By Laura He, CNN Business
Chinese President Xi Jinping will visit Saudi Arabia this week for the first time in nearly seven years, which is expected to mean billions of dollars in deals with the world’s largest oil exporter and meet with leaders from across the Middle East.
The scale in is a sign that China and the Gulf region are deepening their economic ties at a time when U. S. -Saudi relations have collapsed following OPEC’s resolution to cut off crude supplies. As Xi wrote in an article published in the Saudi media, the goal was on strengthening China’s relations with the Arab world.
China is Saudi Arabia’s largest trading partner and a source of development investment. It is also the world’s largest oil customer. Saudi Arabia is China’s largest trading partner in the Middle East and the world’s largest crude oil partner.
“Energy cooperation will be at the center of all discussions between Saudi and Chinese leaders,” said Ayham Kamel, head of Eurasia Group’s Middle East and North Africa research team. this interdependence is taken into account politically, especially given the scale of the transition of power in the West. “
Governments around the world have committed to reducing carbon emissions in the coming decades. Countries such as Canada and Germany have doubled their investments in renewable energy to fuel their transition to net-zero economies.
The United States has particularly increased its domestic oil and fuel production since the 2000s, while accelerating its transition to blank energy.
Russia’s invasion of Ukraine in February triggered a global energy crisis that prompted all countries to rush to improve their supplies. And the West has muddier oil markets by imposing an embargo and value cap on the world’s second-largest crude exporter.
Energy security is also increasingly a key priority for China, which in turn faces significant challenges.
Last year, the bilateral industry between Saudi Arabia and China reached $87. 3 billion, up 30% from 2020, according to Chinese customs figures.
Much of the industry was focused on oil. China’s crude imports from Saudi Arabia amounted to $43. 9 billion in 2021, accounting for 77% of its total imports of the kingdom’s products. This amount also accounts for more than a quarter of Saudi Arabia’s total crude exports.
“The stability of energy supplies, whether in terms and quantities, is a key priority for Xi Jinping, as China’s economy remains heavily dependent on imports of oil and herbal fuel,” said Eswar Prasad, a professor of industrial policy at Cornell University.
The largest economy of the moment relies heavily on foreign oil and fuel. 72% of its oil consumption was imported last year, according to official figures. 44% of the demand for herbal fuel also came from abroad.
At the 20th Party Congress in October, Mr. Xi said energy security is a key priority. The comments came after a series of severe power outages and rising global energy costs following Russia’s invasion of Ukraine.
While the West moved away from Russian crude in the months after the invasion, China took advantage of Moscow’s desperate search for new buyers. Between May and July, Russia was China’s most sensible oil supplier, until Saudi Arabia regained the most sensible spot in August. .
“Diversity is a key element for China’s long-term energy security, as it cannot put all its eggs in one basket and be captive to the power and geostrategic interests of another power,” said Ahmed Aboudouh, a non-resident resident. Fellow in the Middle East Programs at the Atlantic Council. a study institute founded in DC.
“Although Russia is a source of less expensive supply chains, no one can guarantee, with the greatest certainty, that China-Russia relations will continue to consolidate in 50 years,” Aboudouh said.
The Saudi news firm quoted Saudi Energy Minister Prince Abdulaziz bin Salman as saying on Wednesday that the kingdom would be China’s “credible and trustworthy spouse in this field. “
Saudi Arabia also has motivations to deepen power ties with China, according to Gal Luft, co-director of the Institute for Global Security Analysis.
“The Saudis are worried about wasting the market share in China in the face of a tsunami of heavily discounted Russian and Iranian crude,” he said. product. “
Oil costs have fallen back to pre-war levels in Ukraine amid fears of a sharp global economic slowdown. The extent to which China’s economy can be boosted next year will have a massive effect on the severity of this crisis.
Beyond security of supply, Saudi Arabia could be offering value to Beijing with greater geopolitical ramifications.
Riyadh is in talks with Beijing to value some of its oil sales to China in China’s currency, the yuan, rather than the U. S. dollar, according to a Wall Street Journal report. Expand the global influence of the Chinese currency.
It would also undermine the long-standing agreement between Saudi Arabia and the US. The U. S. government requires Saudi Arabia to sell its oil for U. S. dollars and hold its reserves partly in U. S. Treasuries. The U. S. government is all in exchange for U. S. security guarantees. U. S. The “petrodollar system” helped maintain the dollar’s prestige as the main reserve currency and means of payment for oil and other commodities in the world.
Although Beijing and Riyadh never showed the reported talks, analysts said it made sense for both to explore the possibility.
“In the near future, Saudi Arabia could simply sell some of its oil and make a profit in Chinese yuan, which makes economic sense because China is the kingdom’s largest trading partner,” said Naser Al Tamimi, senior research associate at ISPI, an Italian thinker. Foreign affairs reservoir.
Some of this is already happening, but neither China nor the Saudis need to point it out publicly.
“They know very well how delicate this factor is for the United States,” Luft said. “Both sides are overexposed to the U. S. currency. part, especially when that third party is no longer friends with another. “
Xi can mark a new step “in eroding the dollar’s status” as a reserve currency, he added.
However, there are limits to ties between Riyadh and Beijing.
“The Biden administration in the Middle East has engaged the Saudis, and they see a developing relationship with China as a cover opposed to a possible U. S. abandonment. The U. S. and a tool of influence in negotiations with the U. S. “It’s the U. S. ,” said Jon B. Alterman, director of the Middle East program at the Center for Strategic and International Studies, a Washington, D. C. -based think tank.
Biden’s administration has shifted its policy priorities toward fighting China. At the same time, it has signaled its goal of diminishing its own presence in the Middle East, raising considerations among its allies that the United States might not be as involved in the region as it once was.
“Having said all that, China-Saudi relations pale in intensity and complexity to Saudi-U. S. relations,” Alterman said. how the Saudis have noticed the global and how they have noticed it for 75 years. “
Despite switching to yuan transactions, it is too early to say that Saudi Arabia will abandon the dollar in the price of its oil sales, analysts said.
Kamal, of the Eurasia Group, believes it is “highly unlikely” that Saudi Arabia will take such a step, there is an implosion in relations between the United States and Saudi Arabia.
“Essentially, there may be discussions about the value of barrels for China in yuan, but this would be of limited duration and would only correspond to bilateral industry volumes,” he said.
Cornell University’s Prasad said countries such as China, Russia and Saudi Arabia are willing to rely on the dollar for oil contracts and other cross-border transactions.
“However, in the absence of serious opportunities and with few foreign investors willing to accept as true the money markets of those countries and their governments, the dominant role of the dollar in global finance is hardly seriously threatened,” he said.
El-CNN-Wire™
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