Arms deals also serve to bolster use of yuan
Arms dealing has a shadowy image, though it is no secret the United States dominates the trade. It is becoming more competitive amid geopolitical tensions, including realignment of the world order to reflect China’s rise and Russia’s need to prioritise resupply of arms for its invasion of Ukraine. As some regional powers seek to lessen dependence on the US, China has emerged as a major supplier of a traditional American customer, the oil kingdom of Saudi Arabia.
The Middle East has in the past relied on the US and Russia for most of its weapons systems. Now even traditional allies such as the Saudis and Egypt feel they can no longer put all their eggs in the one basket. Riyadh is looking to diversify its weapons shopping amid increased tensions in relations with Washington. It is said to have spent US$4 billion after last November’s Zhuhai air show.
As we have reported, two major deals are on the way, according to Tactical Reports, a Beirut-based intelligence service. A Saudi military-industrial group is in talks with a Chinese state-owned company to buy a wide range of weapons, from reconnaissance drones to air defence systems. And Egypt is in talks to acquire the Chengdu J-10C multi-role fighter.
This reflects changing perceptions over recent years of Chinese weapons development, with a price advantage once being eroded by quality concerns. Now China is known in defence and arms-trade circles for developing advanced weapons systems. It is already selling drones to the Saudis and Iraq, so this is all part of a growing trend that will strengthen Mideast business and political connections.
There are rumours the Saudi deal will be done in yuan, accumulated when Beijing paid in its own currency for oil and other resources. This may not amount to an immediate challenge to the US dollar but it is a step on the way to increasing the use of the yuan outside China and reducing reliance on the dollar.
Likewise China’s greater arms market share does not mean it is going to replace the US, but it serves the interests of Middle Eastern countries who want to hedge against becoming reliant on any one country for mission-critical military equipment while increasing the use of the yuan for overseas transactions.