MALAYSIA’S $6.5 BILLION SCANDAL ALMOST SANK IT’S DERMOCRACY

On the first day of 2017, fugitive Malaysian financier Jho Low, the chief suspect in a $6.5 billion fraud that had split his home country in two, circulated a curious parable to his trusted contacts on Chinese messaging app WeChat: “2016 was the Perfect Storm … and the Captain simply adjusted their sails effortlessly and continued their destined journey….”

It was a remarkably nonchalant message for a man at the center of a U.S. Justice Department criminal investigation, and who had become a cartoon villain for protestors in the streets of Kuala Lumpur. But as Low bobbed along on his mega-yacht,Equanimity, he had the utmost confidence in his “captain” — Malaysian Prime Minister Najib Razak, the man believed to be Low’s partner in defrauding his own country’s public.

When the message was sent, Najib’s reign seemed unassailable. Threatened with ouster two years earlier, the so-called captain — the head of a political alliance that had ruled Malaysia for over six decades — had demonstrated his willingness to burn down Malaysian rule of law and democracy to save himself and his allies.

But today, the former prime minister and his wife are unable to leave the country. The anti-corruption agency investigation has reportedly recommended prosecution and Najib is set to be charged soon after the Eid celebrations finish. Low himself is scuttling between Macau and Taiwan, seeking to cut a deal with the new government in exchange for immunity. His approaches have been flatlyrejected.

Malaysia’s institutions proved more resilient than either man had ever imagined, and descent into authoritarianism has been averted – offering a lesson not only to aspiring dictators, but to those in the United States who argue that propping up corrupt leaders is in U.S. interests.

* * *

The party came to an abrupt end thanks to a multibillion-dollar scandal involving Najib and Low’s brainchild: a government investment fund called 1Malaysia Development Berhad (1MDB). With a nebulous mandate of promoting economic development through strategic partnerships, the fund entered into a series of huge deals with partners in Saudi Arabia and Abu Dhabi to nominally invest in energy and real estate.

The deals were, however, allegedly a smokescreen for a conspiracy to divert billions to a small cabal of conspirators on both sides of the deals; chief amongst them Najib and Jho Low. Fuelled by debt and with no substantive cash flow from its investments, the fund became a $17 billion black hole, for which Malaysians will pick up the tab for generations.

In 2016, when the U.S. Department of Justice (DOJ) seized assets worth $2 billion held by Jho Low and his associates in the United States, Switzerland, and United Kingdom These assets included a private jet, mansions in Beverly Hills and London, penthouses in New York, paintings by Monet and Van Gogh, and the rights to movies likeThe Wolf of Wall Street and Dumb and Dumber To, allegedly purchased using funds siphoned from 1MDB. While the Justice Department named Low as a chief conspirator in the fraud, Malaysian Prime Minister Najib Razak was referred to only as ‘Malaysian Official 1’. The DOJ case confirmed earlierheadlines that over $1 billion flowed into his personal bank account in Kuala Lumpur.

Yet Low knew that he was safe as long as Najib was in power. Like many other Malaysians, he couldn’t imagine a world in which Najib, an aristocrat and head of a political alliance that had ruled uninterrupted since independence in 1957, wouldn’t prevail. Even as knowledge of the fraud spread throughout the country, Najib remained confident in his own impunity — and determined to protect himself even if it meant putting a torch to Malaysia’s democracy and rule of law.

* * *

When Najib became prime minister in 2009, he projected the image of an energetic modernizer. His tenure coincided with the rise of another youthful reformer, U.S. President Barack Obama, who pledged to strengthen alliances as part of his “pivot to Asia” to counter China’s growing influence.Najib’s team of Western public-relations advisors sculpted his image as a pro-Western pragmatist leading a majority Muslim nation, forming his Global Movement of Moderates initiative to fight extremism. The two leaders apparently enjoyed a genuinely warm personal relationship, golfing together in Hawaii over Christmas in 2014 during a meeting brokered by a former Obama fundraiser (himself being investigatedfor receiving millions embezzled from 1MDB).

