The UAE has implemented one of the world’s most successful Covid-19 vaccination programmes – having now delivered more than 80 jabs per hundred people, second only to Israel. By comparison, the UK has so far vaccinated around half its population, while the European Union has managed little more than one in ten.
While UAE has licensed the AstraZeneca, BioNTech/Pfizer and Russian Sputnik vaccines, it has relied heavily on China’s Sinopharm. The Emirates cleared the Beijing-backed jab for general use last December, the first overseas nation to do so, having launched the world’s inaugural Phase III trial of a Covid-19 vaccine back in July.
Now, following a high-profile UAE-China deal in late March, a new Abu Dhabi factory is about to start mass-producing the Sinopharm vaccine, under a joint venture with the local G42 technology group. Interim production has already begun in Ras al-Khaimah – the first time manufacture of the Sinopharm vaccine has been permitted outside China.
Announced by Chinese Foreign Minister Wang Yi during a two-day UAE visit, the deal also includes a new purpose-built research and development hub for life sciences, biotechnology and vaccine production in the Khalifa Industrial Zone of Abu Dhabi (KIZAD).
Producing hundreds of millions of vaccines each year will help UAE’s ongoing economic diversification away from hydrocarbons. The country will also provide a platform from which the Sinopharm vaccine can be rolled out across the Middle East, together with large parts of Africa and Latin America as well.
“This project will play a significant role in confronting the Covid-19 pandemic across the Arab region and the entire world,” said Sinopharm Chairman Liu Jubngzhenn when the deal was announced. Peng Xiao, the Chinese CEO of G42, added that the new joint venture will “revolutionise the life sciences industry in the Middle East over the coming years”.
Looking East
Since 2017, China has been UAE’s biggest trading partner – with the Port of Dubai a focal point for Chinese trade across the broader region. UAE is also the leading destination for Chinese tourists in the Middle East. Prior to the pandemic, there were over 75 weekly flights between the two countries, with travel assisted by a mutual visa-exemption scheme.
China has long been a major destination for the Gulf’s oil and gas exports. The People’s Republic has also forged strong economic ties with Egypt and Lebanon (both of which import more goods from China than any other country) and Algeria (where Beijing is helping to build a mega-port and Expressway at Cherchell, some 60 kilometres from Algiers).
During this pandemic, though, Beijing’s regional ties have strengthened, particularly with UAE – which supplied equipment to Wuhan during the earliest days of the crisis, prior to intense collaboration on mass testing, vaccine rollouts and now vaccine production itself.
The UAE-manufactured vaccine will be known as Hayat-Vax, using the Arabic word for “life”. This rebranding, combined with the Emirates’ large airports and seaports, will help spread Chinese influence across the Middle East and the world.
And while the Gulf business community has always closely followed the value of the US dollar, as China replaces America as the leading commercial partner of various Arab nations, the yuan exchange rate will take on increasing regional significance.
Rate of exchange
In late January, China’s currency hit almost a three-year high against the dollar – having risen some 10 percent since last May. Chinese interest rates were higher than in the US and economic growth had bounced back, with the People’s Republic recovering quickly as lockdown measures were lifted. Beijing also seemed willing to let the currency appreciate – despite that making Chinese exports less competitive. Prior to Covid-19, a cheaper yuan had led to accusations of “Chinese currency manipulation”, sowing the seeds of a Sino-US trade war.
Over recent weeks, though, the yuan has started to weaken again, losing around 2 percent against the US currency. A rebounding American economy, boosted by massive fiscal stimulation, means the dollar has gained – with the interest-rate gap narrowing, as yields on US bonds have gone up.
Aside from currency fluctuations, though, a key long-term trend to watch is whether the yuan successfully challenges the dollar’s “petrocurrency” status, as the main global benchmark for pricing oil and gas. That would seriously undermine the dollar as the universal “reserve currency”, badly denting US power and prestige.
Since Covid-19 emerged, the struggle between Washington and Beijing for Middle Eastern influence has intensified. While Chinese trade and collaboration with UAE, Saudi Arabia and other key Gulf states has been rising fast, each clearly has long-standing strategic and security links with the US.
In the months and years to come, China will be quietly pushing Gulf governments to switch energy pricing away from dollars – seeing as a “petroyuan” would give Beijing more control over its economy, while helping with long-term economic projects that challenge US global hegemony.
America’s Middle Eastern allies and partners, including Israel and the Gulf states, are keen not to take sides in the intensifying US-China geopolitical rivalry. Yet vaccine distribution is now a key strategic feature of China’s foreign relations – as it seeks diplomatic and economic influence to supplant its Western rivals. And perhaps the centrepiece of Beijing’s global vaccine diplomacy efforts is this new production and distribution deal with UAE.
Liam Halligan is a Senior Economics Commentator at The Telegraph Media Group
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