Kuwait-China Relations and Future Prospects

Alanoud AlSabah

Kuwait-China Relations and Future Prospects

Alanoud AlSabah

Kuwait established a political relationship with China in 1971，the first country in the Gulf region to do so. The Kuwait-China relationship saw substantial progress when Kuwait's foreign policy started to give more importance to the East after the liberation of Kuwait in 1991， and it gained impetus with the onset of the global economic crisis in 2008. In this article， the author tries to describe the significance of the Kuwait-China relations built on the five pillars of cooperation and provide her views on the future prospects for relations between the two countries.

Five Pillars of Kuwait-China Relations

The ties between Kuwait and China are built on five major pillars of cooperation namely： political， finance and trade， military and security，energy， and finally people-to-people exchanges.

Political

Political cooperation is considered the key advantage that drives the Kuwait-China relations. Although China's political recognition of the independence of the state of Kuwait was highly dependent on Iraq's recognition of the state of Kuwait， which gained its independence on June 19， 1961， the Soviet Union with the Iraqi's influence stopped Kuwait'sacceptance in the United Nations. The Iraqis compared the Kuwaiti independence issue to the sovereignty issue between the Chinese mainland and Taiwan which delayed the political dialogue between both Kuwait and the People's Republic of China. After the coup in Iraq in 1963， Kuwait took advantage of this event and secured its admittance to the UN on May 14，1963. Thus， the initial period of political encounter between Kuwait and the People's Republic of China was in Beijing in 1965， during this period His Highness Sheikh Jaber Al Ahmad Al Jaber Al Sabah was Minister of Finance and later Amir of the State of Kuwait in the period （1977-2006）. This initial visit aimed to understand the situation in the Chinese mainland and attempted to establish political relations without compromising Kuwait's relations with Taiwan that were established in 1963.1Hashim S H Behbehani， China’s Foreign Policy in the Arab World 1955-1975， Kegan Paul International Ltd， 1981， pp. 200-205.

This early period， 1965—1968， was a fruitful period for political exchanges and delegations visited both capitals. It is worth mentioning that China's aim to build diplomatic relations with Kuwait was due to the fact that Kuwait was the only independent state in the Arabian Gulf and it was seen as a gateway to the rest of the Arabian states. “China's relations with Kuwait were intended to contribute to further stability in the Persian Gulf against the interventions.”2Yitzhak Shichor， The Middle East in China’s Foreign Policy 1949-1977， Cambridge University Press，1979， p. 173.

In 1971， Kuwait and China started official full diplomatic relations. During this period the political relationship depended on trade and economic exchanges. However， “Kuwait's neutral foreign policy kept China satisfied with Kuwait's policy of balancing itself between two superpowers.”3Mohammed Bin Huwaidin， China’s Relations with Arabia and the Gulf 1949-1999， Routledge Curzon，2002， p. 197.Kuwait was one of the only regional countries which had good relations with both the United Sates and the Soviet Union in the Cold War era when countries in the Middle East had to choose between them. Kuwait was regarded as the route to infiltrate the Gulf markets and encourage diplomaticrecognition from other regional states most significantly Saudi Arabia.4Muhamad S. Olimat， China and the Middle East from Silk Road to Arab Spring， Routledge， 2013， p. 27.

During this period， the invasion of Kuwait in 1990 tested China's foreign policy and its influence in the Middle East. China voiced its political and humanitarian support to Kuwait and its people in the face of Iraqi invasion of Kuwait. The political relations with China always included a trade and economic package which will be discussed in detail later.

