The Great Game Continues: From Persian Gulf to Indo-Pacific
In our previous article “The Great Game: From Karakoram to Aksai Chin” we had discussed, how the British Empire had squared off with Russian Empire in 19th & the 20th Century in Central Asia, Persia and across Asian landscape. We saw how the British plotted and made strategic moves to safeguard its territories from the ever-expanding Russian empire. The British policy was to make sure that Russian empire does not reach the Persian Gulf & frontiers of South Asia threatening the British bases in Middle East & its jewel in the crown i.e. British India. The discovery of Oil further solidified this Anglo-American consensus of keeping the middle east and Persian Gulf from Soviet influence post-World War II. The Great Game transitioned post World War II from Anglo-Russian rivalry to the Cold War between USA & the Soviet Union. The first move in Great Game was made by America by shoring up its alliance with the Gulf Arab States in the Middle East just after the Yalta Conference in 1945.
The American Saudi Alliance
In February 1945, William Eddy, the American envoy to Saudi Arabia, who was stationed in Jeddah, received orders to arrange a clandestine meeting between F.D.R. (Franklin Delano Roosevelt), returning from Yalta, and Ibn Saud. Secrecy was critical amid ongoing war with Germany, as a high-profile target like a cruiser hosting both leaders risked German airstrikes. Only five in Saudi Arabia knew initially about it i.e. Ibn Saud (the Saudi King), Foreign Minister Yusuf Yassin, a U.S. coding clerk, and Eddy and his wife. The U.S.S. Murphy’s arrival in Jeddah was framed as a routine visit, and Ibn Saud’s departure was disguised as a return to Mecca, minimizing suspicion. Eddy in his book “FDR meets Ibn Saud” had details the logistical ruse, including a staged dinner for the ship’s officers at the American Legation, attended by 45 which was the largest American gathering in Jeddah to date. F.D.R. withheld plans from Winston Churchill until the last moment, irking the British, who saw the Near East as their domain. Churchill scrambled to arrange follow-up meetings with Ibn Saud, King Farouk of Egypt, and Emperor Haile Selassie, revealing Anglo-American tensions.
On February 14, the U.S.S. Murphy docked alongside the U.S.S. Quincy, where F.D.R., in a wheelchair, greeted Ibn Saud. Their five-hour encounter blended camaraderie and diplomacy. They bonded over shared traits age, leadership burdens, farming passions, and physical disabilities F.D.R. gifting Ibn Saud a wheelchair, later a treasured memento in Riyadh. Politically, F.D.R. sought Ibn Saud’s aid for Jewish refugees, proposing their settlement in Palestine. Ibn Saud firmly rejected this, arguing Germany, the oppressor, should provide restitution, not innocent Arabs. He suggested distributing refugees among Allied nations proportionally, underscoring Arab hospitality’s limits. Ibn Saud, in turn, sought U.S. friendship and assurances of Saudi independence, which F.D.R. granted, promising no hostile acts or Palestine policy shifts without consultation. The pledges were formalized in a memorandum and reiterated in an April 5, 1945, letter, days before FDR’s death.
However, President Truman reneged on the understand which FDR had made with Ibn Saud. Harry Truman, dismissed Arab concerns in October 1945, prioritizing Zionist voters while holding the view that he does not have to pander to hundreds of thousands of Arabs among my constituents marking a policy shift, alienating the Arab world and undermining F.D.R.’s assurances. Post the meeting with FDR, Ibn Saud met Churchill at Fayoum Oasis, finding the British return on H.M.S. Aurora lacklustre compared to the warmth given by FDR. Saudi oil, though not yet fully exploited in 1945, was recognized as a future asset. William Eddy who later became a consultant to the Arabian-American Oil Company (Aramco), understood its potential. Ibn Saud’s trust in F.D.R., coupled with his openness to American technology e.g., accepting “iron” like water pumps, paved the way for Aramco’s expansion, ensuring U.S. access to a resource critical for industrial and military power.
The historic meeting between FDR & Ibn Saud in 1945 laid the cornerstone for a decades-long U.S.-Saudi alliance, driven by oil and mutual security interests. Eddy’s role with Aramco and the Trans-Arabian Pipeline reflects this trajectory, as Saudi oil became a U.S. economic lifeline by the 1950s. Despite early setbacks e.g., Palestine, the personal trust established between F.D.R. and Ibn Saud endured in institutional form, surviving Cold War tensions and regional upheavals like the 1973 oil embargo. The meeting symbolized a potential moral and strategic alignment between the Gulf countries and America, with Ibn Saud facing West to bind fortunes with the U.S. This was seen as a counterweight to losses in Eastern Europe and Asia to communism by US. British and French unease was evident in Churchill’s haste and French concerns at Casablanca reflecting the shifting global order. The U.S. emergence as a player in the region challenged colonial legacies, foreshadowing decolonization pressures.
The meeting followed the Yalta Conference (February 4–11, 1945), where F.D.R., Churchill, and Stalin delineated post-war spheres. The Soviet Union’s expansionist ambitions in Eastern Europe were evident, foreshadowing Cold War tensions. F.D.R.’s detour to meet Ibn Saud signalled U.S. intent to cultivate allies beyond Europe, anticipating a broader contest with the Soviets. However, Ibn Saud’s rejection of Jewish settlement in Palestine, and F.D.R.’s unfulfilled consultation promise, became a Cold War flashpoint. The 1948 establishment of Israel, backed by the U.S. without Arab input, fuelled Arab resentment. The Soviet Union capitalized on this, supporting Arab nationalist movements e.g., Nasser’s Egypt gaining foothold in the region.
