Echoes of Suez, 1956: Will China shove aside America?

Echoes of Suez, 1956: Will China shove aside America?
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There is a saying that history doesn’t repeat itself, but it rhymes. You do not have to be a poet to hear the echoes of the West’s often ill-fated ventures in the Middle East amplified into the future.

The assassination of Iranian Revolutionary Guards commander Qassem Soleimani, together with the U.S. exiting the nuclear deal with Iran and tightening sanctions against that country, form the most recent bout of U.S.-Iran escalation. Although the U.S. Senate has passed an Iran war-powers resolution prohibiting President Donald Trump from further hostilities against Iran without congressional authorization, it is unlikely to constrain the Trump administration for long — nor to mark a sea change in how the U.S. has approached Iran since the 1979 revolution and hostage crisis.

But like sand dunes imperceptibly shifting with the wind, the determinants of how major powers approach Iran have evolved considerably over four decades. After 30 years of military conflict and occupation in the Gulf region, the U.S. has commitment fatigue. Meanwhile, the North American shale oil revolution has made the Mideast marginal rather than central to U.S. energy security. Europe increasingly is determined to shape the Mideast through commercial engagement, even seeking to break with U.S. sanctions through its own parallel financial mechanism known as Instex.

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Perhaps the biggest shift is China’s growing stakes in West Asia, as it has become the largest trading partner and a leading investor in almost every country in that region.

Given that the Gulf region is no stranger to geopolitical maneuvering, what future scenarios might emerge from exploring recent history?

The first relevant echo is the 1956 Suez Crisis, sparked by Egyptian President Gamel Abdel Nasser’s nationalization of the British- and French-owned Suez Canal Company. Britain and France responded by colluding with Israel to spark an incident near the canal, with European forces coming in to “protect” it. Unimpressed by British and French neo-colonial impulses, President Dwight D. Eisenhower used U.S. leverage in the International Monetary Fund to deny Britain emergency loans while the U.S. Treasury threatened to stop supporting the British pound. Facing financial collapse, London pulled back. The British empire came down more because of money than the military.

Could China push aside the U.S. in the way that America did to Britain?

China has cultivated America’s Gulf allies, as well as Russia, Pakistan, Turkey and other key powers in its economic orbit and strategic designs, seeking to shift bilateral trade with each into China’s currency — with Saudi Arabia entertaining a switch to a yuan-based oil trade. Iran is in many ways a central chess piece in this Eurasian strategy, both for its energy resources and market size. In mid-2019, China and Iran signed a raft of agreements hailed as a 25-year partnership. A South China Morning Post column argued that this new alliance was the deeper target of the Soleimani assassination; for its part, China has condemned America’s “military adventurism” and reassured Iran of its commitment to their strategic partnership. Could China next threaten to pull the plug on its U.S. Treasury holdings to get the U.S. to back down on threats against Iran?

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China has gradually reduced its U.S. Treasury holdings but, as the yuan slides due to China’s cooling economy and coronavirus outbreak, it could easily justify a larger sell-off to shore up its own currency. Thus far, the U.S. has not given China an excuse to threaten financial warfare. Iran has even begun to reach out to its Gulf adversaries, Saudi Arabia and the United Arab Emirates (UAE), to restart dialogues aimed at regional stability. And China seems more interested in circumventing the monetary order through a new crypto-currency than in destabilizing the existing financial system from which it currently benefits.

But five years from now, Chinese oil imports likely will be priced in yuan, not dollars, and its parallel digital currency may well have taken off, allowing it to avoid exposure to the SWIFT banking network. There is, therefore, a good chance China could more confidently subvert the dollar and challenge American primacy in the Gulf. Unlike in 1956, of course, it is not two powers within the West switching roles, but the West as a whole losing out to China — and other Asian powers such as India, which is just as keen to see more open trade with Iran.

There is an even more baritone historical resonance in today’s Gulf stand-off, namely that of the 19th century “Great Game” in which Russia muscled in on Britain’s Central and South Asian dominions in its quest to reach the Arabian Sea. In the modern incarnation, China’s Belt and Road Initiative is building new “Silk Roads” to win the new Great Game, diligently constructing sturdy infrastructure passageways from its western borders towards Europe and the Arabian and Mediterranean seas. Russia bit off more than it could chew 150 years ago, and most of the Great Game’s shadow battles ended in stalemate. But China today is a far more robust, cunning player than 19th century Russia or the Cold War’s Soviet Union. Indeed, China is negotiating a free-trade agreement with Israel, for whom it is building major ports and from whom it has managed to acquire sensitive U.S. military technology.

Where does this leave the U.S. and its Gulf allies in their confrontation with Iran?

Influential Gulf leaders, such as the UAE’s Mohammed bin Zayed and Saudi crown prince Mohammed bin Salman, fiercely distrust Iran. Although they still view the U.S. as a strong ally, they see it as unreliable on two levels: The U.S. no longer needs Gulf oil, and there is a bipartisan consensus that America should end its “endless wars,” especially in Iraq. Furthermore, they are armed to the teeth with American military hardware and continue to purchase more, but the technical underbelly of the military-industrial complex can train Gulf Arab forces to fight for themselves with fewer U.S. troops serving as a tripwire. Even if U.S. forces remained in Qatar and Bahrain (respectively the headquarters of U.S. Central Command and of the U.S. Fifth Fleet), they cannot arbitrate the unsettled tensions between regional powers — and the U.S. doesn’t want to be caught in the middle, should war break out.

What, then, is the most likely scenario between Suez Crisis 2.0 and the New Great Game? The best analogy may come neither from the 19th century nor the 1950s but from the 1980s Iran-Iraq War, a decade-long stalemate that claimed nearly a half-million casualties. In this incarnation, Iraq again becomes the principal battlefield, with Saudi Arabia and Iran playing the main antagonists.

Rather than repeating the violent dynamics of their own pasts, one history lesson Gulf countries should learn comes from post-war Europe, where rival powers — and permanent neighbors — built common institutions to restrain hegemony and promote cooperation. Saudi Arabia, Iran, Turkey, Egypt and Israel are all rooted civilizations forming the parameters of the failed states between them. An OSCE-like security dialogue among these powers is essential to building trust among them, since none can conquer the others. The key Gulf Arab powers now have more open relations with Israel, largely because of Iran’s threat. They can bring Iran into the fold to combat common challenges from ISIS to water scarcity; Iran itself has proposed a Hormuz Initiative to share monitoring of that strategic waterway.

America’s Marshall Plan and founding of the NATO alliance provided for the economic rehabilitation and strategic cover that enabled the European Union to flourish. But as Europe began to speak of a common currency and army, rather than remain subordinated to the U.S. dollar and NATO, U.S. administrations turned cynical. President TrumpDonald John TrumpBiden says his faith is 'bedrock foundation of my life' after Trump claim Coronavirus talks on life support as parties dig in, pass blame Ohio governor tests negative in second coronavirus test MORE wants more burden-sharing from Europe but also casts it as an economic threat. Nonetheless, European peace is a bona fide American success.

In the Gulf, supporting such a regional security organization for West Asia’s powers to sort out their own matters would be a similar change from today’s intractable acrimony and diversion of resources. As sparks fly with Tehran, and as China eyes its financial options, that is an echo worth listening to.

Parag Khanna is a former fellow at the Brookings Institution and at New America, a think tank focused on national security, technology and other public policy issues. A former senior geopolitical adviser to U.S. Special Operations Forces in Iraq and Afghanistan, his latest book is “The Future is Asian: Commerce, Conflict, and Culture in the 21st Century” (2019).