From 2004 until now， relations between Kuwait and China have been characterized by Kuwait's continuous support of China's sovereignty and integrity. The bilateral exchange visits began to involve the Gulf Countries Council （GCC） Strategic Dialogue and the China-Arab States Cooperation Forum， which are the main platforms in which Kuwait is considered a key influential partner. Kuwait's presidency of the Arab League （2014-2015） and the GCC （2013-2014） presented the main driver to establish and further develop a strategic partnership between the Arab countries， specifically the GCC states， with China. Most recently， the prime minister of Kuwait Sheikh Jaber Al Mubarak Al Hamad Al Sabah visited China on both a bilateral and multilateral occasion. Kuwait held the presidency during the GCC Strategic Dialogue with China in June 2014 and the China Arab States Cooperation which was highlighted in Xi Jinping's welcome speech， which included the Arab states support's to China and its Belt and Road Initiative.

Trade and Economics

The first trade agreement between Kuwait and China was established in 1969， it involved the importation of chemical fertilizers from Kuwait. In 1961， Kuwait established the Kuwait Fund of Arab Economic Development which extended its first loan to China in 1982. From 1982 till now， the Kuwait Fund for Arab Economic Development has provided China with $810 million （279 million KWD） of loans on favorable terms. Kuwait has been the largest supplier of preferential official loans to China among the Arab countries. It is also worth drawing attention to the fact that “Kuwaitwas the only third world country that has ever extended loans to China”.5Mohammed Bin Huwaidin， China’s Relations with Arabia and the Gulf 1949-1999， p. 197.

Chinese Premier Li Keqiang holds a welcoming ceremony for Kuwaiti Prime Minister Sheikh Jaber Al-Mubarak Al-Hamad Al-Sabah in Beijing， June 3， 2014.

In 1986 Kuwait and China signed a cooperation agreement to create a committee that is in charge of the cooperation between the two countries in economic technological and trade exchange. This committee met four times to discuss pending matters in the economic exchanges between China and Kuwait， most recently in 2002.

The Kuwait-China trade volume doubled from 2006 to 2008. In 2008，Kuwait's government decided to shift its political， economic and trade focus from the West to the East， which was highlighted by His Highness the Amir of Kuwait Sheikh Sabah Al Ahmad Al Jaber Al Sabah's visit to China in 2009. During his visit， the Kuwait Investment Authority （KIA） with assets that exceed $400 billion inaugurated the Kuwait Investment limited Beijing Representation Office （KIRO） in Beijing， as its second foreign office afterLondon. KIRO became the first foreign investment entity to be awarded an additional quota of $700 million over the existing $300 million set by the Chinese regulators in 2012. KIRO is also considered one of the main investors in the Chinese banking system with investments estimated at $ 10 billion in 2013.6“ Kuwait granted highest investment quota in China stock market，” January 21， 2013， http：//www. kuna.net.kw/ArticleDetails.aspx？id=2287970&language=en.

Another economic milestone came in 2005 with the establishment of the first Arab Company to invest in Asia； the Kuwaiti Chinese Investment Company （KCIC）， with more than 50 percent of the capital ownership belonging to Kuwaiti companies. In 2012， KCIC enlisted a new investment company called Asyia Investment to bridge investment opportunities between Asia and the Middle East， especially the Arabian Gulf.