This friendship was one reason why the Justice Department seizure of assets held by his family and associates blindsided Najib and temporarily upended Malaysia’s foreign policy. Najib’s press secretary accused the United States of imperial overreach, calling the indictment “unnecessary and gratuitous” and tantamount to “domestic political manipulation and interference.” Najib dropped any pretense of domestic reform and began to appeal to his supporters’ basest political sentiments, racial and religious supremacy, directed against Malaysia’s ethnic Chinese population. At a fundraising dinner for his party, he even called on his supporters to be “brave” like Islamic State fighters.

At the same time, he jetted off to China in search of a bailout for 1MDB, which had begun defaulting on its debts. “The stories about 1MDB monkey business and the DOJ indictment caused huge capital flight from Malaysia, leaving a foreign investment vacuum that China saw as an opportunity to further cement its strategic presence” said James Chin, director of the Asia Institute at the University of Tasmania. China had already been ramping up its investments in Malaysia under Najib’s administration as part of Xi Jinping’s Belt and Road Initiative.

Najib inked a number of new deals with Chinese state-owned firms including the construction of a $13 billion high-speed rail line and purchase of 1MDB’s dubiously overvalued power and land assets. The price of this neighborly “goodwill” was a tacit shift in Malaysia’s foreign policy toward China, and coincided with unprecedented levels of encroachment by Chinese vessels into Malaysian waters in the South China Sea.

“In effect, China took for itself all the benefits and left us with all the liabilities” argues Dennis Ignatius, a former Malaysian ambassador. “If Najib had won the election “we would have become so indebted to China that our independence and territorial integrity would have been seriously compromised.”

As 1MDB publicly unraveled, Najib targeted Malaysian democracy itself. In 2015, leaked documents first surfacedrevealing deposits into his accounts. By this point, Malaysian authorities had been quietly building a case against Najib for some time, and were in the final stages of preparing for his arrest. Najib got wind of their intentions and launched a purge, dismissing Attorney General Abdul Gani Patail and senior officers of the Malaysian Anti-Corruption Commission.

They were replaced with bumbling placemen who would later clear Najib of all charges. Soon after the purge, Kevin Morais, a state prosecutor alleged to be one of the leakers, was kidnapped and found buried in cement in an oil drum outside Kuala Lumpur. His exact role remains mysterious, but his gruesomemurder sent shockwaves through the civil service.

As law enforcement in the United States, Singapore, Switzerland, and Luxembourg announced investigations and froze billions in assets allegedly stolen from 1MDB, Najib’s new attorney general, Apandi Ali claimed that they must be mistaken. Letters for legal cooperation went unanswered. There was, apparently, no money missing from 1MDB. Malaysia didn’t want this money back, because to do so would be to admit a crime had been committed.

After his assault on the law, Najib went after the media, introducing and enforcing new laws, including a Trump-inspired ban on fake news, ahead of the May 2018 general election that criminalized dissemination of any story Najib’s ministers deemed as fake. He also furnished himself with powers to effectively declare martial law in the event of an ill-defined “security crisis”.

Finally, he went after the voting system itself, re-delineating an alreadygerrymandered electoral map in the hopes of eliminating any possible ouster by the ballot box.

As the country drifted toward the general election on May 9, most commentators predicted another grubby win for Najib’s incumbent coalition. “Najib’s campaign strategy relied on a set-piece battle where he thought he’d shaped the battlefield ahead of the election with factors like the gerrymandering, the fake news law and weekday polling” says Ben Sufjan, Director of the Merdeka Center, Malaysia’s leading polling group.

Had Najib won the election, he would have taken the country into unchartered authoritarian territory. He was in so deep that his options were dictatorship, exile, or prosecution. The election would have been the funeral for a Malaysian democracy that was already looking in terminal decline. Yet that evening, Lazarus-like, it would spring back to life.

* * *

As polling day neared, it became increasingly clear that Najib’s usual tricks weren’t working. The long-term power of his party had also brought with it a fatal inertia.