Saudi Arabia’s oil and geographic position flanking the Persian Gulf and Red Sea made it a Cold War linchpin. Eddy William’s involvement with Aramco (1947–1952) underscores how the meeting seeded U.S. oil access, critical for fuelling NATO and countering Soviet industrial capacity. By the 1950s, Saudi Arabia joined the U.S.-led anti-communist framework, notably through the 1955 Baghdad Pact’s periphery though not a formal member. This countered Soviet-aligned states like Egypt and Syria, which embraced Soviet arms and advisors during the Suez Crisis (1956) and beyond.
The Pivot to Persian Gulf
The Soviets sought Middle Eastern oil influence e.g., Iraq’s nationalization in the 1960s, but Saudi Arabia’s Western tilt rooted in the 1945 meeting limited their success, preserving U.S. dominance in this region. In the 1950s, the U.S. sought to anchor Iraq in the Western bloc to encircle the Soviet Union’s southern flank, mirroring efforts with Iran and Saudi Arabia. The 1955 Baghdad Pact (later CENTO), initiated by the U.S. and Britain, included Iraq under the pro-Western Hashemite monarchy of King Faisal II, alongside Iran, Turkey, Pakistan, and the UK. This alliance aimed to block Soviet penetration into the Middle East, leveraging Iraq’s proximity to the USSR (via Turkey and Iran).
The USSR cultivated Arab nationalist movements, opposing Western-aligned monarchies. The 1953 coup, orchestrated by the CIA and MI6, ousted Prime Minister Mohammad Mosaddegh and restored Shah Mohammad Reza Pahlavi to power. The primary U.S. motive was fear of Soviet influence over Iran’s oil wealth and its 1,200-mile border with the USSR. Mosaddegh’s nationalization of the Anglo-Iranian Oil Company (1951) and perceived instability raised concerns of a Soviet tilt, prompting Western intervention to secure Iran as an anti-communist stronghold. The Shah leveraged U.S. aid to modernize Iran’s military, joining the Baghdad Pact (1955, later CENTO) alongside Turkey, Iraq, Pakistan, and Britain to encircle the Soviet Union’s southern flank. By the 1970s, Iran’s oil revenue bolstered by the 1973 price surge funded a massive arms buildup, including advanced U.S. weaponry (e.g., F-14 Tomcats), making it a regional counterweight to Soviet-backed states like Iraq. The Shah’s regime, supported by the U.S.-trained SAVAK (secret police), cracked down on the communist Tudeh Party and other leftist groups, which were seen as Soviet proxies.
According to the declassified CIA document ‘Islam in Iran’, Ayatollah Khomeini, then a prominent cleric opposing the Shah Mohammad Reza Pahlavi, secretly sought contact with the Kennedy Administration in 1963. This outreach coincided with his public resistance to the Shah’s White Revolution a U.S.-backed reform program launched in January 1963 to modernize Iran through land redistribution, women’s suffrage, and secularization. In these communications, Khomeini reportedly assured the U.S. that he was not opposed to American interests in Iran, supported Muslim-Christian coexistence, and viewed an American presence as a bulwark against Soviet and British influence. This stance starkly contrasted with his public denunciations of U.S. imperialism and the Shah’s Western-aligned policies, which he framed as threats to Iranian sovereignty and Islamic values.
By November 1978, the situation in Iran was spiralling out of control, and William Sullivan’s “Thinking the Unthinkable” cable captures a pivotal moment of reckoning for U.S. policy makers. Khomeini had just landed in Paris after being expelled from Iraq, setting up shop in Neauphle-le-Château and amplifying his revolutionary message with global reach. Meanwhile, the Shah’s regime was crumbling with strikes, protests, and defections that had paralyzed the country. Sullivan, as the U.S. Ambassador in Tehran, was on the ground watching this unfold, and his cable reflects a stark realization: the Shah was a lost cause, and clinging to him risked losing any chance to shape what came next.
Sullivan’s proposal to facilitate the Shah’s exit and negotiate with Khomeini and military remnants was bold and pragmatic. He wasn’t suggesting a full embrace of Khomeini but rather a damage-control strategy to preserve some U.S. influence amid the chaos. The military, particularly the Shah’s generals, were still a powerful force, and aligning them with a transitional deal could’ve tempered the revolution’s trajectory. But President Jimmy Carter, caught between his human rights rhetoric and Cold War realpolitik, wasn’t ready to hear it. The Shah had been a U.S. ally for decades, a bulwark against Soviet influence, and abandoning him outright clashed with Carter’s instincts and the broader Washington consensus. Carter saw it as an admission of failure, and their relationship tanked.
The delay until January 1979 is telling. By the time President Jimmy Carter met with officials on January 3rd and greenlit the Shah’s “Californian vacation” a polite euphemism for exile, the window for proactive U.S. action had narrowed. The Shah of Iran left on January 16th, and Khomeini returned triumphant on February 1st, riding a wave of popular support Sullivan had seen coming. Carter’s hesitation whether from indecision, mis judgment, or political pressure left the U.S. scrambling to react rather than steer events. BBC’s Persian Correspondent Kambiz Fattahi has explained in detail the American engagement of Ayatollah Khomeini in Paris prior to Iranian Revolution of 1979. The Americans knew Shah was on his way out and the Carter administration sought to curry favours with Ayatollah Khomeini. The article titled “Two Weeks in January: America's secret engagement with Khomeini” has summarised it crisply.