Currently， there are around 33 Chinese companies operating and competing for government tenders in the Kuwaiti market. The main projects that the Chinese companies are working on in Kuwait are the Boubyan Port Project， which began in 2007 with a cost of 118 million KWD （$389 million） and constructed by China Harbour Engineering Company LTD，and the construction of the new Central Bank of Kuwait by China State Construction Engineering Corporation expected to be completed by the end of 2015. It is important to note that the previous Kuwaiti cabinet and planning minister visited China in 2013 to encourage Chinese Stateowned enterprises to invest in and cooperate on projects in Kuwait， most importantly the China Communication and Construction Company which will be involved in the construction of New Mubarak Port on the Kuwaiti northern border in the near future.7“Kuwait Woos China Investors，” February 28， 2013， http：//www.kuna.net.kw/ArticleDetails. aspx？id=2295689&language=en.During the visit of Kuwaiti Prime Minister Sheikh Jaber Al Mubarak Al Hamad Al Sabah to Beijing in June 2014， he and Chinese Premier Li Keqiang attended the signing of 10 agreements between Kuwaiti and Chinese ministers.8“Kuwait， China ink cooperative deals MoUs，” June 3， 2014， http：//www.kuna.net.kw/ArticleDetails. aspx？id=2380669&language=en.In conclusion， Kuwaitis willing to learn from China's economic boom and try to invest in China for a better trade and economic cooperation. China believes that even if the United Arab Emirates， Qatar and Saudi Arabia have better economic cooperation with China today， Kuwait remains in the lead with regards to economic loans and investment in China. Kuwait thus remains an important partner for China's Belt and Road Initiative， which includes Kuwait's Silk City. In June 2014， the Kuwaiti government approved a decree creating a body in charge of developing Silk City， which is just opposite Kuwait City and which will feature numerous bridges， an expansive sports complex，convention centers， a duty free mall， and a 1，001-meter skyscraper， which a Chinese company is in charge of as part of the MoU signed between the two countries during the Kuwaiti prime minister's visit to China in June 2014. In addition， Kuwait has committed to providing the Asian Infrastructure Investment Bank with $731 million， which will be dedicated to providing Asia with better infrastructure. China hopes to penetrate the Kuwaiti market once the Kuwaiti Direct Investment Authority has been set up within the next two years. In short， Kuwait is still the gateway to the rest of the Gulf States， Iraq and the rest of the Middle East. The Kuwait-China Trade volume reached $13 billion in 2014 and is expected to reach $15 billion in 2015，bearing in mind that Kuwait has a surplus trade balance with China. The establishment of the first Chinese bank the Industrial and Commercial Bank of China （ICBC） branch in Kuwait with full banking authority to invest in all sectors and industries in the market symbolizes China's interest in Kuwait's economy and industry.9“Kuwait can contribute positively to Silk Road， Martime Route - Chinese Amb，” April 19， 2015， http：//e. gov.kw/News/KUNAMoreNews_Eng.aspx？NewsId=187519.

Energy

Kuwait is the sixth oil producing country in OPEC and 75 percent of its production goes to Asia. With the rapid development of the Chinese economy， China has become the world's major oil consumer， and it has become the third-largest importer of oil from Kuwait after South Korea andIndia， with a 30 percent increase in oil imports from Kuwait in 2015.

The Kuwaiti government is striving to increase oil production and exploration in its territory， as well as maintain its marketing and refining strategies in Europe and Asia， specifically China. Although oil prices have been decreasing lately， the government allocated the oil sector around $75 billion to work on exploration and increase production in 2015. Kuwait also has oil and gas projects with both Iraq and Saudi Arabia. Nonetheless，this sector represents the main source of income for the country and it has attracted many foreign companies and investments in order to maintain a balance between domestic and foreign consumption of Kuwaiti oil and gas.

The Kuwait-China energy relations lie within the cooperation in production and exploration and diversity of energy sources and suppliers as China's up-streaming， exploration and production of oil in Kuwait are critical to China's energy security and strategic partnership with this Middle East country.10Muhamad S. Olimat， China and the Middle East from Silk Road to Arab Spring， p. 27.Energy security has thus become a priority as shown in China energy white paper of 2012. The Chinese energy policy consists of four principles： rationalization of energy consumption， increasing its petroleum reserve， continuation of exploration and production of fuels， and diversification of energy sources.

The main energy project between China and Kuwait is the agreement signed in 2007 between Sinopec and the Kuwait Petroleum Company （KPC）to build a refinery in Guangdong， at an estimated cost of $9 billion， which is due to be completed in 2016. This refinery will be devoted to refining imported Kuwaiti oil with a capacity of 300，000 barrels per day. However，there were obstacles that delayed the execution of this project because Sinopec was unwilling to grant oil product marketing rights to KPC， which saw it as a vital way to mitigate heavy refining losses due to oil product price caps imposed by the Chinese government in the domestic market. However，this project remains at the core of most official bilateral meetings and it is expected that there will be a solution in the near future merely because thereis a race in the region towards joint venture projects with China， specifically on Chinese territory.11Muhamad S. Olimat， China and the Middle East from Silk Road to Arab Spring， p.29.

