Middle Powers and the U.S.-China Rivalry: MEPS Forum Reflections

Howard J. Shatz, RAND Corporation

Even as the war with Iran continues to escalate, the United States and China, the world’s first- and second-largest economies, are competing over technological pre-eminence as well as the global rules of economic exchange. This has left other countries and governments in a bind, including the Kurdistan Regional Government. Engaging with both the United States and China has much to offer, but each is tacitly pressing others to choose between them on important questions of technology, security, and economics.

Political and diplomatic leaders confronted this issue at the 2025 Middle East Peace and Security Forum at the American University of Kurdistan in Duhok. A panel on global connectivity and the growing U.S.-China rivalry in the Middle East, chaired by Martine Dennis, host of Africa Here and Now, presented the views of leaders and diplomats from four countries navigating this rivalry: Iraq, Thailand, Turkey, and the United Arab Emirates.

Each is seeking to balance competition between the U.S. and China. Thailand, for example, is a treaty ally of the United States, but tries to keep an equal distance from both and work with each, noted Kantathi Suphamongkhon, former foreign minister of the Kingdom of Thailand. The leading countries of the Gulf Co-operation Council, including Saudi Arabia, the United Arab Emirates, and Qatar, or the G3, aim to benefit from the United States and China in different ways and are careful to hedge, said Eric Alter, dean of the Anwar Gargash Diplomatic Academy in the United Arab Emirates. They rely largely, though not entirely, on the United States for defence, while deepening economic ties with China and remaining attentive to American concerns over high technology.

Turkey has pursued a “multi-dimensional diplomacy,” said Zeki Korkutata, member of parliament in the Republic of Turkey. Turkey is a member of the U.S.-led NATO, but it also participates as a dialogue partner in the China-led Shanghai Co-operation Organisation and in other groups outside the American orbit. “The fact that President Erdoğan is able to meet with U.S. President Donald Trump and Russian President Vladimir Putin at the same time is a result of this multi-dimensional diplomacy,” Korkutata noted.

Iraq has not reached such a balance, at least in commerce and economics. That is not for lack of desire, said Bangin Rekani, Iraq’s minister of construction, housing, municipalities and public works. China is deeply involved in the Iraqi economy because that economy is based on oil, and Chinese companies in energy, construction and other sectors offer lower prices, Rekani said. The paucity of technologically advanced economic activity has meant fewer opportunities for American companies. “We believe that Iraq must operate in a balanced manner,” Rekani said. “There have been attempts, even within the Iraqi Council of Ministers by my colleagues, to grant privileges to American companies to encourage them to enter the Iraqi market.” Beyond price, however, American firms face a security environment riskier than that faced by Chinese companies, and Iraq hopes to rectify that as well.

One symptom of this competition is the tariffs the United States has been imposing on countries worldwide since early 2025. Although partly aimed at reducing the American trade deficit, they are also intended to force reforms in what the U.S. regards as unfair bilateral and global trade rules. America has also used the threat of tariffs for geopolitical ends, such as calming a conflict between Thailand and Cambodia.

None of the countries thinks highly of the new tariffs, but all have navigated the changes with the aim of minimising damage to their own economies.

Since Iraq exports very little apart from oil, the U.S. tariffs have not affected it, Rekani said. Thailand has faced high tariffs, which it regards as contrary to agreed rules and inappropriate for geopolitical purposes. Nonetheless, from an economic standpoint, the level of tariffs it faces relative to that faced by its competitors, such as Vietnam, is the key measure, Suphamongkhon noted. By that standard, Thailand has not fared badly.

Even when used for economic rather than geopolitical leverage, Turkey vigorously opposes the tariff changes, saying they lead to lower incomes for ordinary people, declining production, rising unemployment and a weakening of the state, Korkutata said. By contrast, new U.S. tariffs have not been an issue for the United Arab Emirates, Alter said. He credited this to the good relations the G3 countries have maintained with the U.S. administration.

While all these countries have sought balance between the United States and China, some have also tried to amplify their influence through regional associations. Thailand was instrumental in the creation of the Association of Southeast Asian Nations, Suphamongkhon noted. The group now has 11 members and forms the core of a vast Pacific regional trade bloc known as the Regional Comprehensive Economic Partnership.

Intraregional co-operation is also a GCC goal, Alter said. Greater co-operation would enable its members to arrive at norms and standards useful to the region, rather than letting outside powers set the agenda or allowing U.S.-China rivalry to dictate terms.

The U.S.-China competition is partly about who provides new technologies, which magnifies the challenge for smaller countries. Iraq has relied largely on China for large, strategic technology contracts. But, heeding American warnings about data security, Iraq has also slowed or frozen contracts with some Chinese companies, Rekani said.

Thailand aims to strike a balance, co-operating with China or the United States depending on the issue, Suphamongkhon said. For example, Thailand has entered into an agreement on rare earths with the United States, recognising that access is a matter of American sensitivity.

The adoption of artificial-intelligence systems for economic advancement may prove a major thicket ahead. This is a key area of U.S.-China competition, as both want to become the default developers and providers of AI. In this case, Alter noted, a major concern is that the world ends up with two separate systems and that countries really will be forced to choose.

In fact, AI is an area in which the world would benefit from greater U.S.-China co-operation, Suphamongkhon said. The risks are potentially large, and their nature remains uncertain. “I have been emphasizing, around the world that there is a need for very developed international institution and rules and regulations to govern AI. And we have seen very little of that,” he said. “AI can be very helpful, and it can be very harmful too, especially if it goes into the area of chemical weapons, biological weapons, and other areas.”

Competition remains the main focus. But in this case, he said, it is co-operation that is needed.

Dr. Howard J. Shatz is a senior economist at RAND, a nonprofit, nonpartisan research institution, and a professor at the RAND School of Public Policy.