While Ayatollah Khomeini was sending political conciliatory messages to the Carter administration through the American embassy in Paris, he was actually setting up the Americans for what was to come. Khomeini relayed a message to Washington from Paris as reported by Kambiz Fattahi that there was not any sort of particular animosity with the Americans and that a government that replaced the Shah’s would be a humanitarian one, which will benefit the cause of peace and tranquillity for all mankind. He further added that there should be no fear about Iran not selling oil to the United States, a message which the American visitor quickly relayed to the American Embassy in Paris. Khomeini outright invited American investment in Iran, particularly regarding farming equipment, and further noted that Khomeini’s Iran would rather trade with the Christian Americans than the Atheistic Russians.
Khomeini’s entourage had plenty of reasons to eye the Soviets warily. Iran’s northern border had long been a flashpoint with Russian imperialism, from the 19th-century Qajar losses to the 1946 Azerbaijan crisis, that left a legacy of suspicion. The 1921 Soviet-Iranian treaty, with its Articles 5 and 6 allowing Soviet intervention, was a lingering wound, seen as a legal cudgel Moscow could wield at will. The Shah had rejected its relevance, and Khomeini’s regime doubled down, formally abrogating those clauses on November 5, 1979. Add to that the Soviet coup in Afghanistan in April 1978 escalating to a full invasion by December 1979 and Moscow’s perceived meddling in Iraq’s support for Arab separatists in Khuzistan in Southern Iran, and you’ve got a perfect storm of grievances. For Khomeini, an Islamic state rooted in Shia theology was antithetical to Soviet atheism and communism; his public blasts at Soviet aggression weren’t just rhetoric but a signal of irreconcilable visions.
The Kremlin didn’t help itself. Reaffirming the 1921 treaty on February 27, 1979 right after Khomeini met Soviet Ambassador Vladimir Vinogradov was a diplomatic blunder, reinforcing Iranian fears of encroachment. Ambassador Mokri’s conciliatory noises in May and June clashed with the mood in Qom, where Khomeini was consolidating power and railing against foreign interference, Soviet included. The July exchange with Brezhnev went nowhere. Brezhnev likely pushed for recognition of Soviet interests, while Khomeini doubled down on sovereignty. By September, Soviet media was openly slamming the Islamic state concept and targeting Khomeini personally marked a point of no return. Moscow’s insistence on framing the treaty as a shield for Iran’s independence rang hollow Tehran saw it as a veiled threat, especially as the Afghan war loomed.
This Soviet misstep likely nudged Khomeini further from any lingering pragmatism toward the superpowers. His 1978 message to Carter about no animosity and oil assurances already feels like a distant memory by mid-1979, overtaken by revolutionary zeal and the hostage crisis. The Soviets, by overplaying their hand, alienated a regime that might’ve otherwise kept a cautious distance rather than outright hostility. Tehran’s abrogation of the treaty articles in November with Soviets coinciding with the U.S. embassy takeover crystallized Iran’s stance: no imperial puppets, East or West.
Though America's Arabic allies in the region feared a Marxist takeover after Khomeini’s arrival, Khomeini would go on to radically destroy leftist and even moderate movements and personages within Iran. In 1983, the CIA handed Khomeini’s government an extensive list of Tudeh members and leftist operatives embedded in the state names sourced partly from a defected KGB officer via MI6. What followed was swift: over 10,000 arrests, mass imprisonments, and executions, including top leaders like Noureddin Kianouri, who later claimed torture forced his televised confession. The Tudeh’s pro-Soviet leanings made them a perennial target, and the CIA’s consistent pattern, from 1953 to 1983, was to weaken them through any means available: coups, propaganda, or feeding names to allied regimes.
The Iraqi Paradox
Iraq’s participation in the pact drew Soviet-backed criticism from Egypt’s Nasser, foreshadowing internal tensions. The monarchy’s alignment held until the 1958 coup, but its dependence on Britain and perceived elitism fuelled discontent, weakening its anti-Soviet utility. On July 14, 1958, a military coup led by General Abdul Karim Qasim overthrew the monarchy, executed Faisal II, and established a republic. Qasim withdrew Iraq from the Baghdad Pact, pivoting toward neutrality and accepting Soviet aid, including arms and technical assistance. This shift alarmed the U.S.,as Iraq’s oil and strategic location risked falling into the Soviet orbit.
The U.S. bolstered ties with neighboring allies Iran under the Shah and Saudi Arabia to encircle Iraq and limit Soviet influence. Declassified records suggest CIA support for anti-Qasim factions, including Kurdish rebels and conservative elements, to destabilize his regime and counter Soviet backing. These efforts intensified after Qasim nationalized parts of the Iraq Petroleum Company (1961), threatening Western oil interests. The 1963 coup, which ousted Qasim and briefly brought the Ba’ath Party to power, reportedly received tacit U.S. approval. The Ba’athists, though nationalist, were anti-communist, aligning with U.S. goals to curb Soviet-aligned factions like the Iraqi Communist Party.