KPC opened a branch office in Beijing in 2005 with the aim to market Kuwait's oil in China. From 2004 until 2011， Kuwait oil exports to China increased ninefold from around 25，000 bpd to 220，000 bpd. This increase demonstrates the importance of energy to Kuwait-China relations. Recently， KPC and China International United Petroleum and Chemicals Co. （UNIPEC） agreed to supply china with 300，000 bpd for the next 10 years for almost $120 billion. China is the main hub for Kuwaiti oil which is refined in China before being distributed to other Asian countries.12“Kuwait signs biggest crude supply deal with China， ” August 22， 2014， http：//www.kuna.net.kw/ ArticleDetails.aspx？id=2393109&Language=en.

Military and Security

Kuwait is forced to acquire arms and equipment due to its geographic location， and it depends heavily on military agreements and security cooperation.

Kuwait has security and military agreements with the United States， the United Kingdom， France and Russia after the invasion of Kuwait in 1990. In 1995， Kuwait and China reached their first military agreement， which was also the first among the GCC countries and is considered an important step in China's policy in the Arabian Gulf. In 1998， China reached its first arm sales deal with Kuwait， including the supply of artillery guns and ammunition worth $186.5 million.13Mohammed Bin Huwaidin， China’s Relations with Arabia and the Gulf 1949-1999， p.200.

Most recently， in November 2011， Chinese warships held a five-day official visit to Kuwait in a bid to increase military cooperation between the two countries. The tour by the destroyer Wuhan and the frigate Yulin aimed to boost military links between the two countries， which established diplomatic ties nearly 40 years ago.14“China aims to boost military links with Kuwait，” November 28， 2011， http：//m.arabianbusiness.com/ china-aims-boost-military-links-with-kuwait-432338.html.

The Kuwaiti prime minister's visit to China and the signing of ten agreements that were previously mentioned emphasize the importance of military and security cooperation. It is important to mention that Kuwait has maintained military expenditure at five percent of its GDP since 1991， and it is currently reviewing its military capabilities in terms of arms， equipment and assets which could be a promising market for China.

People-to-People Exchanges

Kuwait seeks to create a strong cultural relationship with China， not only through student language programs run by Kuwait University but also through establishing the Asian Unit in the College of Social Science of Kuwait University which aims to host many Asian artists and writers. Kuwait also has scholarships for Kuwaiti students willing to study in China and both governments promote and support such activities.

Chinese president Xi Jinping's policy highlights the importance of people-to-people and cultural exchanges as part of China's soft power.15Xi Jinping： The Governance of China， Beijing： Foreign Language Press， 2014， p.345.In this regard， the Chinese media has been modernized and translated to Arabic. There is also a large movement for cultural and educational exchanges through the China-Arab States Cooperation Forum and GCC on the bilateral level. During a news conference by the Chinese Ambassador to Kuwait in April 2015， he emphasized the importance of education and culture exchanges to create a bridge of understanding between Arabs and Chinese， focusing on China's tolerance towards Islam and referring to the Muslim regions of China.

A memorandum of understanding concluded between the Kuwait Institute for Scientific Research and the Chinese Academy of Science also highlights the keenness of the two countries to enhance cooperation in accordance with the 2012-2015 Executive Program for Cultural，Information， and Educational Program and honors the cooperation agreement signed by both the countries in the field of higher education，research and technology.16“Enertech Training Center， Inaugurated at KISR，” http：//www.kisr.edu.kw/en/news-and-events/ news？start=7.

