Thursday, September 7, 2017

Oman To Become A Key Part Of China’s Silk Road

http://oilprice.com/Geopolitics/International/Oman-To-Become-A-Key-Part-Of-Chinas-Silk-Road.html


By Zainab Calcuttawala - Sep 07, 2017, 4:00 PM CDT

New Chinese investments are working to transform a small fishing village in Oman into the country’s new industrial center, according to a new report by Reuters.

The city receiving all of the industrial attention is located 345 miles south of Muscat. The project promises an overall surge in Chinese investment in the country if it shows any indications of a success.

Three years of low oil prices have pummeled the country’s revenues, making foreign direct investment a key source of new capital in a difficult time. Duqm, the city inundated with construction interest, is just one of the projects initiated by the central government.

The Belt and Road Initiative’s route ties Oman to China’s international trade narrative for the next few years. Even countries that are less popular in diplomatic circles due to ongoing rows, such as Qatar, remain tied to Beijing as the country’s grand economic scheme unfolds over the next few years.

Oil and gas resources in the gulf remain the irreplaceable element of success for any long-range trade strategy. The gulf can no longer send off a ship in the direction of a trade partner and expect it to return on time with the boon of its labor. Immediate capital transfers and related forms of instant gratification are the hallmarks of 21stcentury trade. These expectations cannot be fulfilled without regular and robust access to fossil fuels in large quantities.

 Related: The Next Step In Mexico’s Oil & Gas Privatization Push

The Chinese consortium that is building the fishing town to its height says it aims to pour in $10.7 billion by the time it is done with it.

“Duqm isn’t like Jeddah or like Dubai. It’s still new, it needs time to develop. But we at Wanfang are thinking the future for Duqm will be better than those cities inside the Gulf,” Wanfang CEO Ali Shah told Reuters for a recent article.

The $10.7 billion figure equals twice as much Oman’s usual foreign direct investment numbers. Duqm’s prime location – near trade routes but away from the Strait of Hormuz – make it an easily serviceable route even if tensions arise in the region.

Chinese money has poured into the Middle East since the Silk Road plan has begun taking shape. Before, less than one percent of FDI came from the Asian giant, according to the research firm ChinaMed, which operates out of Italy. Now that ratio is up to five percent, according to figure from 2015. It is hard to get up-to-date numbers from China because the central government keeps its development strategy so closely under wraps. But Beijing alone was the region’s top investor in 2016, with $29.5 billion in promised funds to a range of players in the Arab World.

The Duqm investment represents a large chunk of that FDI total. The site has a port, a dry dock, and a refinery to keep the workers busy. But the city’s first major facility, a storage house for construction materials, will not be completed for another 18 months. It costs $138 million and represents the first building block for China’s so-called miracle project.

The other parts of the project will bring Duqm a $2.8 billon methanol plant, an $84 million vehicle assembly plant, and a $203 million hotel in the next five years.

Related: North Korean Sanctions May Hurt China’s Oil Giants

Though the United States and Europe see the Chinese One Belt, One Road plan as a form of expansionism for the country’s sphere of influence, Russia sees it as an alternative take on free foreign policy. At a summit earlier this year, President Vladimir Putin warned that “protectionism is becoming the new normal,” adding that the “ideas of openness and free trade are increasingly often being rejected (even) by those who until very recently expounded them.”

China’s slow creep into the Middle East is subtle, but it speaks to the larger agenda of fossil fuel hunger in the world’s largest oil and gas consumers. Despite the hype about green energy and nuclear power plants, carbon-based energy is here to stay for at least a couple more decades.

By Zainab Calcuttawala for Oilprice.com

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