Xi Jinping in Saudi Arabia: China sees opportunity to step in America's shoes in West Asia

New Delhi: China’s President Xi Jinping’s ongoing visit to Saudi Arabia has laid bare the widening gulf between Saudi Arabia and the United States. China is running in to try to fill in for the middle eastern oil giant’s old military and economic ally, but it has been spreading its tentacles in Saudi Arabia for quite some time now with investments in the oil sector, joint military exercises and infrastructure.

An escort of Saudi Air Force fighter jets, a purple carpet rolled out at the airport and flags of China and Saudi Arabia welcomed Xi in Riyadh for a three-day visit to the gulf nation. The visit comes against the backdrop of Saudi Arabia’s soaring relations with the US, which for long has been its biggest defence ally.

The visit will see the Chinese president sign an initial agreement worth around $30 billion, according to Saudi Arabia’s state-run news agency.

Xi will also take part in the first-ever China-Arab States Summit and the China-Gulf Cooperation Council Summit in Riyadh.

Saudi Arabia made the biggest recipient of funds under China’s Belt and Road initiative in the first half of 2022, even though spending on the project fell by 11 per cent compared to the same time period last year.

China is Saudi Arabia’s largest trading partner, with bilateral trade worth $87.3 billion in 2021. Chinese exports to Saudi Arabia reached $30.3 billion, while China’s imports from the kingdom totalled $57 billion.

Oil sector

Saudi Arabia is China’s largest oil supplier. With 1.77 barrels a day, it accounted for 18 per cent of China’s oil purchases in the first ten months of 2022.

Oil imports last year amounted to 87.56 million tonnes, worth $43.9 billion, making up 77 per cent of China’s total merchandise imports from Saudi Arabia.

Chinese refiners including Sinopec, CNPC, CNOOC, Sinochem, and Norinco as well as private refiner Zhejiang Petrochemical Corp have annual supply deals with Saudi Aramco, Saudi Arabia’s state-owned oil company.

In early 2022, the Saudi oil company made a final investment decision to build a $10 billion refinery, and petrochemical complex in northeast China, marking its single largest investment in China.

Aramco’s only other similar investment in China is a 25 per cent stake in Refining and Petrochemical Company Ltd in Fujian province controlled by state refining giant Sinopec Corp, which began in 2008 operating a 280,000 BPD refinery and a 1.1 million tonne per year (tpy) ethylene complex.

Financial ties

 China’s state-owned Silk Road Fund is part of a consortium led by US-based EIG Global Energy Partners that in mid-2021 closed a deal to buy 49 per cent of Saudi Aramco’s oil pipelines business for $12.4 billion.

Silk Road is also part of a consortium led by BlackRock Real Assets and Hassana Investment Company that announced in February the completion of a 49 per cent stake acquisition in Aramco Gas Pipelines Company for $15.5 billion.

Power sector

Saudi utility developer ACWA Power, partly owned by the Saudi sovereign wealth fund, said in September that it agreed with Silk Road Fund to jointly invest in a 1.5 gigawatt (GW) gas-fuelled power plant in Uzbekistan for $1 billion, part of Beijing’s One Belt One Road initiative.

State-run China Energy Engineering Corp (CEEC) is building a 2.6-GW solar power station in Al Shuaiba Saudi Arabia, also owned by ACWA Power, the Middle East’s largest solar project.

Defence

 Saudi Advanced Communications and Electronics Systems Co (ACES) signed a deal with China Electronics Technology Group to manufacture unmanned aerial vehicle payload systems in the kingdom, Saudi English-language newspapers Arab News and Saudi Gazette reported in March.

Earlier in November 2019, both countries conducted ‘Blue Sword 2019’ joint military drill between their Naval forces.

US’s reaction to Xi’s visit

The US is watching Xi’s visit very cautiously as its closest ally in the region is now looking up to its rival for better ties.

The White House Secretary National Security Council spokesperson, while issuing a warning against China, said that Saudi Arabia remains a key ally.

“We are mindful of the influence that China is trying to grow around the world. The Middle East is certainly one of those regions where they want to deepen their level of influence,” he said.

We believe that many of the things they’re trying to pursue and the manner in which they’re trying to pursue it are not conducive to preserving the international rules-based order.”

With inputs from Reuters

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