Saudi Arabia's New Best Friend: China?

September 2, 2015 Topic: Diplomacy Region: AsiaMiddle East Tags: Saudi ArabiaChinatrade

Saudi Arabia's New Best Friend: China?

Beijing's commitment to strengthening its relations with Riyadh is certain. Should Washington be worried?

All eyes will be on Washington on Thursday as Saudi Arabia’s King Salman makes his first official visit to the United States —or anywhere else for that matter—since ascending the throne in January after the passing of his half-brother, King Abdullah. Some preliminary reports out of the Middle East are suggesting that the King might be accompanied by a large delegation comprised not only of senior officials, but also some well-known businessmen and prominent Saudi women. While the visit could mark a new era of improved relations between the two traditionally close allies, there is little doubt that the tumult that has gripped the Middle East since 2011 has put a strain on Saudi-U.S. relations.

Many observers have argued that the U.S. administration’s willingness to part ways with President Hosni Mubarak in Egypt, its sudden reversal on striking Bashar al-Assad’s forces in Syria after they had crossed President Obama’s self-imposed “red line” by using chemical weapons outside of Damascus in 2013 and the July signing of an agreement with Iran over its nuclear activities have led to a “rift” between Saudi Arabia and the United States. While talk of an even more serious “rupture” in relations should not be taken very seriously—Saudi Arabia and the United States have not sustained a mutually beneficial relationship for seven decades by happenstance—some Saudis have long advocated that Saudi Arabia needs to wean itself off from what they consider to be its overdependence on the United States as a strategic ally and trading partner. That’s where China comes in.

China cannot match the United States’ proven track record of projecting its military power in the Middle East. Nevertheless, there is wide agreement among Saudis that during a time of unprecedented turmoil in the region, it is vital to keep all their options open and to strengthen relations with as many regional and global powers as possible. As far as Saudi Arabia is concerned, the upside of closer relations with China far outweigh any potential downside.

A Slow Start

The staunchly anti-communist Saudis were firmly in the U.S. camp during the Cold War. They even played an important role in supporting the Afghan “Mujahidin” in its war against the Soviet Union, which invaded the country in 1979 to prop up its allies there. Therefore, it should not come as a surprise that Saudi-Chinese relations were virtually nonexistent after the triumph of Mao Tse Tung and the communists in 1949. However, as the Soviet Union collapsed in 1989 and China slowly began liberalizing its economy, Saudi Arabia and China established diplomatic relations in 1990. Although relations developed slowly, today, there is a wide consensus among Saudi officials, businessmen and analysts that relations with China should not only be maintained, but should broaden in scope.


Oil Anchors Saudi-Chinese Relations

It is tempting to assume that any conversation about Saudi-Chinese relations begins and ends with oil. After all, Saudi Arabia is the world’s top exporter of crude oil and China is the world’s biggest importer. Saudi Arabia is indeed China’s biggest supplier of crude. In July, the Saudis exported 993,000 barrels of crude oil a day to China, which represented a 12-percent increase from the previous month. With the exception of this past May, when Russia briefly overtook Saudi Arabia as China’s top supplier of crude, Saudi Arabia has maintained the top spot for close to ten years.

Not only has China’s demand for energy increased dramatically over the past two decades as its economy grew at a rapid clip, the International Energy Agency estimates that China’s imports from the Middle East will roughly double by 2035. As the shale revolution in the United States has led to increased domestic production and lower demand for Saudi imports, the Asian market has looked even more attractive. While the United States continues to be an important market for Saudi crude; China, Japan, South Korea and other Asian countries account for close to 70 percent of Saudi crude exports.

However, Saudi-Chinese energy relations extend beyond trade in crude and include sizable Saudi investments in Chinese refineries and Chinese companies helping develop Saudi Arabia’s own refineries and natural-gas fields. As Saudi Arabia’s own domestic energy needs have risen rapidly in recent years—electricity consumption has doubled since 2000—and are expected to continue to increase, policy makers have tried to meet increased demand by tapping into the kingdom’s natural gas, allowing more-lucrative crude to be exported. And while the results of the search for natural gas in Saudi Arabia have been disappointing, the Saudis have made real progress in expanding their refining capacity.

As the Saudis made a concerted effort to increase their capacity, China’s Sinopec stepped forward and partnered with Aramco to build a 400,000-barrel-a-day plant , which began exporting its first shipments in January of this year. Not surprisingly, the Saudis have also invested heavily in Chinese refineries to position themselves as the supplier of choice over the long term. Saudi Arabia’s Aramco has entered a joint venture with PetroChina Co and Yunnan Yuntianhua to build a 260,000-barrel-a-day refinery in China’s southwest. This is in addition to the refinery that Aramco manages in Fujian province along with Sinopec and MobilExxon.