enhance communication and cooperation in 2024.
Economic and Technological Dynamics
The world has witnessed a complex tapestry of economic and technological dynamics between the United States and China, with 2023 marking a period of continued economic interdependence and technostrategic rivalry. Despite a nominal dip in US imports from China, bilateral trade volumes remained substantial. US exports to China totalled US$135.8 billion and imports stood at US$393.1 billion for January–November 2023.
Economic Relations and Tensions
Policymakers, cognisant of the perils inherent in economic decoupling, have started to eschew such a course. High-level meetings and initiatives offered a positive glimpse of potential bilateral relations. In contrast, the high-tech landscape in 2023 was tense. The United States reinforced its global stance against China’s ascendancy, supported by US political parties.
Moving into 2024, the US–China economic and technological relations are poised to undergo a shift, characterised by enhanced communication, selective cooperation, and balanced management of both interdependence and competition. There is a mutual understanding among senior officials of the potentially devastating repercussions associated with misunderstandings and miscalculations in the US–China relationship. 2024 is expected to witness increased economic dialogues between Beijing and Washington.
- Canberra ties the knot with Washington
- 2024 China IIT Reconciliation: Appointment Through IIT App Opens on February 21st
- The Year of the Dragon brings record-breaking travel and consumption during the 2024 Chinese Spring Festival
- China’s Minimum Wage Guide (Updated as of February 19, 2024)
- Getting Vietnam’s economic growth back on track
- Legal Ways to Manage Sensitive Personal Information in China