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To: The President
From: Nadia Schadlow
Date: January 2025
Re: Managing Strategic Priorities in Asia, Europe, and the Middle East

Purpose: The purpose of the memo is to articulate why and how the United States should maintain an active diplomatic, military, and economic presence in three key strategic regions of the world: Asia, Europe, and the Middle East. The assumptions undergirding this memo are that China remains the principal adversary facing the United States, but that regional developments will have a direct impact on the trajectory and outcomes of the U.S.-China competition itself.  It is in regions of the world that the U.S.-China competition is being played out, and where it will be won or lost.  If regional dynamics favor China, they will have detrimental impacts on U.S. security and economic interests: forward presence, markets, raw materials, lines of communication, and more are located within, or move among, regions. U.S. retrenchment and withdrawals are unlikely to be reversed, and the alternative to a U.S. presence is a Chinese presence.    

The bottom line is that the active management of regional balances—a strategy in play since the Cold War—remains relevant. The operational concepts and the related toolkit that we can apply are, however, in flux and demand creativity and more inputs from our allies and partners. Military presence is of course critical, but today the competition is as much economic as well.  


China’s views of the world are global, and its diplomacy, economic statecraft, and military buildup reflect this view. Xi Jinping’s plan of “a community with a shared future of mankind” foresees a future in which U.S. power is displaced by China—with the CCP as the alternative.1 Initiatives such as China’s Global Development Initiative, Global Security Initiative, and Global Civilization Initiative reflect these goals and the CCP’s efforts to put China at the center of its role in the world. 

China is seeking to displace the United States at helm of global economic order. While this would take time, trends are moving in directions favorable to China. China is now the second largest economy in the world, with a nominal GDP over $10 trillion. That’s larger than Japan and Germanythe world’s third and fourth biggest economiescombined.2

While the Moscow-Beijing relationship might be tactical, they are bound by their desire to reduce American power. As the leaders of both countries agreed in their March 2023 summit, “there are changesthe likes of which we haven’t seen for 100 years … [and] they are driving these changes together.” 

Other countries are noticing—and are hedging their bets.  More countries are now enabling their companies to settle their bills in Chinese yuan, from Argentina to Brazil to the UAE.  China surpassed the United States as the world’s largest trader.3 (And Saudi Arabia is reportedly considering accepting the yuan instead of the U.S. dollar as payments for Chinese oil purchases, however, has not yet made the switch.) In Asia, a 2022 survey of Southeast Asian policymakers and experts found that 75% of respondents viewed China to be the most economically influential power in the region, with just 10% answering that the United States was the most economically influential power.4 One study noted, “U.S. economic relationships were weaker than those of China in every country of Southeast Asia.”5

Diplomatically, China is creating new coalitions and alignments. In the Middle East, China is driving fundamentally new dynamics and relationships, working to engineer a breakthrough in Iran and Saudi relations, and ensure its supply of LNG and other fuels well into the future.6

China has sought to develop close ties with Saudi Arabia by attempting to fill gaps in the U.S.-Saudi relationship that have left those relations strained. China has played a notable role in bolstering Riyadh’s indigenous ballistic missile capabilities, supplying it with technical assistance to create a ballistic missile base that is currently under construction.7 During Xi Jinping’s visit, Saudi Arabia also signed a deal in which the company agreed to build a number of projects in the country.  

China has become a key exporter of military technologies to Iran and has signed a 25-year Comprehensive Strategic Partnership that calls for China to invest $400 billion over 25 years in Iran in exchange for Iran providing a consistent oil supply to China.8 

In Europe, China’s network of ports, along with railway and highway infrastructure, are entry points into the European Union and the Western Balkans.9 These networks in turn have allowed the development of alternatives to avoid Russia sanctions.  

