How China could Disrupt Global trade if the Israeli conflict escalates into a Regional War
- Andres Vite
- Oct 10, 2023
- 6 min read
Updated: Oct 17, 2023
An unexpected attack from Hamas and the Israeli conflict
On Saturday, October 7, 2023, the Palestinian group Hamas launched a surprise attack on Israel, combining fighters breaking through security barriers and a hail of rockets fired from Gaza. It was the largest attack by Hamas since the 11-day war in 2021 and the most complex and multifaceted in the long conflict between both sides. Israeli Prime Minister Benjamin Netanyahu declared the country "at war" and responded with a deadly bombing raid on the blockaded coastal enclave. What implications does this attack have for regional stability and global trade? Could it escalate into a conflict similar to the Yom Kippur War or the Six-Day War?
The potential for a regional conflict
The recent Hamas strike into Israel has the potential to escalate into a regional conflict. Hamas is a Palestinian militant group that is sworn to the destruction of Israel. Israel is a nuclear-armed power with a powerful military.
If the fighting continues, it could draw in other countries in the region, such as Egypt, Jordan, and Syria. Iran and Hezbollah, another Lebanese Shia militant group, could also provide support to Hamas.
The potential for a regional conflict is also increased by the fact that the Middle East is already a volatile region. There are ongoing civil wars in Syria and Yemen, and there is a long-running conflict between Israel and the Palestinians.
A regional conflict in the Middle East could have a significant impact on global trade and supply chains. The Middle East is a major oil-producing region, and a conflict could lead to disruptions in oil production and exports. This could lead to higher oil prices, which would have a negative impact on the global economy.
The Middle East is also a major transit route for goods moving between Europe and Asia. A conflict could lead to disruptions in shipping, which would also have a negative impact on the global economy
Here are some specific scenarios that could lead to a regional conflict in the Middle East:
An Israeli military operation in Gaza: If Israel launches a large-scale military operation in Gaza in response to Hamas rocket attacks, it could lead to a wider conflict involving other countries in the region, such as Egypt, Jordan, and Syria.
An Iranian attack on Israel: Iran has threatened to retaliate against Israel for any attack on its nuclear program. If Iran does attack Israel, it could lead to a full-scale war between the two countries.
An Israeli or US military strike on Iran: If Israel or the US launches a military strike on Iran's nuclear program, it would likely lead to a war between Iran and Israel or the US.
A collapse of the Syrian government: If the Syrian government collapses, it could lead to a civil war in Syria and could also create a power vacuum that could be exploited by ISIS and other extremist groups.
A sectarian conflict between Sunnis and Shias: The rivalry between Sunnis and Shias is a major source of instability in the Middle East. If this rivalry escalates, it could lead to a sectarian conflict that could engulf the entire region.
A silent Growing Friend in Middle East
China and Egypt have been deepening their bilateral relations in recent years, especially in the fields of trade, investment, infrastructure, and energy. This has raised some concerns in the US and other Western countries, as they fear that China's growing influence in the region could undermine their strategic interests and jeopardize their control over the Suez canal, a vital waterway for international commerce.
The Suez canal is one of the most important chokepoints in the world, connecting the Mediterranean Sea with the Red Sea and allowing the passage of about 10% of global trade. The Suez Canal is a vital route for energy, especially for oil and gas from the Middle East to Europe and Asia. According to the Suez Canal Authority, approximately 7-10% of the world’s oil and 8% of liquefied natural gas traverse the canal daily. A disruption in the canal would reduce the supply of these commodities and increase their volatility in global markets. This could affect energy security, economic growth and environmental sustainability for many countries.
The canal is also crucial for the US military, as it enables the rapid deployment of forces
and equipment to the Middle East and beyond. The US has maintained a close partnership with Egypt since the 1970s, providing it with billions of dollars in military and economic aid, as well as political support. In exchange, Egypt has granted the US preferential access to the canal and cooperated on regional security issues.
However, China's growing presence in Egypt could pose a challenge to this arrangement. China is now Egypt's largest trading partner, with bilateral trade reaching $14.5 billion in 2020. China is also a major investor in Egypt's infrastructure projects, such as the new administrative capital, the Suez Canal Economic Zone, and the electric railway linking Cairo with Aswan. China is also involved in Egypt's energy sector, helping to develop its natural gas resources and renewable energy projects. Moreover, China and Egypt have signed several agreements on military cooperation, including joint exercises, training, and arms sales.
These developments could have significant implications for the US and its allies. First, China could leverage its economic ties with Egypt to gain more political influence and sway its foreign policy decisions. For instance, China could pressure Egypt to align with its positions on issues such as Taiwan, Hong Kong, Xinjiang, and human rights. China could also persuade Egypt to join its Belt and Road Initiative (BRI), a massive infrastructure project that aims to connect Asia, Africa, and Europe through land and sea routes. The BRI could enhance China's strategic access to the region and potentially challenge the US-led order.
Second, China could use its military ties with Egypt to gain more access to the Suez canal and the surrounding areas. China could seek to establish a naval base or a logistics hub in Egypt, similar to what it has done in Djibouti. This would allow China to project its power and protect its interests in the region, especially in light of the rising tensions with the US over the South China Sea and the Indo-Pacific. China could also seek to increase its presence in the Eastern Mediterranean, where it has been expanding its cooperation with countries like Greece, Cyprus, and Israel. This could create frictions with NATO and undermine its cohesion.
Third, China could use its soft power and public diplomacy to win over the hearts and minds of the Egyptian people and elites. China could present itself as a reliable partner that respects Egypt's sovereignty and supports its development goals. China could also highlight its cultural and historical ties with Egypt, as well as its contributions to global issues such as climate change and pandemic response. China could also counter the negative perceptions of its role in the region by addressing the concerns over its debt-trap diplomacy, labor standards, environmental impact, and human rights record.
Conclusion
If a regional conflict does break out, it is likely to be devastating. The region is home to a number of nuclear-armed powers, and it is also a major oil-producing region. A conflict could lead to a global oil crisis and could also trigger a nuclear war.
China's strengthening ties in the Middle East, especially with Egypt could pose a serious threat to the US control over the Suez canal and international trading commerce. The US should therefore adopt a proactive strategy to maintain its influence and interests in the region. The US should reaffirm its commitment to Egypt's security and stability, while also encouraging it to pursue democratic reforms and respect human rights. The US should also enhance its economic engagement with Egypt, offering alternative sources of investment and trade that are more transparent and sustainable. The US should also strengthen its cooperation with its allies and partners in the region, such as Israel, Saudi Arabia, Turkey, and Greece, to counterbalance China's growing clout. The US should also engage in dialogue with China on areas of common interest and mutual benefit, while also competing where necessary and defending its values and principles.
The US has a strong interest in preventing a regional conflict in the Middle East. The US is a major ally of Israel, and it also has a strong interest in promoting peace and stability in the region. However, the US's ability to influence events in the Middle East is limited, and it is important to be realistic about what the US can achieve.
The US should continue to work with its allies in the region to promote peace and stability. However, the US should also be prepared for the possibility that a regional conflict could break out. The US should have contingency plans in place to deal with the consequences of such a conflict.
Want to cover from offshore manufacturing risks?
If your company is looking to relocate its production to North America and you are looking for specific information about the most important potential markets in which to invest in, I recommend that you Download my Reports on the Top Industrial Real Estate Markets in North America, so you will be able to know key indicators, such as asking rental price per square foot. , absorption, vacancy or inventory levels. They are completely FREE, you just have to register and you will be able to access the most up-to-date information updated every quarter on cities like Dallas, Los Angeles, New York and several more.
Comments