Qasim’s successors deepened ties with the USSR. By the 1970s, under Ba’athist rule (restored in 1968), Iraq signed the 1972 Soviet-Iraqi Treaty of Friendship and Cooperation, securing massive arms deliveries (e.g., MiG fighters, T-62 tanks). Soviet advisors flooded Iraq, and oil nationalization (1972) further aligned it with Moscow’s anti-Western economic bloc. Saddam Hussein, emerging as Iraq’s strongman by 1979, balanced nationalism with Soviet ties. While reliant on Soviet arms, he distrusted communist ideology, purging local communists and maintaining Iraq’s autonomy. In the early 1970s, the U.S., alongside Iran and Israel, armed Kurdish rebels under Mustafa Barzani to weaken Iraq’s Soviet-backed regime. By the late 1970s, the U.S. cautiously engaged Saddam, seeking to peel Iraq away from full Soviet dependence.
Iraq’s invasion of Iran in September 1980, sparked by border disputes and revolutionary turmoil, drew heavy Soviet support for it i.e. arms, advisors, and economic aid. The USSR saw Iraq as a proxy to weaken Iran and secure Persian Gulf influence. The U.S., estranged from Iran post-1979, pivoted to Iraq to counter this Soviet leverage. The U.S. provided Iraq with intelligence (e.g., satellite imagery of Iranian positions), dual-use technology (e.g., helicopters), and agricultural credits. While avoiding direct arms sales due to Iraq’s Soviet ties, the U.S. encouraged allies like Saudi Arabia and France to arm Baghdad, indirectly bolstering Iraq’s war effort. Simultaneously, the U.S. secretly sold arms to Iran (1985–1987) to fund Nicaraguan Contras, but this was a minor counterweight to its pro-Iraq stance. The primary goal was to prolong the war, draining both Soviet-backed Iraq and Iran, thus weakening Moscow’s regional clout.
The Afghan Jihad against the Soviets
The Soviet Union invaded Afghanistan in the quest for access to the warm waters in the Persian Gulf, and to insulate Central Asia from American influence. The invasion of Afghanistan and the decade-long war finally culminated in the disintegration of the USSR and the end of the Cold War; giving rise to a unipolar world. It is widely believed that the Soviet invasion of Afghanistan in 1979 prompted the Americans and Saudi Arabia to collaborate with Pakistan and train the Afghan Mujahideen to bleed the Soviet Union in the rugged terrain of Afghanistan. However, it was the US that provoked the USSR into invading Afghanistan; laying a perfect trap for it before unleashing the Afghan Jihad. Former CIA Director Robert Gates in his memoirs published in 1996 revealed that CIA began training the Mujahideen, not after the Soviet invasion of Afghanistan but six months before.
The above facts also stand corroborated in an interview given by President Carter’s National Security Advisor Zbigniew Brzezinski, who revealed that on 3rd July 1979, President Carter signed the first directive for secret aid to the opponents of the pro-Soviet regime in Kabul. Brzezinski further stated that he had no regrets about the creation of terror groups and rather indicated that it was an excellent idea, which drew the Russians into the Afghan trap giving the USSR, its Vietnam War. It was during this period that Brzezinski went to Pakistan and told the Jihadist forces that, “We know of your deep belief in God, and we are confident that your struggle will succeed. That land over there-Afghanistan is yours. You will go back to it one day because your fight will prevail and you’ll have your homes and your mosques back again because your cause is right and God is on your side”.
Even former Secretary of State Hillary Rodham Clinton has deposed before the US Congress on Al-Qaeda and the Taliban stating:
“We also have a history of kind of moving in and out of Pakistan. I mean, let’s remember here: The people we are fighting today we funded 20 years ago. And we did it because we were locked in this struggle with the Soviet Union. They invaded Afghanistan, and we did not want to see them control Central Asia, and we went to work, and it was President Reagan, in partnership with the Congress, led by Democrats, who said, “You know what? Sounds like a pretty good idea! Let’s deal with the ISI and the Pakistani military, and let’s go recruit these Mujahideen! That is great! Let’s get some to come from Saudi Arabia and other places, importing their Wahhabi brand of Islam so that we can beat the Soviet Union! They retreated, they lost billions of dollars, and it led to the collapse of the Soviet Union. So there’s a very strong argument, which is: It wasn’t a bad investment to end the Soviet Union, but let’s be careful what we sow because we will harvest”
Cold War 2.0: The Great Game Continues
They say that trends in history tend to repeat itself. We had earlier read about how the British Empire manoeuvred strategically in stalling the Russian advance to South Asia and Persian Gulf in 19th & 20th century. The said pattern continued in Cold War era between United States & Soviet Union. The US’s goal during the cold war to destabilise the pro-soviet regimes in the middle east and stop the Russian access to warm waters of the Persian Gulf in a continuity of the policy of the British Empire. Russian influence on Middle East & Persia could directly undercut fragile American alliance with GGC, the Petro-Dollar scheme & its military bases in the region. The Americans used all possible tools in its tool box from coups to assassinations to regime change to invasions to make sure that the pro-soviet regimes are toppled in the middle east before Russia or the next great power could rise and challenge the American dominance in the region. The said fact was confirmed by General Welsley Clarke who spoke about a list of pro-soviet countries to be toppled post 9/11 which included Iraq, Lebanon, Libya, Sudan, Syria, Iran etc. The said regimes were duly toppled some through invasions, some through Arab Spring, NATO operations in Libya and Turkey backed offensive in Syria. The said facts have been borne out in our book “The New Global Order” (2016).
