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5 January 2023

Xi Jinping’s Visit to Saudi Arabia and Prospects for Relations with China


Chinese President Xi Jinping visited Saudi Arabia on 7–9 December, taking part in a summit with the Saudi crown prince as well as the Gulf-Chinese Summit and the first Arab-Chinese Summit. During the visit, Riyadh and Beijing signed agreements worth $30 billion in the fields of green energy, green hydrogen, photovoltaic energy, information technology and cloud services, transport and logistics, medical industries, housing, and construction, according to the Saudi Press Agency.[1] Xinping received a notably warm welcome in Saudi Arabia, especially compared to the reception given to US President Joe Biden during his visit in July, when he met with the leaders of the six Gulf Cooperation Council (GCC) states along with Egypt, Jordan, and Iraq.

I. The Centrality of Energy in Arab-Chinese Relations

Sino-Arab relations have evolved significantly over the last two decades as China has become the world’s top manufacturer and the second biggest economic power after the US. Trade between China and Arab countries exceeded $300 billion in 2021, President Jinping said in a speech at the Arab-China summit in Riyadh,[2] increasing tenfold in less than two decades[3] (the trade figure includes China’s purchases of oil and gas from Gulf countries). Arab states occupy a prominent place in China’s Belt and Road Initiative, in which China has invested more than $1 trillion, mostly in the construction of ports, highways, and railways, to facilitate global trade, including with Arab countries. Twenty Arab states have joined the initiative, with more than $200 billion in Chinese investment. Saudi Arabia is the recipient of 21 per cent of these investments, amounting to some $40 billion,[4] followed by the UAE with 17 per cent, Iraq with 14 per cent, and Egypt and Algeria with 12 per cent each.[5] In 2019, China became the leading trade partner of the GCC states, surpassing the EU with total trade of more than $180 billion; Saudi-Chinese trade accounted for about half of the total.[6]

Energy is a central element in Chinese-Arab relations, particularly in Chinese-Gulf relations. It has grown especially significant after the West stopped being a major buyer of energy from the Arab region. EU states came to rely on Russian energy after the Cold War, establishing a series of projects for the transport of oil and gas, including the Yamal-Europe pipeline running through Belarus to Poland, the Nord Stream 1 line via the Baltics, the so-called Brotherhood pipeline through Ukraine, the South Stream pipeline (subsequently the Turkish Stream), and finally the Nord Stream 2 line. Before the war in Ukraine, these pipelines transported up to 80 per cent of Russia’s energy exports to Europe, meeting about half of the latter’s energy needs.

The US, too, has significantly reduced its energy dependence on the Arabian Gulf region over the last decade, as its development of oil and shale gas extraction technology has transformed it into the world’s largest energy producer. The US now meets a major portion of its own needs and competes with other producers in global energy markets. According to the US Energy Information Administration, in 2021 the US produced about 18.9 million barrels a day of crude oil and other petroleum derivatives (roughly 20 per cent of global production). Its gas output in the same year was 935 billion cubic meters, surpassing Russia’s 700 billion cubic meters.[7]

This technology-driven development has led to two important changes. Firstly, the Arab Gulf region has declined in importance as an energy source for the US economy (although its importance for the global economy has increased), and secondly, the energy markets of the Arab Gulf states have shifted from the west to the east, as the bulk of the region’s oil and gas now flows to Asia, especially China, which became the world’s leading energy importer in 2013. China currently imports approximately 11 million barrels of oil a day, and by 2026 it will consume 16 million barrels of oil a day, 13 million barrels of which will be imported, mostly from the Gulf region. In 2020, China imported about 101 million tons of gas, and by 2040, it is expected to consume 620 billion cubic meters annually. Since 2019, Saudi Arabia has been the largest exporter of oil to China, selling it about 1.8 million barrels a day.[8] China has also become one of the largest importers of Qatari liquefied natural gas (LNG). In November 2022, Qatar signed the longest-running contract in the history of the LNG industry, committing to supplying China with 4 million tons of LNG over 27 years, starting in 2026.[9]
II. The US as a Factor in the Chinese-Saudi Rapprochement

Objective factors have contributed to the recent evolution of Sino-Gulf relations, first and foremost changes in production and consumption patterns in global energy markets and China’s transformation into the largest energy importer in the world as a result of its substantial industrial and economic growth in the years following its accession to the World Trade Organisation in 2001. But an additional important factor in the development of Chinese-Gulf relations, especially Chinese-Saudi relations, is the trajectory of relations with Washington. Saudi-US relations have faced growing challenges in recent years, partly due to the changing nature of US interests in the region and partly due to the erosion of the formula that traditionally governed ties between Washington and Riyadh, which since 1945 have been based on security for oil. The mistrust between the two parties grew during the tenure of President Barack Obama, demonstrated in the dispute over the attitude to the Arab Spring revolutions, especially what Saudi Arabia saw as the US abandonment of its most prominent allies in the region (President Mubarak’s regime in Egypt). The rift between the two grew when Washington signed the nuclear agreement with Iran in 2015.

