The mediator’s cut

China’s donning of the mediator mantle is driven purely by its economic considerations

chin, russia
Two recent prominent examples are its mediation between Iran and Saudi Arabia and the official display of deep bonhomie with Russia. 

The year 2023 is witnessing a different China. Shedding off the marked external disengagement that followed the outbreak of Covid-19, when the mainland was widely criticised for being the origin of the virus, China is making its presence felt in global affairs. Two recent prominent examples are its mediation between Iran and Saudi Arabia and the official display of deep bonhomie with Russia. 

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China’s turnaround from being an isolationist country, unwilling to reestablish global social and commercial links for persisting with a zero-tolerance Covid management policy, has taken barely a few months. The most decisive driver of the shift has been president Xi Jinping’s reaffirmation of power for a record third term in October 2022. Soon after, China begun lifting Covid controls, notwithstanding the predictable adverse impact of such a move on an under-vaccinated local population. With conditions stabilising after nearly three months of distress, China has begun working on recovering the momentum it lost on the global stage during the last three years. 

Several analysts argue that China has been pushed into an unusually tight corner during the last three years. The argument is driven by several reasons, including the success of the US and its allies in building strategic country coalitions, such as the Indo-Pacific and the Quad, for counterbalancing China; a firm push on decoupling of major global supply chains from China; a weak macro-economic performance by China, largely due to production crunches caused by restrictive Covid-19 policies and exacerbation of domestic institutional debts; and the stumbling of the humongous cross-continent Belt and Road initiative (BRI).   

All these were big hits taken by China, marking a rare period of decline in Chinese economic and strategic influence since the beginning of its economic transformation and global engagement in 1978. The last three years saw China coming under severe economic pressure following escalation of tensions with the US and imposition of American restrictions on technology trade with China. President Xi—the champion of economic globalisation in world business forums shocked by the anti-globalisation tirade of Donald Trump and the cruel reality of Brexit—became the symbol of hard nationalism and economic persecution as China shut itself off and home-grown mega unicorns like Alibaba were forced to bite dust.  

The geopolitics of the Covid era has had major economic implications. For China, the key ones among the latter include lower technology and hi-tech sales to China following US restrictions and gradual reshoring of some major supply chains from China. China’s own predicaments in dealing with Covid-19 prevented it from responding to these adverse developments. The Russian aggression in Ukraine provided it with an opportunity to recover its influence. 

China has been a major beneficiary of the Ukraine conflict. Western sanctions on Russia forced the latter to turn decisively to China for selling energy and resources. For China, Russia is not just a source of cheap energy. It is a major source of noble gases like neon and krypton and a critical mineral like palladium. Over time, these resources will be crucial for China and Russia in retaining control over global semiconductor supply chains, which, the US and its allies are keen on displacing both countries from. On the other hand, the sharp rise in Chinese exports of a wide variety of industrial goods to Russia since the Ukraine crisis makes Russia heavily dependent on China for shoring up its wartime economy. The Chinese influence over the Russian economy has increased significantly since the Ukraine conflict with the Renminbi becoming the core currency in which Russia is holding its foreign exchange reserves.

China’s commitment to a deep friendship with Russia, along with its economic clout, puts it in a strong position to influence Russia. But this doesn’t mean it will use the influence to disengage Russia from Ukraine. On the contrary, it will hard sell its allies and ‘neutral’ global actors the ‘damage’ inflicted by the US and Western alliances, chiefly the NATO, on the global order by perpetuating the Ukraine crisis. It will also spare no pains to demonstrate the ineffectiveness of Western sanctions, which is evident from Russia’s ability to persist with the aggression in Ukraine.

The Saudi Arabia-Iran truce mediated by China is also driven by economic motivations. Cooperation with these two critical energy economies of the Middle East is crucial for advancing the BRI in the region. The mediation will also serve as an effective example for articulation of China’s global security initiative (GSI) emphasising on achieving collective security through broader cooperation and development. 

The global optics that has worked to China’s advantage is the joint declaration by Saudi Arabia and Iran of their resumption of diplomatic relations due to mediation by China. The ostensible benefits for China in this regard are confirmation of its global power status and acceptance of its role as a mediator by two key actors in a geopolitically complex region of the world. Further, this also brushes off on the ability—or the lack of it—of the US and the West to bring two historically estranged countries of the region within a formal diplomatic relation. There is little doubt about China’s growing strategic clout in the region and the corresponding decline in the influence of the US.

Will China position itself as an active global mediator in other parts of the world in the days to come? It appears so. For China, the role of an active mediator is driven by long-term economic interests, such as securing access to energy and critical minerals, expanding trade, and adding more countries in the user network of Renminbi and digital Yuan. The strategy aims to counterbalance the US-led initiatives in recent years for reducing China’s control over strategic economic production and curbing its geopolitical influence. 

Amitendu Palit, Senior Research Fellow and Research Lead (trade and economics) in the Institute of South Asian Studies in the National University of Singapore. Views are personal.

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First published on: 27-03-2023 at 04:30 IST
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