Xi visit to Saudi Arabia is a signal for the US
2022.12.06 09:00
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Xi visit to Saudi Arabia is a signal for the US
Budrigannews.com – As the Gulf region increasingly looks to the East to drive economic transformation at home for a post-oil era, trade and investment ties between China and Gulf Arab states are expected to feature prominently in President Xi Jinping’s visit to Saudi Arabia this week.
Gulf oil and gas producers have a significant trade partner in China, the world’s largest energy consumer. Although economic ties remain anchored by energy interests, bilateral relations have expanded as a result of the region’s push for infrastructure and technology.
State-owned Saudi Aramco (TADAWUL:) is China’s primary oil supplier, accounting for 18% of China’s total purchases. has supply agreements with half a dozen Chinese refiners annually.
During Xi’s visit, Riyadh has said that strengthening trade ties and regional security will be top priorities. The kingdom will also host a China-Gulf summit and a China-Arab summit, both of which, diplomats say, will involve dozens of agreements and memorandums of understanding.
In addition to energy, Gulf Cooperation Council (GCC) nations support Beijing’s Belt and Road Initiative by providing Chinese goods with markets, construction contracts, and investment opportunities in infrastructure, manufacturing, and digital economies.
Fareed Mohamedi, managing director of SIA Energy International, stated, “The GCC wants FDI” (foreign direct investment) that not only meets local demand but also allows these economies to integrate into global supply chains.
“The Chinese businesses will assist in doing that, first on a regional level in Asia and then beyond,”
Saudi Arabia, the largest Arab economy and the world’s top crude exporter, wants to reduce its reliance on oil by developing new industries that can create jobs for Saudis. The government is driving these projects while FDI lags behind.
It is competing with local business community the UAE to turn into a vehicle and operations center, including by creating ocean ports to profit by the district’s essential situation between Asia, Africa and Europe.
As a pillar of economic diversification, Saudi Arabia and the United Arab Emirates are also investing in future technologies as part of a global shift away from fossil fuels.
A senior regional executive disclosed to local media in August that the Chinese tech giant Huawei, which has participated in the construction of 5G networks in the majority of Gulf states despite concerns from the United States, is finalizing a location for a new data center in Saudi Arabia, which would be the region’s second after Abu Dhabi. Online goliath Alibaba (NYSE:) has partnered with STC Group for Saudi Arabian cloud services.
As Saudi Arabia moves to build local content, including in the nascent automotive and defense industries, Chinese companies are looking at opportunities in mining and manufacturing as well as mega projects like the $500 billion NEOM zone.
According to analysts, Saudi Arabia and other Gulf states’ management of Western and Chinese supply chains in sensitive areas like critical national infrastructure is likely to remain a source of contention with the United States, a key security partner.
According to Adel Hamaizia, a managing director at Highbridge Advisory, “Managing these digital divides, dividends, decouplings, and disaggregations is central to economic progress in Saudi Arabia, the GCC, and the broader Middle East and North Africa.”
Gulf Arab officials have stated that the region’s national economic and security interests necessitate strengthening ties with other partners, such as China and Russia, despite Washington continuing to be a crucial strategic partner.
“Our primary security and investment relations are in the West,” senior UAE official Anwar Gargash stated last month. “Our trade relations look increasingly to the East.”
According to a report from London-based think tank Asia House, trade between the GCC and China has doubled between 2010 and 2021. However, since 2004, no progress has been made on a free trade agreement, and sources claim that any talk of an agreement in the near future seems premature.
While Arab producers are still heavily reliant on hydrocarbon revenues to deliver on their diversification drive, Beijing’s primary motivation for greater cooperation with the Gulf remains embedded in its dependence on energy imports.
Russia, an individual from the OPEC+ oil maker union close by Saudi Arabia, has been expanding its business volumes to China with limited oil subsequent to confronting Western authorizations over its intrusion of Ukraine, which Moscow calls a “unique military activity”.
Karen Young, a senior research scholar at Columbia University’s Center on Global Energy Policy, stated, “All of the region’s oil exporters will want more information on China’s plans for lifting COVID restrictions, especially those like Iraq and Oman who are so dependent on that market.”