China and Kuwait's Cooperation on Regional Issues

Kuwait is seen either as a peaceful negotiator or rational partner by the international community. There are many fields in which China and Kuwait can work hand in hand to help attain solutions to the following issues：

The Iranian Nuclear Issue. As one of the P5+1， China is one of the negotiating parties in the bid to resolve the Iranian nuclear issue. It had a lot of influence in establishing the Iranian Nuclear Framework agreement reached in Lausanne in April 2015. It is important to note that China has played a major role in these negotiations. However， the Iranian deal's impact on the region and China's other strategic partners in the region， such as the GCC and Saudi Arabia， could be described as catastrophic. For instance， Kuwait stands for Iran's right to have peaceful but safe nuclear power， it does not fear Iran's will to obtain a nuclear power but rather fears Iranian influence on the four main Arab capital cities： Baghdad， Beirut， Damascus and Sana.17“Iran's Advances create alarm in Saudi Arabia and the Gulf，” The Guardian， March 13， 2015.China and Kuwait recognize that Iran is a regional power aiming to be a global power. Thus， working together towards a deal with more solid security guarantees for China's strategic Arab partners would be advisable.18“Wang Yi Raises Four-point Proposal on Negotiation on Iranian Nuclear Issue，” April 1， 2015， http：// www.fmprc.gov.cn/mfa_eng/wjb_663304/zzjg_663340/xybfs_663590/xwlb_663592/t1251850.shtml.

The Syrian Conflict. China's position regarding the Syrian conflict demonstrates China's caution in fulfilling its role in the UN Security Council in a balanced manner. It decided to veto foreign intervention in Syria under the responsibility to protect， but it supported humanitarian aid to Syria. It seems that Sino-Russian relations aim to back up the current regime in Syria，which in one way or another has resulted in the rise of Iranian influence in the region. China and Kuwait could work towards a solution for the Syrian people in which China can still protect its interests （unlike what happened inthe case of Libya） because Kuwait is the only Arab country that stood neutral but rather supportive of the Syrian people and its participation in securing a solution is internationally and regionally welcomed.19“Kuwait diplomacy： A beacon of global peace and coexistence，” February 22， 2015， http：//www. timeskuwait.com/Times_Kuwait-diplomacy--A-beacon-of-global--peace-andcoexistence.

The Yemen Crisis. Although China supports Resolution 2216 of the UN Security Council which legitimizes Arab intervention （including Kuwait） in Yemen， China like Russia fears the humanitarian consequences of the Yemen conflict from two perspectives. China would like to see the Yemeni conflict resolved by peaceful means because of its historic relations with Yemen and China's interest in military cooperation with Yemen due to its geographic location on the Gulf of Aden， which is important to Chinese trade.

Prospects for Kuwait-China Relations

China's Middle Eastern policy needs the support of regional countries and Kuwait might be the most favorable partner as it has balanced relations with the United States， the United Kingdom， the European Union， Russia and China， as well as the regional powers—Iran， Turkey， Egypt and Saudi Arabia.

In the years ahead， the two countries will promote further cooperation in a variety of areas. Kuwait will increase its spending on infrastructure projects by $100-155 billion， including its new airport. China could be interested in the $75 billion that Kuwait is supposedly planning to invest in the period 2015-2017 to maintain and develop its energy infrastructure and services， in addition to increasing production and exploration activities which will achieve a win-win situation for both countries. China may become one of Kuwait's partners in achieving the goal of becoming a financial center by 2035 through the construction of Silk City.

China is willing to support Kuwait becoming a non-permanent member of the UN Security Council， which would enable the two sides to make joint efforts to create a better regional security environment and call for reform of the international security structure.

Alanoud AlSabah holds a master's degree in Chinese Studies from the Pompeu Fabra University， Barcelona，Spain. She has eight years of work experience in the field of International Relations. She has participated in the 3rdAnnual Arab Youth Delegation to China and is awarded the Personality of the Future for the Year 2013 from the French Ministry of Foreign Affairs.