Earlier this month, the Jordanian telecom company Zain signed a contract with Nokia to deploy 5G networks in the kingdom. Umniah, another local cellular phone service provider picked Ericsson. Jordan’s third mobile internet operator, Orange, has yet to reveal its 5G choice for several markets, but like its competitors, the firm also seems inclined to select a Swedish or Finnish multinational for its coverage.
The snubbing of Chinese telecommunications behemoth Huawei will disappoint Beijing. Not only is Jordan a participant in China’s Belt and Road Initiative and increasingly a destination of Chinese foreign direct investment, but Huawei also provided the backbone for Jordan’s 2G, 3G and 4G networks.
Beijing is sure to blame U.S. pressure for the exclusion of Huawei from the kingdom’s market. No doubt Amman understood that continued close strategic cooperation with Washington and the goodwill of Congress — which currently provides the monarchy with $1.6 billion per year in financial assistance — would be difficult to sustain if Jordan utilized Huawei for its 5G. Perhaps Amman, like Washington, also came to appreciate that corporations in China are beholden to the government, and therefore data traversing networks supported by Huawei are inherently compromised.
Notwithstanding the U.S. position, the Kingdom had other reasons to be wary of this particularly sensitive Chinese investment. Like so many other states, Jordan finds itself caught in a Chinese debt trap.
Since its establishment in 1946, the Kingdom has been endemically insolvent. King Abdullah II’s strategy to extricate Jordan from this morass relies on attracting billions in foreign direct investment. This dynamic — and the fact that Jordan is Washington’s traditionally most reliable Arab partner — has made Jordan an appealing target for Chinese investment.
In 2015, the monarchy signed agreements in excess of $7 billion with the Middle Kingdom, including a deal to finance Jordan’s Attarat project, the world’s second-largest oil shale plant. The $1.6 billion investment represents Beijing’s largest 100 percent financed project in the Belt and Road Initiative.
Yet Attarat hasn’t turned out as hoped for Jordan. When the deal was inked, critical gas supplies from an Egyptian pipeline had been interrupted by recurrent Islamist militant attacks and the Kingdom was in desperate need of energy. Less than five years later, however, Jordan signed a 15-year, $10 billion contract with Israel to supply the bulk of the kingdom’s natural gas, which provides nearly 80 percent of the energy for electricity generation.
Construction of Attarat is nearly complete, but the kingdom now has a surplus of energy and the facility is no longer required. Worse, the terms of the 30-year power purchase agreement between Beijing and Jordan’s perennially indebted state-owned National Electric Power Company (NEPCO), turn out to be exploitative if not predatory. Already partially open, when this white elephant power plant is fully operational, deficits for NEPCO could reach an estimated $300 million per year.
Seeking relief from its Chinese debt trap, in 2020 Amman initiated arbitration proceedings in the International Chamber of Commerce in Paris to revise the “gross unfairness” of the power purchase agreement. Results of the arbitration are pending, yet a Jordanian victory could prove pyrrhic. Should Amman prevail — or if Huawei is eventually shut out of the kingdom’s 5G tenders — Beijing might seek retribution via its increasingly coercive economic policies. Three years ago, China initiated a trade war against Australia for having the temerity to request an investigation into the origins of COVID-19.
In the age of great power competition, even Washington’s closest friends — attracted by easy Chinese money — can find themselves stuck in debt traps and placed in uncomfortable positions. Given the critical need for foreign direct investment in the region, however, Washington cannot compel its friends to choose between the U.S. and China. To be sure, continued bilateral strategic cooperation with the U.S. necessitates that Washington defines some red lines. But all Chinese investments are not equal. Beijing’s 2018 purchase of a 28 percent stake in the Arab Potash Company, a fertilizer enterprise with the kingdom’s third largest market capital on the Amman Stock Exchange, rightly raised little concern in Washington.
Despite complications, Jordan by necessity will continue to seek foreign direct investment, including from China. The challenge for Washington will be to establish and enforce expectations while being tolerant of its partners’ less strategically consequential dealings with Beijing. For Jordan and Washington’s other Arab partners looking to do business with China, Attarat should prove a cautionary tale.
David Schenker is a senior fellow and director of the Program on Arab Politics at the Washington Institute and a former assistant secretary of state for Near East affairs during the Trump administration.
Editor’s note: This piece was updated on April 27 to correct the timing of an announcement.