The Great Game continues till date only the protagonists have changed from British & Russian, to American & Soviets in Cold war to America & China in Cold War 2.0. We have written extensively in our article “Rise of China as Techno-Industrial Power” on how the American elite & the wall street enabled the rise of China as a bulwark to the Soviet Union. However, post the collapse of Soviet Union, China has embarked on making itself a strong techno-industrial power which Soviet Union never was. This presents an unprecedented challenge to American hegemony in the world. America has now woken up and has decided to contain China’s advance to warm waters of Persian Gulf in Iran & Pakistan and the Indian Ocean in Myanmar. The US is following the strategy of not allowing the Chinese unfettered access to warm waters in Persian Gulf and Indian ocean while building its own alliance with QUAD and AUKUS in the Indo-Pacific. The region of Indo-Pacific has become the new theatre for Washington as it nudges Europe to re-arm itself to contain Russia on European continent while America pivots itself to containing China in Indo-Pacific.
In Iran, the U.S. faces a steep uphill battle to counter China due to decades of hostility since the 1979 Islamic Revolution and the lack of formal diplomatic ties. China has capitalized on this, deepening economic and strategic ties with Tehran. The 25-year cooperation agreement signed in 2021, potentially worth up to $400 billion, has seen China invest in Iran’s energy, infrastructure, and military sectors, offering Tehran a lifeline against U.S. sanctions. China’s imports of Iranian oil often disguised via ship-to-ship transfers hit record highs in 2023, undermining U.S. efforts to isolate Iran economically.
The U.S. response has leaned heavily on sanctions and diplomatic pressure rather than direct engagement. The Trump administration’s maximum pressure campaign, continued in spirit under Biden, aimed to choke Iran’s economy and force concessions on its nuclear program, indirectly targeting China’s economic leverage by hitting Iran’s oil revenues. The U.S. has also pushed allies like India to reduce reliance on Iranian oil, though with mixed success. Militarily, America maintains a robust presence in the Persian Gulf, conducting joint exercises with partners like Israel and Saudi Arabia to signal deterrence against both Iran and its backers, including China. However, this hasn’t stopped China from gaining ground, Beijing’s mediation of the 2023 Saudi-Iran rapprochement showcased its diplomatic clout, sidelining U.S. influence in a key regional dynamic.
In early 2025, the U.S. Treasury Department sanctioned entities and individuals in China, India, and the UAE for shipping millions of barrels of Iranian oil to China, often on behalf of Iran’s Armed Forces General Staff and its front companies. More recently, on March 20, 2025, the U.S. imposed sanctions on a China-based "teapot" refinery, Shandong Shouguang Luqing Petrochemical Co., Ltd., for purchasing and refining Iranian crude oil worth hundreds of millions of dollars, some of which was linked to vessels associated with Yemen’s Houthis and Iran’s Ministry of Defense. Additionally, an oil terminal in China, Huaying Huizhou Daya Bay Petrochemical Terminal Storage, was sanctioned for buying and storing Iranian crude from a sanctioned vessel.
Pakistan’s pivot toward China has been stark, driven by the $62 billion China-Pakistan Economic Corridor (CPEC), a flagship BRI project. Since the early 2010s, China has poured funds into energy, ports (like Gwadar), and highways, binding Pakistan’s economy closer to Beijing. This shift accelerated as U.S.-Pakistan relations soured post-2011, with the Osama bin Laden raid and the end of the Afghanistan war reducing America’s strategic need for Islamabad. By 2022, Pakistan’s foreign minister was calling China his second home, a sentiment echoed across its political spectrum, including the powerful military.
The U.S. has struggled to counter this. Efforts under Trump focused on criticizing CPEC’s debt risks Pakistan’s external debt hit $130 billion by 2023, with China as the largest creditor but this didn’t sway Islamabad. The Biden administration has tried a softer tack, approving a $450 million F-16 upgrade package in 2022 to maintain some military ties, though this drew Indian ire and didn’t shift Pakistan’s China alignment. The U.S. also backs IMF bailouts Pakistan’s 23rd since 1947 came in 2023 hoping economic leverage might peel it away from Beijing. Yet, Pakistan’s elite see China as a more reliable partner, especially as U.S. aid has dwindled from $2 billion annually in the 2000s to under $100 million by 2020. America’s best play might be quiet cooperation on counterterrorism, exploiting shared concerns about Afghan instability, but it’s a long shot against China’s economic pull in the region.
On the other side Myanmar’s civil war since the 2021 coup has turned it into a geopolitical chessboard. China has long been the dominant player, with investments like the $7.3 billion Kyaukphyu port and pipelines securing access to the Indian Ocean. Post-coup, Beijing backed the junta while hedging bets with ethnic armed groups along its border, ensuring influence whoever wins. The U.S., by contrast, has been sidelined imposing sanctions on the junta and modest support for democratic forces (like the National Unity Government) haven’t translated into leverage.
America’s counter-China strategy here is nascent but picking up. Since 2023, the U.S. has ramped up humanitarian aid over $317 million pledged by mid-2024 and quietly engaged resistance groups, avoiding direct military aid that might provoke Beijing. The 2022 BURMA Act authorized non-lethal support, signalling intent to bolster anti-junta forces without crossing China’s redlines, like arming northern factions near its border. Analysts suggest the U.S. aims to exploit Myanmar’s chaos to disrupt China’s BRI projects resistance gains in Shan State by late 2024 threaten key trade routes. Still, China’s adaptability balancing junta support with pressure on border rebels keeps it ahead. The U.S. lacks the economic clout to match Beijing’s infrastructure play, limiting its influence to moral and tactical support.