With crowds flocking to opposition campaign gatherings, the government resorted to cynically suppressing voter turnout: polling day was called on a weekday; postal votes didn’t arrive; and a strict deadline of 5 p.m. was called while hundreds still waited in line to vote. In some areas, voters were even rejected because they didn’t meet an arbitrary and newly invented “dress code.”

None of this was enough to save him. Najib believed the complexity of the 1MDB fraud made it incomprehensible to most voters in the key swing seats. Yet he was up against the wily Mahathir Mohamad, a 92-year-old political veteran who boiled it down to “Najib is not a rich man — he steals money,” and scathingly referred to Najib’s loyalists as farmyard animals receiving dedak, or chicken feed, from their master.

1MDB became a lightning rod and an indelible symbol of grand corruption. Najib’s fate was sealed. It was a stunning victory for the opposition coalition.

* * *

The first couple’s downfall was humiliating. After a bungled attempt to fly out the country on a private jet was thwarted, they were effectively under house arrest. Days later, police launched dawn searches of their properties in Kuala Lumpur. Photos, probably taken by police and leaked on social media, showed the shattered pair slouched in armchairs, dressed in their fine silks, as officers broke open a series of safes. In scenes reminiscent of Ferdinand and Imelda Marcos’s downfall, inside was $28 million in cash (in 26 different currencies) and $50 million in luxury items including 284 boxes of designer handbags (Najib’s wife, Rosmah, wasinfamous for her purchase of a $200,000 Hermès Birkin bag). But unlike the former first couple of the Philippines, Najib and Rosmah weren’t agile enough to get out of Dodge.

Across the border, Low slipped out of Thailand. With the Equanimity now impounded in Bali and his captain under unofficial house arrest, Low’s world has collapsed on him — leading to his recent hints he might flip on his old boss.

The new government quickly reappointed the original 1MDB task force that was disbanded by Najib. With a new and highly cooperative jurisdiction in Malaysia, the full and ugly scale of the 1MDB fraud is likely to be revealed. Mahathir is already talking of revising the country’s deals with China, struck during the era of blatant corruption. Nationalist press in Beijing are warning Mahathir of the price Malaysia will pay “if it fails to adhere to the spirit of the contract”.

* * *

The lessons of 1MDB aren’t confined to Malaysia. In the wake of the 2007-2008 global financial crisis, investors flocked to growth markets in Asia and Latin America, where confidence was high and governments flush with money.1MDB and Brazil’s Petrobras scandal will go down as the two iconic corruption cases that exposed the rot within globalization. But the brave officers of anti-corruption commissions and citizens at the ballot box ultimately brought down prime ministers and presidents.

In Malaysia’s case, they had a little help from the United States, specifically from a controversial program within the Department of Justice called the Kleptocracy Asset Recovery Initiative which continued its civil action even after Najib quashed the domestic 1MDB investigation. The State Department reportedly tried to stifle the DOJ action against Najib. That it failed has been only positive for the reputation of the United States at a time when its image has been badly tarnished worldwide.

While President Donald Trump has talked scathingly of the DOJ’s foreign corruption agenda (and influentialfigures like donor Eliot Broidy were reportedly in talks with Jho Low to attach a $75 million success fee if he could end the 1MDB investigation), the 1MDB case is a striking instance of how anti-corruption can pay off not only morally, but geopolitically for the United States.

With a fresh administration in Malaysia, the DOJ is now able to repatriate the $2 billion in assets that were seized and help plug the 1MDB debt, stabilizing the new government. After a three-year interlude, they can also resume working with their Malaysian counterparts. In the meantime, the new administration has tugged the country away from the seemingly inevitable gravity of China’s orbit.

Najib’s fall is a reminder that tyrants are not invincible, and that U.S. interests, in the long term, are best served by supporting those fighting for the rule of law, financial transparency, and anti-corruption efforts than by short-term alliances with strongmen.