Although Saudi-US bilateral relations improved significantly under President Donald Trump, the US administration’s failure to respond to alleged Iranian attacks on Saudi Arabia — especially the attack on Aramco facilities in September 2019, which put about half of Saudi oil production out of service — raised growing doubts in Riyadh about Washington’s commitment to its security. While Trump was initially willing to respond to the attack, he stressed that the responsibility for a response rested primarily with Saudi Arabia.[10] Despite Trump’s populist remarks, the US increased Patriot missile batteries in Saudi Arabia and took several preventive steps. It remains the principal source of Saudi weapons and intelligence.

The erosion of trust in Gulf-US relations prompted Gulf states to diversify their international partnerships, especially with states that have become dependent on the Gulf as a major source of energy, specifically China. Saudi Arabia’s turn to China became sharper when the Biden administration entered the White House after the November 2020 elections. During his campaign, Biden made statements hostile to the regime in Saudi Arabia and expressed a desire to revive the nuclear deal with Iran. As soon as his administration assumed power, it removed the Houthis from the list of designated terrorist organisations, suspended the export of offensive weapons to Saudi Arabia, and began to pressure the kingdom to end the war in Yemen.

The Biden administration also allowed the release of a secret intelligence report accusing Saudi Crown Prince Mohammed Bin Salman of ordering the assassination of Saudi journalist Jamal Khashoggi in the Saudi consulate in Istanbul in 2018. But the Biden administration subsequently changed its position and approved arms deals for Saudi Arabia, motivated by its need for Saudi cooperation in regulating oil markets after the Russian invasion of Ukraine and fearing that Riyadh would seek out alternative weapons sources. President Biden visited Saudi Arabia in July 2022, during which he tried to mend the rift with Riyadh. But this did not slow the pace of Saudi-Chinese and Gulf-Chinese rapprochement, particularly in the security and military arenas. Figures from the Stockholm International Peace Research Institute reveal that between 2016 and 2020, China increased its arms exports to Saudi Arabia by 386 per cent and to the UAE by 169 per cent over the period of 2011–2015.

In April 2022, Biden sent CIA chief Bill Burns to Riyadh to persuade Saudi Arabia to suspend a major Chinese weapons deal after US newspapers revealed that China was building a ballistic missile facility north of Riyadh.[11] China and Saudi Arabia have been discussing the purchase of Saudi oil in renminbi for some time now, and in 2021, Beijing persuaded Riyadh to become a “dialogue partner” of the Shanghai Cooperation Organisation, a regional security and economic group launched by China in the mid-1990s that includes Kazakhstan, India, Russia, Kyrgyzstan, Tajikistan, Pakistan, Uzbekistan, and Iran.[12] The same thing happened with the UAE, and in late 2021, President Biden personally intervened to stop the construction of what was then described as a Chinese base at the Khalifa Port in Abu Dhabi.[13] The US press reported that one reason for the UAE’s abandonment of the F-35 deal was the requirement by the US to suspend the 5G project being implemented by the Chinese firm Huawei in the UAE.[14]

Nevertheless, China is not a realistic alternative to the US or a viable strategic partner to Gulf states in the foreseeable future. Expanding relations with China is therefore likely to be based primarily on economic interests and, secondarily, to pressure the US by strengthening ties with its most significant global competitor. Even Chinese arms sales are more about trade than actual security cooperation. This may change in the future, however, if China alters its strategic doctrine on the global level. At the same time, China’s relations with Iran are growing more stable. In early 2021, the two states signed a 25-year strategic partnership agreement, under which China will pump $400 billion in investments into Iran’s economy over a quarter century, targeting the oil and gas sectors in particular, demonstrating that China is also attempting to balance its international relations.

Conclusion

The Arab Gulf states, especially Saudi Arabia, still do not have the option of replacing their security alliance with Washington with one with Beijing; China itself still does not want this and is not strong enough to do so, being primarily interested in commerce as part of its global trade. Nevertheless, the common interests linking the Arab Gulf states with China are too substantial to abandon. Although Saudi Arabia is trying to use its relationship with China to pressure the US, which is increasingly concerned about China’s growing influence in the region, this does not mean that Saudi Arabia is not more comfortable in its dealings with China. Unlike the US, China puts no conditions on relations, especially in the field of human rights, where China itself faces similar problems. In short, the Gulf economies are more closely tied to China than ever before, but they remain dependent on the US for security. The Gulf Arab states are thus attempting to maintain a balance between the two parties and resist choosing between their economic and security interests.

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