The U.S. is countering China in Indo-Pacific region through a mix of sanctions, military posturing, and selective engagement, but it’s playing catch-up. Americans are applying maximum pressure to choke China off be it Trade corridors or Technology transfers from semiconductor chips to GPUs proliferation from Singapore/Malaysia to China. However, China’s advantage lies in its willingness to invest without strings attached $130 billion across BRI projects in countries across the world. While the U.S. leans on punitive measures and alliances e.g., the Quad or the AUKUS to counter it. Iran’s anti-Americanism, Pakistan’s economic dependence on China, and Russia’s commodities trade all tilt the board toward China in Asia. The American use of maximum pressure by the Trump Administration on Iran & its Nuclear Program, the Israeli operations of decimating Hamas in Gaza, Hezbollah in Lebanon and overthrowing Assad in Syria has substantially weakened the Iranian influence in the region. A likely military attack on Iranian nuclear facilities or a regime change could throw the entire region into chaos with chances of a regional war. America’s prime concern is the Chinese access to Persian Gulf through Iran and the Gwadar Port in Balochistan province of Pakistan.
Thus, it comes as no surprise that America wishes to use Israel as regional ally against Iran and terror groups in Balochistan to target Chinese investments and engineers in Pakistan. It is willing to co-opt non state actors like factions of Taliban and other terror groups in the region who may be more than willing do its bidding in the region. America is seeking India as an economic ally to counter China and using it as a trade territory for American corporates, its military industrial complex and on the other hand it still maintains its strategic depth in Pakistan via Pakistani army trying to wean it away from Beijing’s shadow. The sole reason to co-opt the arch rivals in south Asia is to impede China’s BRI/CPEC access to Persian Gulf. The American strategy hinges on India containing China in the Indian Ocean region and the Malacca straits with America, while its proxies deal with China’s land route access in Pakistan and Iran.
This strategy by America may look very shrewd to begin with but there is no guarantee that things would turn out the way Washington would want it too. This fact about Washington’s desire to contain China was vividly expressed by Secretary of State Marco Rubio in a Podcast interview to an American broadcaster Hugh Hewitt on 19th March 2025, as follows (Excerpts):
Hugh Hewitt:
Well, Mr. Secretary, you’ve been on this program since 2010, and I think probably more than 100 times. And you may remember my basic worldview is that America’s biggest adversary is China, the People’s Republic of China. General-Secretary Xi is a tough, ruthless man. He’s in an alliance with the fanatics in Iran, and they present a real and present danger with us. Do you share that worldview? Can a diplomat say that?
Marco Rubio:
“Well, I think it’s certainly the biggest challenge we face. Look, here’s the way I characterize it, because you’re right. I mean, we need to have relations with these countries, but I think the story of the 21st Century is going to be about what happened between the U.S. and China. I think I said this during my confirmation hearing. I think the Chinese believe that they are on a path towards becoming the most powerful nation on Earth, that it’s inevitable, it’s just a matter of time. And they seek to manage that rise in a way that, and avoid disruptions along the way if possible. And look, if in fact they end up out-competing us, out-innovating us, outworking us, what have you, that’s one thing. But for us to sort of unilaterally allow them to do that rise while not playing by the same rules, then that would be on us. And I think what’s happened for the better part of 20 years. There was this assumption that some made that if, that we should allow China to continue to cheat in rules of trade and commerce and intellectual property and that kind of thing, and if we let them do it, then eventually, they’d become rich. And when they became rich, they’d become just like us. Well, that’s not what happened. They became rich, but they’re not just like us. So I would say they’re a rich and powerful country. They’re going to be a rich and powerful country. We need to engage with them, because it’s irresponsible not to. But we also don’t want to live in a world where we depend on China for things that we need.”
US versus China: The Battle Royale
The above quote by Secretary of State Marco Rubio clearly shows that Washington is paranoid of the rise of China as a great power in the East and the Americans do not want to be at the wrong end of this great power competition. Thus, the declining American empire much reminiscent of the British Empire in 1930s, severely under debt is trying to regain its position as leading techno-industrial power of the world while aiming to secure trade territories for American corporates in Europe and Asia. The American administration is not interested in keeping its globalist empire alive at cost of being out competed by China in the field of Trade, Technology & Artificial Intelligence.
Bank of China is reportedly investing 1 Trillion Yuan over next 5 years with 300 billion Yuan through equity and debt. The aim is to strengthen national technology self reliance, enhance AI infrastructure including computing power, data supply and key equipment. The core focus areas for Chinese are AI driven robotics, biomanufacturing, advanced materials and drone related technologies and services. The ultimate aim of China is to establish a robust a AI financial ecosystem to promote innovation, industrial growth & sustainable development. In response the US Government has started a ‘Stargate’ project with 500 billion $ private investment in AI infrastructure, led by companies like Open AI, Oracle, and Softbank. Stargate prioritizes the enabling layer of AI-data centers, semiconductors and cloud services. US companies like Alphabet, Amazon, Meta and Microsoft are investing 222 billion $ in AI related capex by 2024 end.