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DEULOFEU’S MOVE FROM WATFORD IS NOW PERMANENT

Watford have completed the signing of winger Gerard Deulofeu from Barcelona on a five-year contract, the Premier League club said on Monday.
The 24-year-old, who joined Watford on-loan in January, made seven appearances in the league for the English side last season.
Barcelona said a fee of 13 million euros ($15.3 million) along with another 4 million in variables was agreed for the transfer.
“We are very pleased to welcome Gerard back to Vicarage Road and thank FC Barcelona for their part in concluding this deal,” Watford Chairman & CEO Scott Duxbury said on the club’s website https://www.watfordfc.com . “Our ambition to succeed and grow in the Premier League remains as strong as ever.”
Deulofeu, who has four caps for Spain, progressed through Barcelona’s youth system and made his senior debut in 2011 but failed to establish himself at the La Liga outfit.
The Spaniard then moved to Everton in 2015 but re-joined Barcelona in 2017 after a loan spell at AC Milan.

JULEN GET SACKED BY SPAIN AND BEEN HIRED BY REAL MADRID

Spain dramatically sacked coach Julen Lopetegui on Wednesday and apointed federation sporting director Fernando Hierro — just two days before the team’s opening game at the World Cup.
In a surprise announcement on Tuesday, Real Madrid appointed Lopetegui as Zinedine Zidane’s successor to take over after the tournament in Russia, sparking outrage among the federation and Spanish fans at the timing of the announcement.
At a severely delayed press conference at Spain’s World Cup base in Krasnodar, Spanish football federation (RFEF) chief Luis Rubiales expressed dismay at the timing of events that threaten to derail Spain’s World Cup chances.
“The national team is the team for all Spaniards and there are some decisions we feel obliged to take to protect some values,” said Rubiales.
“Negotiating is legitimate but it took place without the RFEF being informed until five minutes before a press statement was released. There has to be a message for all workers in the federation that there is a right way to do things.”
Later on Wednesday, Spain named Hierro as the coach for the tournament in Russia.
“Fernando Hierro will assume coaching responsibilities at the World Cup in Russia,” the Spanish football federation announced.
The 50-year-old Hierro’s only real coaching experience came when he was in charge of second division Spanish outfit Oviedo for one season.
Lopetegui had signed a contract extension until 2020 just last month and never tasted defeat in his 20 games in charge as Spain boss.

Latin America in the ‘Asian Century’

Latin America is undergoing a process that could redefine the geopolitics of the region. Uninvolved in the conflicts of the Middle East, West-Russia competition, Islamic terrorism, north-eastern Asia and the South China Sea, the continent is in the midst of a geopolitical vacuum: devoid of major contexts for regional influence, as well as of any grand strategy capable of merging compelling parts of the Americas.

The inclusion of Latin America in the OBOR and particularly the proposed Be-Oceanic Railroad (TORR) could be a transformative factor in the continental geopolitics

After the Cold War and 9/11, the US focus has shifted to the Middle East, while significant political and economic transformations took place in the international arena. These transformations haven’t spared Latin America. The gradual erosion of the “unipolar moment”, along with the region’s domestic policies and the rise of China, changed the face of key countries in the region. Trying to get out of the shadows of their northern neighbour, Latin American countries – notably Brazil and Venezuela – pursued a relatively independent foreign policy and established a sphere of influence through the creation of regional (MERCOSUR, UNASUR, ALBRA, PETROCARIBE, and to a lesser extent the Pacific Alliance) and international association bodies (such as the BRICS). Such states have also witnessed the establishment of political relations with important centres of power in the world. Perhaps most notable is the continent’s growing relationship with Asian powers like China.

As a result, in recent years an academic debate has erupted over the loss of US hegemony across the Americas, particularly while the so called “pink tide” brought to power leftist governments in Brazil, Bolivia, Argentina, Chile, and Venezuela among others.

Recently, we’ve witnessed a shift with respect to the alignment of parties and movements. The “pink tide” typical for many Latin American countries has been hampered by the new market conjecture, the global financial crisis, and a revival of centrist and rightist parties, not without US support. In countries like Honduras, Paraguay, Guatemala, Вrazil, Argentina, Peru, Paraguay, Panama, the Dominican Republic, and Chile, in the last few years the centre-right came back to power, making it possible for several experts to point out a ‘turn to the right’.

