The Chinese Communist Party (CCP) is using Iran to tighten its grip on the Middle East's major oil routes. The objective is to seize a dominant position during the energy crisis triggered by the Russia-Ukraine war. Oman, at the gateway to the Hormuz Strait, has become a target for Iran to expand its influence in the Middle East. Oman is also a key sea and land logistics intersection in the CCP's Belt and Road Initiative (BRI) and an important part of its energy strategy in the region.
The Persian Gulf and its outlet, the Strait of Hormuz, is the route for at least one-third of the world's oil shipments. Iran's coastline dominates the northern shore of the Persian Gulf and the Strait of Hormuz, while the southern shore of the Strait is dominated by Oman and the United Arab Emirates. Part of Oman lies at the apex of this narrow and winding choke point—where all ships must slow down to traverse.
During his visit to Oman, Raisi planned to sign a number of cooperation agreements with Oman, including the finalization of a gas pipeline link to Iran, which will enable Iran to significantly increase its gas exports to Oman. Although this project began in 2013, it has not moved forward in earnest.
Watkins believes an agreement the CCP reached with Iran in 2019 helped to strengthen its control over the Strait of Hormuz. The $400 billion deal allows the CCP to trade for Iranian oil supplies while simultaneously weakening U.S. efforts against the country.
China is the largest buyer of Iranian crude oil, importing a total of 440 kbd from Iran since June 2015. Thirty percent of the volume was received when Iran was under U.S. sanctions.
CCP Takes Advantage of Oman's Fiscal DownturnThe CCP hasn’t limited its search for opportunities to just Iran in the Middle East. In 2018, when the Omani government’s finances had been weak for several years, the CCP initiated a partnership with the country and signed The Belt and Road Initiative Memorandum of Understanding (p38) (pdf). In June 2020, Moody’s further downgraded Oman's sovereign credit rating to Ba3 in speculative grading.
Roughly 82.3 percent of China's imports from Oman are mainly crude oil (p46). Chinese businesses mainly invest in Oman’s oil and gas sector, energy and electricity, infrastructure, and information and communications, similar to their investments in Iran. Among the businesses investing in Oman are the telecom giant Huawei and oil companies including PetroChina International Co., China National Grid, and China National Petroleum Company.
The largest Chinese project in Oman is the Port of Duqm Special Economic Zone industrial park. It began in May 2016 with a total investment of $10.6 billion. The funds were used for crude oil smelting, producing natural gas chemicals, and for solar photovoltaic projects and logistics (p50).
Oman’s Duqm is a major port of call for container ships, general cargo ships, and bulk carriers. It is also an important crossroad for Middle Eastern oil to enter Europe via the Red Sea and the Suez Canal.
Yemen, on the opposite side of the Bab al-Mandab strait, has become a battleground for geopolitical wrangling. The Iranian-backed Houthis are still trying to confront Arab powers such as Saudi Arabia and the UAE to seize control of Yemen's southernmost portion of the strait.