The AI & Tech war between US & China is heating up with both powers investing hundreds of billion of dollars in a bid to outdo each other. The rapidly accelerating array of enhancements and tune-ups is more than Chinese companies jumping on the DeepSeek bandwagon. Collectively, the AI models nearly all of them open-sourced represent the developers’ effort to set world standards and benchmarks, and grab a bigger slice of the global market. While the jury is out on whether these AI releases match or surpass the most cutting-edge systems from Western AI developers, these newer options are putting more pressure on the business models of leading US companies.
For example, China’s apparent move to flood the market with open-source AI models spanning computer vision, robotics, image generation, and beyond could indeed be a calculated play to disrupt the profitability of AI software, particularly for Western tech giants. The idea that they’re aiming to commoditize AI complements while focusing their revenue on AI-enabled hardware aligns with their historical strengths. They’ve long excelled at manufacturing and scaling physical goods, as seen in industries like solar panels, electronics, and now electric vehicles (EVs), where they’re challenging German and Japanese automakers with competitive pricing and volume.
China has launched various open-source AI models in the year 2025 aiming to disrupt the plans of American big tech. DeepSeek, a Chinese AI startup spun off from the hedge fund High-Flyer announced the launch of its Open-Source AI model DEEP SEEK R1 on 20th January 2025. Deep Seek R1 is an advanced reasoning large language model (LLM) designed to rival OpenAI’s o1, excelling in mathematics, coding, and multi-step reasoning tasks. Alibaba another Chinese giant released Qwen2.5-VL, a family of open vision-language models available in three sizes (3B, 7B, and 72B parameters) in February 2025. The models process images, text, and videos and can also interact with computer interfaces. Qwen2.5-VL-72B outperformed competitors like Open AI’s GPT-4o and Google’s Gemini 2.0 Flash on key benchmarks. Baidu a leading tech company in China has launched its latest foundation AI models, including native multimodal foundation model ERNIE 4.5 and deep-thinking reasoning model ERNIE X1 on 16th March 2025. Other Chinese AI models in pipeline that are set to be released in 2025 are Deep Seek R2, ERNIE 5 & Manus AI.
DeepSeek’s release causing a temporary $1 Trillion drop in U.S. tech market caps suggests Chinese have already seen evidence of their ability to rattle Western markets. If they can replicate that effect across multiple AI domains, it could erode the economic moat of companies relying on proprietary models like OpenAI or Google whose high training costs require substantial margins to justify. Open-source models, especially if they’re good enough for most use cases, could make that difficult. China’s dominance in supply chains and manufacturing gives them an edge in producing affordable AI-integrated devices like smart homes, drones, robotics, smartphones and Laptops. If they can pair these with free or low-cost AI models, they could undercut Western competitors who are still trying to monetize software alone. This mirrors their past playbook: study an industry, replicate its best ideas, optimize for cost and scale, then flood the market.
The involvement of top leadership (Xi Jinping and Li Qiang) and the resources likely flowing to DeepSeek’s founder, Liang Wengfeng, signal serious intent. And the open-source approach, while ironic given China’s censorship reputation, makes sense as a pragmatic pivot. They’ve built guardrails into these models like censorship that’s easily bypassed outside China suggesting a focus on domestic control while letting the global market run wild. This could accelerate adoption worldwide, especially if developers and companies integrate these models into their own systems locally. Open-source models might disrupt raw AI development, but Western companies could still hold an edge in polished, user-facing apps think ChatGPT’s interface versus a barebones open-source alternative.
China is improving at software faster than the West is at hardware rings true when you consider the U.S.’s struggles to reshore manufacturing or compete with China’s EV battery dominance. The West’s lead in AI has largely been software-driven, but if China pairs decent software with unmatched hardware scale, the balance could shift. Western firms might counter this with innovation in more advanced GPUs, regulatory moves (e.g., tariffs), or superior ecosystems. Though the west i.e. USA as of now controls the lithographic chip making technology and the supply of high-powered GPUs to scale up AI models. But if China can pull out more open-source AI Models with hardware to scale it up at enterprise level, it could indeed reshape the AI landscape. The way ahead for America & its Tech Giants is certainly not an easy one. No wonder US Vice President JD Vance has called on Silicon Valley to join forces with the White House in the Stargate Project on Artificial Intelligence.
Chinese EV giant BYD has recently beaten Tesla in revenue of 100 billion $. In 2024, BYD’s revenue reached $107 billion, surpassing Tesla’s $97.7 billion. Its profit of $5.5 billion lags behind Tesla’s $7.1 billion but is growing fast. BYD introduced a fast-charging system, allowing an EV to gain 250 miles of range in just five minutes, though it's limited to two models and certain chargers in China. BYD is ahead of Tesla in offering advanced driver-assistance features in China, including its "Eyes of God" software, which allows self-parking and city road cruising with minimal human input. With 4.3 million vehicles sold last year, BYD became the 6th largest automaker globally, surpassing Honda. CEO Wang Chuanfu plans to expand globally, but U.S. tariffs on Chinese EVs and concerns in other regions pose challenge to its rise. BYD revenue stood at $107B growing at 27% per year and rapidly gaining market share which is valued at $160B. On the other hand, Tesla’s Revenue is at $98B growing at only 1% per year and rapidly losing market share which is now valued at $900B. This show how the Chinese are not only innovating but also scaling up giving American companies a run for their money.