Given this background, President Donald Trump’s decision to cancel his visit at the Summit of the Americas in order to plan and conduct a military strike on Syria reveals Washington’s approach to Latin America. The presence of the US commander in chief at the meeting held in Lima between 12 and 13 April would have marked the first time he went beyond the southern border as US president after a harsh start.

The United States’ comparatively weak footing in the Americas is undoubtedly attributable to long-term trends (a retreat from the region in terms of political and economic influence), but Trump’s missteps could lead to a new low, from trade protectionism and US withdrawal from the TPP to the hostile rhetoric against countries such as Mexico and threats of military intervention in Venezuela.

As US Southcom Commander Admiral Kurt Tidd puts it, “although other regions may figure more prominently on U.S. foreign policy and national security agendas, Latin America and the Caribbean is the region most connected to our own society, prosperity, and security.” According to Tidd, there are also strategic challenges to be addressed by the White House: “while threat networks and potential crises are immediate concerns… over the past decade, China, Russia and Iran have established a greater presence in the region. These actors have capitalised on the perception that the US is disengaging from the region. Our leadership is weakened not because China or Russia offer compelling alternatives, but because it’s not always clear to our network of allies and partners what’s important to us.”

This perception has been confirmed by the remarks of then Secretary of State Rex Tillerson during his Latin Americandiplomatic tour in February 2018, which took place in currently pro-US states such as Peru, Colombia, Argentina. He described the Monroe doctrine as being “as relevant today as it was the day it was written,” and criticised the region’s relationship with “imperialist” China. According to Tillerson, “today China is getting a foothold in Latin America. It is using economic statecraft to pull the region into its orbit.” Tillerson took aim at China’s economic approach, which has been centred on acquiring access to commodities from countries such as Brazil, Venezuela, Argentina, and Peru. “Latin America does not need new imperial powers that seek only to benefit their own people,” he stated, “China’s state-led model of development is reminiscent of the past.. It doesn’t have to be this hemisphere’s future.”

Latin America’s swing to the left provided fertile ground for advancing China’s “harmonious rise” strategy, serving its economic purposes and reinforcing its position in the Western Hemisphere. Beijing’s trade with the region has grown over twenty times in the last two decades. Since 2005, Beijing has provided at least $150 billion in loans to Latin American countries and state-owned firms. For the period between 2015 and 2019, President Xi Jinping set out the remarkable goal of $500 billion in trade and $250 billion in direct investment.

China is currently the region’s second largest trading partner (after the US) and the largest extra-regional trading partner for key countries including Argentina, Brazil, Chile, Peru and Uruguay. After developing a trading relationship in the 1990s, between 2005 and 2010 the China-Latin America relationship entered a new phase – focused on financing and Foreign Direct Investment in countries like Brazil, Venezuela, and Argentina.

Since 2013, Beijing has moved into a third phase: infrastructure projects, based on global composite strategies such as the “One Belt, One Road” (OBOR). The inclusion of Latin America in the OBOR and particularly the proposed Be-Oceanic Railroad (TORR) could be a transformative factor in the continental geopolitics, letting Brazil (a BRICS and MERCOSUR member) break through to the Pacific Ocean and create a platform for cooperation between MERCOSUR and the pro-US Pacific Alliance.

However, the economic relationship between China and Latin America remains riddled with tensions. Aside from a growing trade defecit with China, Latin America is still seen as a “centre-periphery” liaison. Moreover, the recent political trend towards centrist governments, in addition to the ongoing crisis in Venezuela (one of China’s preeminent Latin American partners), represent a critical test for what seems to be a marriage of convenience. If Xi Jinping wishes to capitalise on the United States’ lack of engagement with Latin America, he needs to foster the image of a leader committed to globalisation.