Militarily, China’s power projection capabilities have increased dramatically over the past decade. While technically China has only one formal military base in Djibouti, its control of ports around the world provides dual-use capabilities. China or Chinese firms own or operate terminal assets in 96 ports in 53 countries. These ports provide logistical and intelligence networks for the PLA, which can direct commercial ports for strategic purposes.10 China’s diplomatic overtures are also impacting traditional cooperative military arrangements: most recently, the UAE dropped out of a U.S.-led maritime coalition in the Strait of Hormuz—one of the most important waterways that connects the Persian Gulf to the Arabian Sea and through which about 20% of the world’s petroleum products pass through.11 And China just announced a port facility in Cuba, specifically to gather intelligence on the United States. China is also now the fourth largest exporter of value arms around the worldexporting to countries such as Saudi Arabia, the UAE, Indonesia, Pakistan, and many African states, creating linkages around the world.   

Finally, as experts have pointed out, Beijing now appears intent on building a network of facilities that could extend from the Horn of Africa south and east around the rim of the Indian Ocean, west and north along the Atlantic coast of Africa, and perhaps across the Atlantic into the Western Hemisphere. Attacks launched from some of these locations could close vital waterways such as the Suez or Panama Canals at the outset of a future war, slowing the movement of U.S. forces from its east coast to the Indo-Pacific theater.12

Policy Approaches

A loss of U.S. power in strategic regions of the world is a loss of U.S. military, economic, and political power. It will impact U.S. basing and access rights; it will shift economic power over time and reduce our ability to operate freely. In the case of war with China, it could significantly hamper our access.   

Maintaining regional balances of power that favor Washington does not mean we need to operate in the same way. We can rebalance our toolkit in these regions.    

Diplomatically, the United States and its allies can highlight China’s support for Moscow’s brutality and illustrate the threat these countries pose to smaller and weaker states. In any conflict with China, our relationships in the Middle East will matter. China receives approximately 50 percent of its imported oil13 and 33 percent of its overall oil supply from the Middle East.14

Many countries want to align with the United States, and we should not squander those opportunities. Japan, Australia, South Korea, Taiwan, and India have all undertaken major increases in defense spending in the past half-decade and are wary of China’s intentions. All will be critical in the event of conflict with China and are part of our deterrence calculations. 

The United States now faces the complexity of a multipolar world; we cannot wish for a world of unipolarity. In order to preserve our power and our freedom of action, we must actively manage across these regions. We can do so with new tools: seeking greater integration with allies for military purposes; de-risking by restructuring supply chains; and adopting new technologies more quickly and at scale.

1 Liu Ming, “Xi Jinping’s Vision of a Community with a Shared Future for Humankind,” National Bureau of Asian Research, 2 June 2020.
2 “How is China Shaping the Global Economic Order?,” China Power, 9 March 2016.,and%20fourth%20biggest%20economies%20%E2%80%93%20combined.
3 “How is China Shaping the Global Economic Order?,” China Power,,and%20fourth%20biggest%20economies%20%E2%80%93%20combined.
4 “In Charts: the US and China’s Economic Footprints in Asia,” Economist Intelligence, 24 May 2022.
5 Susannah Patton and Jack Sato, “Asia Power Snapshot: China and the United States in Southeast Asia,” Lowy Institute, 20 April 2023.
6 For example, China used its massive purchasing power to gain a diplomatic foothold within Qatar.  In November 2022, China signed a 27-year LNG distribution deal with QatarEnergy. and more recently Sinopec bought a 1.25% ownership stake in Qatar's North Field East (NFE) expansion project, which is currently the largest Liquefied Natural Gas (LNG) project in the world.
7 Julia Masterson, “Saudi Arabia Said to Produce Ballistic Missiles,” Arms Control Association, January 2022.
8  “Iran’s Increasing Reliance on China,” The Iran Primer, 18 May 2023.
9 Jens Bastian, “China in the Eastern Mediterranean,” National Bureau of Asian Research, 23 May 2023.
10 Andrew Erickson, “Pier Competitor: China’s Power Position in Global Ports,” Andrew Erickson, 13 May 2022.
11 Arwa Ibrahim, “UAE Withdraws from US-led Maritime Coalition,” Al Jazeera, 31 May 2023.
12 Aaron Friedberg, “The Marshall Papers: A World of Blocs,” CSIS, April 2023.
13 “China Regional Snapshot: Middle East and North Africa,” US House of Representatives Foreign Affairs,;
14 “Country Analysis Executive Summary: China,” U.S. Energy Information Administration, 8 August 2022.