Tesla is facing growing competition from Chinese BYD, German & Japanese Auto Giants and to continue its growth it is looking for greener pastures in countries like India. Tesla’s overall market share shrinks in Europe dropping to 1.8% in Feb 2025 from 2.8% a year earlier. The EV Share fell from 21.6% to 10.3% with a sales Drop of Under 17,000 units sold vs. 28,000+ in Feb 2024 a 42.6% YTD decline. Thus, India as the second largest market of 1.4 billion people with its skilled labour base becomes critical player for America to tilt the balance of power in its favour. The Trump Administration strategy to make peace with Russia and Co-opt India explains the American need to contain China’s rise by aiming to pull India into its orbit as a trading territory. Thus, it is using tariffs as a strategy to get India to open up and lower its protectionist trade barriers to American corporates, for its goods & services.
Many Indian conglomerates have resultantly tied up with American corporates. The Tata Group companies have reportedly tied up with TESLA for its global supply chain which could enable it to penetrate the Indian market, cut costs leading to increasing margins and profitability globally. Tata Communications has tied up with NVIDIA for establishing India’s AI Cloud venture with its Hooper GPUs. Reliance Industries is exploring tying up with Meta & Chat GPT for deployment of low-cost AI solutions in India. Reliance Jio & Bharti Airtel have tied up with Starlink to provide satellite internet service in India. ISRO i.e. the Indian space agency has been working with Space X & NASA.
It would be thus fit to say that while China may not be anyway near toppling the American hegemony in foreseeable future but it is by far the biggest challenge America has faced in a century. The China story though looks great from outside but from inside it has huge issues grappling it from deflation to aging population to debt bubble and a middle-income trap to name a few. The US this time is facing China as Techno-Industrial power and not Soviet Union which was a basket case of socialism. The world is about to witness the battle between two poles i.e. US & China which has not been seen ever before. In this duality of geo-politics ironically it will be third pole having countries like Russia, India, Israel & Gulf States who could play a pivotal role in tilting the balance of power. The Great Game in Asia specifically the Indo-Pacific has just begun. We are getting ready for a battle royale!
Notes:
1. The New Global Order (2016) – Asian Warrior
2. The Great Reset (2022) – Navroop Singh
3. FDR Meets Ibn Saud – By William D Eddy
4. Ibn Saud, FDR, and the Future of the Jewish State - https://jinsa.org/ibn-saud-fdr-future-of-jewish-state/
5. ‘The Soviet Union and Iran under Khomeini’ - By Alvin Z. Rubinstein, International Affairs (Royal Institute of International Affairs 1944-), Vol. 57, No. 4 (Autumn, 1981), pp. 599-617
6. ‘Midnight in Paris: President Carter, the Shah, and Ayatollah Khomeini During the Paris Exile’ By Pablo Vazquez SOAS, University of London
7. Two Weeks in January: America's secret engagement with Khomeini – BBC News – By Kambiz Fattahi – 3rd June 2016 - https://www.bbc.com/news/world-us-canada-36431160
8. U.S. Embassy Tehran, William Sullivan, Cable to State Department, “Thinking the Unthinkable,” Secret November 9, 1978 - https://nsarchive.gwu.edu/document/18195-national-security-archive-doc-07-u-s-embassy
9. Strategic Partnership Agreement With China Represents Lifeline for Iran – 9th July 2020 - https://agsiw.org/strategic-partnership-agreement-with-china-represents-lifeline-for-iran/
10. China’s Rise as a Techno-Industrial Power – By Niti Shastra – 3rd February 2025
11. The Great Game: From Karakoram to Aksai Chin – By Niti Shastra – 22nd March 2025
12. Secretary of State Marco Rubio On China, Iran and the Deportations To El Salvador – 19th March 2025 - https://hughhewitt.com/secretary-of-state-marco-rubio-on-china-iran-and-the-deportations-to-el-salvador
BYD posts record revenue after unveiling 5 minute supercharger for electric vehicles, threatening Tesla - 25.03.2025 - https://www.abc.net.au/news/2025-03-25/byd-profits-surge-after-supercharger-ev-tesla-competition/105075394
Four Tata Cos Hitch Global Ride with Tesla -https://brandequity.economictimes.indiatimes.com/news/business-of-brands/four-tata-cos-hitch-global-ride-with-tesla/119288082
OpenAI and Meta Eye AI to Reportedly Form Partnership With Reliance Industries - 24th March 2025 - https://www.gadgets360.com/ai/news/openai-meta-reliance-industries-ai-partnership-discussion-report-7997447
Airtel and Jio team up with SpaceX to bring Starlink - India Today - 13th March 2025 - https://www.indiatoday.in/business/story/starlink-india-entry-partnership-spacex-bharti-airtel-reliance-jio-what-it-means-for-india-telecom-sector-2693090-2025-03-13
Tata Communications unveils AI infra with NVIDIA-accelerated computing - 24th October 2024 - https://www.moneycontrol.com/news/business/markets/tata-communications-unveils-ai-infra-with-nvidia-accelerated-computing-shares-up-3-5-12849630.html
China Floods the World With AI Models After DeepSeek’s Success - 25th March 2025 - https://finance.yahoo.com/news/china-floods-world-ai-models-144650368.html?guccounter=1&guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&guce_referrer_sig=AQAAAAbN0fRUiOki7qoLry6JipaqQON_5ZGdZupTntLyTx_mHOqipmO6t5AvFcPb6OEXvxNyLo4oLCzTJqHMiTtkjBEqfl_ygMECfENzIJLIsQ9os9KW7gIy0Ra8CdRYf5FSuvVJCZ_MAS6A0770UTZXVovKW_z4zeypWPXtv6Z-aUiV