Ultimately, Trump’s absence at the Summit of the Americas stresses a key feature of the US stance in the region; although the control or dominance of North and South America is one of the oldest US strategic imperatives, Latin America is not perceived as an overriding geopolitical area of interest. As no regional or external actor has the capability nor the resources to fill the geopolitical vacuum, the American hyperpower will keep a vigilant eye and intervene only if and when geostrategic interests are jeopardised. Likewise, China isn’t capable of projecting significant power in the Western Hemipshere; Beijing has bolstered ties through trade, investment and financing, but its cardinal goal has been to advance its domestic economic and financial development. Given such a low-conflict framework, most Latin American states will continue to pursue maximum profit from relationships with China and the US.

Lorenzo Di Muro is a contributing editor at Limes – Italian Review of Geopolitics, and a contributor to Aspenia and La Voce d’Italia. His research focuses on global geopolitics, Sino–US relations and Latin America. Find him on Twitter@lorenzdimuro. Image Credit: CC/Wikimedia Commons.

KYLIAN MBAPPE PICKED UP AN INJURY WHILE TRAINING

Kylian Mbappe has played down an injury scare after he limped out of training on Tuesday as France stepped up their preparations for the World Cup.
Didier Deschamps’ squad were taking part in an open training session at the Glebovets Stadium in Istra when Paris Saint-Germain forward Mbappe went down following a challenge with defender Adil Rami.
The 19-year-old was pictured laying on the floor holding his left ankle before being helped to his feet by staff.
There was no immediate further details given of the injury by the French Football Federation, which had broadcast the training session on YouTube.
However, later on Tuesday, Mbappe took to his personal Twitter account to allay fears it could be a serious problem.
“I’m fine, it’s just a knock so it does not matter but thank you for your posts ?? PS: And leave my friend @Rami13official it was not mean??”
Earlier, Atletico Madrid forward Antoine Griezmann had spoken at a press conference, looking ahead to the opening Group C match against Australia in Kazan on June 16.
Les Bleus also face Peru and Denmark as they aim to progress to the knockout stage.
Griezmann said: “We know it will be difficult, but we have the squad and the dressing room to achieve something big.
“We know that going forwards, we can hurt teams at any time, but we must also be strong defensively, that will be the basis [for success]”.
Deschamps could opt to play with a front three against Australia, which could see Griezmann pushed alongside Olivier Giroud and Mbappe, if he is fully fit in time.
“As long as I am on the field, I am happy,” the Atletico Madrid forward said.
“I am better in the axis, but I can play right or left. I want to give the best of myself in the field, that is the most important, no matter where I play, I am at the service of the team.”

2018 Career Diplomat of the Year Zeid Raad al-Hussein: Read the Transcript

Good evening to you all. I must confess I was astounded as well as delighted to receive an award for diplomacy. Over the past few years, I have been attacked and trolled in various ways, but never have I been described as being diplomatic. Still, diplomacy properly defined is the peaceful arrangement of relations between states.

This does hit home.

The Universal Declaration of Human Rights is based on two core premises. One: every human being has inherent dignity, and all of us have equal and inalienable rights. Recognition of those rights, and I quote the first line of the preamble, is the foundation of freedom, justice, and peace in the world.

Four years as the U.N. high commissioner for human rights has brought me many luminous encounters with women and men of immense dignity and principle, a number of desperately important life-saving struggles, much shocking and painful information, and some lessons, profound lessons which may take many years to fully assimilate. I hope to share a few of them with you tonight.

But first I want to circle back, as I have constantly done and found myself doing throughout my mandate, to the Universal Declaration and to the context in which it was drafted.

Forgive me, but I am a historian by training. This is truly where the story begins. It was at time of slaughter and terrible suffering, with broken economies and nations emerging from the ashes of two world wars, an immense genocide, atomic destruction, and the Great Depression. Finding solutions that could ensure global and national peace was a matter of the starkest kind of survival; committing to the U.N. charter and the Universal Declaration of Human Rights was desperately important. They were not philosophical goals. This was life and death.

