After Iraq, the Premature Pivot: Why the Middle East Still Matters

by Bilal Baloch on March 22, 2013

Note from the Editor: This article is part of The Fletcher Forum’s “Iraq War Special Series” commemorating the 10th anniversary of the invasion of Iraq.

This week marks the tenth anniversary of the start of the Iraq war, a war that epitomized the Bush Administration’s bullish foreign policy in the Middle East. While much has changed in the region over the past ten years, including a wave of political and social unrest culminating in new leadership and demands by populations, U.S. foreign policy under President Obama has failed to adapt. The United States continues to view the Middle East through a counterterrorism lens, increasingly relying on drone strikes as it withdraws troops from the region. Meanwhile, China has capitalized on the Middle East’s vast economic and strategic potential, and has reaped political and economic gains as a result.

The Middle East’s geography and demographic trends are among the main drivers of its economic potential. Flanked by Europe on one side and Asia on the other, the Middle East is strategically situated along the New Silk Road of trade and commerce that connects the United States and Europe with other emerging markets in Asia, through the Persian Gulf. Moreover, with a 200 million-strong (and growing) youth population, the region has the potential to be an engine for growth in the same way that China was post-1978. Indeed, and in spite of their recently tumultuous internal politics, countries such as Bahrain have been growing at tiger-like rates over the last decade. Jim O’Neill, Chairman of Goldman Sachs Asset Management (and famous for his coinage of the term “BRIC”) says, “If I look at the whole region together, then just at Africa in general, MENA has the combined potential to be a BRIC-like economic group.” Despite this, many investors have been slow to make inroads into Middle Eastern markets, in part due to negative perceptions of the region. According to a recent Ernst & Young report, forty percent of would-be investors in the region highlight the current political environment as the key area requiring improvement, compared to only twenty percent of investors who have already invested. One country bucking this trend is China.

While the United States whittled away of trillions of dollars on wars in Iraq and Afghanistan over the past decade, China’s commerce-driven approach took full advantage of the Middle East’s economic growth and trade potential. Though China may be the largest importer of Middle Eastern oil, trade between the two parties extends well beyond energy. Exchange between small-scale traders, construction contracts, and Chinese lending have increased China’s trade with Saudi Arabia by $44 billion and Egypt by around $9 billion. Overall, in the past six years, China has exported more to and, since 2009, imported more from the Middle East than ever before. Deepening economic ties between China and the Middle East have bred favorable political ties and increased trust between the two parties. Today, leaders in the Middle East and Persian Gulf can point to infrastructure, including roads and bridges, built with the aid of Chinese contracts. They do not point to a similar American footprint. It is no surprise then that analysts project Chinese-Middle Eastern trade to remain strong, growing at 12.5 percent per annum through to 2020; by contrast, U.S.-Middle Eastern trade is slated to grow 8.4 percent per year. Clearly, as the U.S. pivots east, China is swiveling west.

As the United States washes its hands of the Middle East, it will continue to cede influence in the region to China. In doing so, it will weaken its position in the global balance and fail to capitalize on the Middle East’s manufacturing and trade potential, and its access to new emerging and frontier markets. The region’s massive transformation over the past couple of years presents an opportunity for the United States to broaden its engagement with the Middle East. Aside from increasing investment in the region, the United States remains in a position to increase stability in the Middle East much like it did in post-war Europe. Change is taking place in the region and that will last much longer than a season. The United States must decide whether it will leave a legacy of war and withdrawal that began with, and has been defined by, the Iraq war, or one of lasting, sustainable development in the Middle East.

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