Beijing is good at adjectives and over-the-top flattery in its public diplomacy. Whether it means anything is another matter, and in the visit of President Xi to Saudi Arabia, it may be even more effusive than usual.
After all, the objective is to ease out the US influence in this oil-rich state and establish Beijing’s writ. That’s not going to be easy. Riyadh would like to butter both sides of its bread considering the details of the relationship.
Chinese President Xi Jinping Visits Saudi Arabia To Discuss Trade, Oil Ties, Investment, and more.
Washington committed to cut off arms supply to Saudi & UAE after lawmakers condemned indiscriminate bombing by both countries in Yemen in what is being increasingly labelled as 'war crimes'.
Saudi Arabia is India’s top supplier but China is the world's largest oil importer, and the bulk of that comes from Saudi with imports soaring 38 percent in mid-year.
Trading in Yuan, replacing dollar, is already happening as China now has a huge presence in not just Saudi Arabia but all the GCC (Gulf Cooperation Council) states.
India could up its sales pitch on construction, cloud computing, and all the issues on the Prince’s wishlist.
Saudi’s Strained Defense Ties With West
Rather ironically, the incoming aircraft carrying the Chinese President was escorted by Saudi fighter jets with a show of red and yellow colours lighting up the sky. All very nice except that the aircraft are of western origin as is the entire equipment of the Saudi military.
That kind of relationship is enduring simply because your defence is so dependent on admittedly, not just the US but also the British and the French. In fact, a massive USD five billion in Arms deals granted to both the Saudis and UAE, mainly aimed at defence against Iran, backed Houthi rocket attacks.
That’s been labelled as ‘defensive’ equipment since earlier, Washington had committed to cutting off arms supply to both on demands of lawmakers who (rightly) condemned indiscriminate bombing by both the countries in Yemen in what is being increasingly labelled as 'war crimes'.
Beijing will never embarrass its hosts by referring to such things. Indeed, the Joint Statement instead said, “the Chinese side expressed support for the Kingdom in maintaining its security and stability and affirmed its opposition to any actions that would interfere in the internal affairs of the Kingdom of Saudi Arabia, and rejects any attacks targeting civilians, civilian facilities, territories, and Saudi interests”.That's one in the nose for those carping Congressmen.
What China-Saudi Oil Deals Signal for the US
There’s more in the statement, however, to perturb the US and its allies. The recent spat on oil prices has roiled relations with Riyadh which had refused to get on the US bandwagon against Russia.
The Saudi-led oil cartel OPEC+ slashed output by two million barrels per day in an effort to “stabilise” prices, which in short meant that the oil prices went up, assisting Moscow— a part of the grouping to a considerable extent.
The 23 countries in the grouping, including Iran and Venezuela which also face sanctions, effectively controls more than 79% of the world’s crude supplies. Saudi Arabia is India’s top supplier but China is the world's largest oil importer, and the bulk of that comes from Saudi Arabia with imports soaring 38 percent in mid-year.
Now the joint statement while ‘commending’ their oil trade volume also called for “development and consolidation of cooperation in the field of oil is in conformity with the common interests of both sides”. It also calls for stability. China doesn’t want soaring prices any more than the others. Besides, the Saudis don’t want the Chinese going towards cheaper Iranian or Russian oil.
It could be that Beijing will buy even less from Iran (at any rate this was just 0.26 percent in May) and that Saudi banks may price some of their oil sales in Yuan. Riyadh has an agreement with the US to sell oil only in dollars and hold some reserves in US treasuries. That’s ostensibly ‘protection money’ against Iran and others.
Any such announcement will mean a huge setback to President Biden, who was famously derided for his ‘fist bump’ with Prince Mohammad Bin Salman after Washington wholly condemned the Saudis on the murder of journalist Jamal Khashoggi.
Don’t forget either that the prince has been made Prime Minister this September in formal recognition of his role though his father remains the ‘head of state’. The Chinese of course said nothing at all about this. Instead, President Xi lauds the prince and his Vision 2030.
Xi’s ‘Trade in Yuan’ Bid at Gulf Summit
Meanwhile, there is an economic sense in trading in Yuan which some say is already happening quietly. China now has a huge presence in not just Saudi Arabia but all the GCC (Gulf Cooperation Council) states. It's not coincidental that the first China-Arab States Summit and the first China-GCC Summit are also taking place.
President Xi’s signed article in the Saudi media, notes with satisfaction that China has levels of ‘strategic partnership’ with 12 Arab states, and also signed documents on Belt and Road cooperation with 20 Arab states. There’s more but the crux of the matter with the GCC was again energy.
Data shows that while Saudi Arabia remains the top oil supplier, Qatar— a major natural gas exporter to China, signed up with Chinese firms after placing its first order for vessels carrying Chinese Liquefied Natural Gas (LNG) for USD 762 million.
Similarly, a huge portion of oil exports from Kuwait, Iraq, the United Arab Emirates (UAE), and Oman are destined for China. That makes for a certain dependence on China for revenue, given the lack of alternative industries in these states.
China-Saudi’s Soaring Global Ambitions
Now MBS and Xi plan to change all that with a reported 34 agreements signed including green energy, green hydrogen, photovoltaic energy, information technology, cloud services, transportation, logistics, medical industries, housing, and construction factories. Typically on both sides, details are unavailable.
Reports that the Saudis receive the largest Belt and Road Initiative (BRI) investment didn’t mean much since it was earlier all in energy, but the point of this summit is to change this towards using Chinese expertise in green technology, and the IT sector.
Meanwhile, MBS has been making changes himself. Saudi Arabia’s Aramco in early 2022 made a final investment decision to build a USD 10 billion refinery, and petrochemical complex in Northeast China, marking its single largest investment in China.
The Saudis are involved in other refineries, but this makes a signature statement. Riyadh has also jointly with China, funded Belt and Road projects in Uzbekistan, and may take on more as MBS puts his diversification plans into motion. Reports also note a deal between Saudi Advanced Communications and Electronics Systems Co (ACES) with China Electronics Technology Group to manufacture unmanned aerial vehicle payload systems in the kingdom. It's not much, but it’s a lot when viewed from Washington.
India's Key Takeaways..
For India, the growing role of China is not entirely welcome, but Delhi will take it in stride given that US influence is unlikely to seriously erode anytime soon.
The replacing of the Dollar with the Yuan has been talked of for years with nothing much coming out of it. But the trends are clearly pointing to multiple power centres which do India no harm at all. An ambitious prince changing gears to look towards China is only going to push this trend, as long as this doesn’t change Beijing into the role of an ‘influencer’.
That hasn’t happened yet since MBS values his independence as much as he does his petrodollars. But the picture is changing fast in terms of Chinese influence which Delhi can do little about. But meanwhile, it could up its sales pitch on construction, cloud computing, and all the issues on the Prince’s wishlist. We need a larger slice of that cake. If that eats even a little for instance, into the massive deal signed with Chinese tech giant Huawei, then it could be like having the cake and eating it too.
(Dr Tara Kartha is a Distinguished Fellow at the Institute of Peace and Conflict Studies (IPCS). She tweets @kartha_tara. This is an opinion article and the views expressed above are the author’s own. The Quint neither endorses nor is responsible for them.)
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