There will be, to use the refrain, no peace without justice. There will be no durable development without the promotion of broad social progress and better standards of life for all, and larger freedom. The men and women who survived the two world wars understood this, utterly. It was in their bones.

Leaders of states understood it and knew they must draft and hold to international laws which would ensure collective action within and peaceful relationships within and between states.

Treaty after treaty, they built a body of laws and covenants and committed to implementing them. And there was, there is, great cynicism about the global order they constructed, never fully global, never fully orderly.

China Smells Opportunity in the Middle East’s Crisis

As the Middle East becomes ever more unstable, a surprising victor may be emerging: China. Under President Xi Jinping, China has accelerated its engagement with the Middle East — a region Beijing once treated as peripheral to its interests. Increased trade and investment, invigorated diplomatic exchanges, and expanded military ties are gradually transforming China’s position in the Middle East. Unless Washington can free its focus from the crises of the moment, Beijing may realize its ambitions: a Middle East more squarely within its own economic and diplomatic orbit, where the United States remains responsible for addressing the region’s most intractable challenges.

Oil has traditionally served as the glue holding together America’s relationships with key Arab states. Yet while the United States has revitalized its domestic petroleum production through the fracking revolution and reduced its dependence on foreign oil, China’s energy imports from the region have surged as the Middle East’s demand for energy at home has grown. Today, even as Beijing seeks to diversify its sources of foreign oil away from the region, it remains the among the top three importers from Saudi Arabia, Iraq, andIran.

China’s appetite for Middle Eastern energy is creating the conditions for economic interdependence that mirrors the ties that have bound the United States to Saudi Arabia and other Gulf countries. This co-dependency runs the risk of curbing U.S. influence and rendering key Arab states more susceptible to Chinese demands. Indeed, Beijing has not shied away from using its leverage as a leading energy importer — in a recent example, it threatened to scale back oil imports from Saudi Arabia over a pricing dispute.

Beyond energy trade, China’s economic influence across the Middle East has expanded through its investment. Arab countries, eager to reduce their dependency on oil exports and diversify their economies through creating new industries, are welcoming Chinese investment. Saudi Arabia and Jordan are both in discussions with Beijing to harmonize their development plans with the Belt and Road Initiative — Xi’s signature piece of economic statecraft.

In the case of Saudi Arabia, this alignment of strategic visions has translated into a strong commercial signing package during King Salman’s March 2017 state visit to Beijing, totaling$65 billion of bilateral agreements in the oil, space, and renewable energy sectors. Additionally, Egyptian collaborationwith China on a new Suez Canal cooperation zone is underway. In Duqm, Oman, Chinese capital inflows transformed a backwater fishing village into a $10.7 billion “Sino-Oman Industrial City” featuring an oil refinery capable of processing 235,000 barrels per day.

In positioning its engagement with the Middle East as purely commercial in nature, China has enhanced its economic relations with the Arab states without endangering its similarly growing ties with Israel and Iran.

In Israel, China has invested in ports and railways, and it has become a growing player in the Israeli high-tech sector. At a time when the United States and its allies in Europe, Australia, and Japan increasingly regard Chinese investment as a threat to their long-term innovation edge, Israel, without taking appropriate precautions, could become a backdoor for China to obtain the technology it needs to realize its ambitions to dominate the critical industries of the 21st century.

China’s economic relationship with Iran, for which it is the No. 1 trading partner, has continued to deepen. As European firms fretted last year about a return of U.S. sanctions under President Donald Trump, Chinese state-owned investment arm CITIC Group established a $10 billion credit line for Iran. In 2017, China-Iran trade exceeded $37 billion, with year-on-year growth of 19 percent. U.S. withdrawal from the Iran nuclear deal and the threat of new sanctionsputs all foreign companies under growing pressure to scale down their presence in Iran. Yet the specter of sanctions does not appear to havedissuaded Beijing from continuing to enhance its trade and investment relationship with Tehran, which will — as it did prior to the nuclear deal — have few alternatives to China going forward.

China’s burgeoning ties with the Middle East — though still primarily economic — are not limited to commercial and financial activity. Xi is augmenting the country’s economic gains with diplomatic exchanges, notably his January 2016 tour of Saudi Arabia, Egypt, and Iran. Xi subsequently welcomed Saudi Arabia’s King Salman and Israeli Prime Minister Benjamin Netanyahu to Beijing for official visits. China has also demonstrated a new, if cautious, willingness to make forays into some of the region’s disputes. For example, Beijing has given the Bashar al-Assad regime and its patron in Moscow diplomatic backing as well asconsistent support in the Chinese media. Beijing has also hosted Israelis and Palestinians for a Peace Symposium.Although it is unlikely that China will ever play a prominent role as a mediator in either of these crises, its increasing willingness to wade into divisive regional issues demonstrates Beijing’s changing perception of its role in the region.

Beyond these diplomatic overtures, China has ramped up its military engagement across the Middle East. The Chinese navy has made efforts to demonstrate its presence in the vicinity of strategic chokepoints such as the Strait of Hormuz, the Bab el-Mandeb strait, and the Suez Canal. Since 2010, the navy has conducted port calls in every nation in the Gulf Cooperation Council (GCC), Egypt, Israel, and Iran. In June 2017, China and Iran conducted ajoint naval exercise on the fringe of the Strait of Hormuz. Building on port visits and exercises, and leveraging dual-use infrastructure created by its regional investments, China could ultimately seek to obtain military access in the region — much as it did in nearby Djibouti.

China has also emerged as a boutique source of armaments for the Middle East, given its willingness to supply military-grade unmanned aerial vehicles (UAVs) that until very recentlywere subject to U.S. export controls. Preliminary open-source satellite imagery indicates that China recentlysold such UAVs to the United Arab Emirates. Reporting from Yemenindicates that these drones are being actively employed in the ongoing campaign to eliminate prominent Houthi leaders.

Moreover, China has reportedly inked an agreement to open a new facility in Saudi Arabia to manufacture military drones. Although China has little hope of displacing the United States as the region’s preeminent arms supplier, military sales to the Middle Eastgenerate new markets for China’s low-cost, high-tech weapons systems, which further incentivize Chinese indigenous research, development, and production. And China’s willingness to sell weapons to nearly any actor, regardless of its intentions, could exacerbate regional conflicts by providing countries with the means to wage war at attractive prices.

Now is the time for the United States to engage key regional allies and partners on China’s growing involvement in the Middle East. This can start by debunking Beijing’s narrative that it is a purely commercial actor without a geopolitical agenda.

The Trump administration should, in particular, publicly and privately highlight to the GCC members and Israel the nature of China’s relationship with Iran, which has too often remained overlooked. The United States should also have a quiet — and candid — dialogue with Israel on the challenges posed by China’s investment in its high-tech sector, and it should work to align their screening processes.

In the economic domain, the United States need not match the level of Chinese trade and investment. But it must advance a positive vision for the Middle East. This could take the form of a new infrastructure initiative in partnership with Saudi Arabia and the UAE, U.S. allies that are keen to play the role of hubs linking the region both internally and to Africa and the Indian Ocean.

With many countries in the Middle East eager to diversify their sources of domestic energy production away from fossil fuels, the United States should consider a regional energy agenda premised on efficiency and the use of renewables. On both infrastructure and energy, Japan, which ranks among the top five export destinations for all GCC countries, could play a pivotal — and reinforcing — role in counterbalancing China’s regional economic influence.

Finally, the United States should continue pressing China to expand the Belt and Road Initiative to countries in need of reconstruction assistance, such as Iraq, Syria, and Yemen. Washington should be unafraid of comparing the hypocrisy of Xi’s “community with shared future for mankind” with Beijing’s tepid interest in post-conflict reconstruction efforts.

With tensions roiling the Middle East, it would be easy for the United States to simply ignore China’s quiet power play. But that would be a mistake — one that will enable Beijing to continue to capitalize on economic opportunities across the region and solidify its diplomatic influence while leaving Washington to carry the burden of crisis management.