A New Era of Ties Between China and Saudi Arabia

Three days after establishing his position as general secretary of the Chinese Communist Party, chairman of the Central Military Commission, and de facto supreme leader of the PRC, Chinese President Xi Jinping landed in the Kingdom of Saudi Arabia on Dec. 7. There was a lot of fanfare for his arrival, including a purple carpet, an air display, a royal guard, and cannon fire. Mohammed bin Salman, the Crown Prince and de facto head of the kingdom, then arranged a sumptuous banquet for him at Al Yamama Palace.

Indeed, Washington and Riyadh’s animosity persists over OPEC+’s decision to boost the price of oil via a production reduction, so Xi’s visit has mostly been seen through the prism of Saudi-U.S. ties. The United States sees this as funnelling more money to Moscow’s military machine, which is assisting Russia’s war campaign in Ukraine. The foreign press has so concluded that Xi’s trip is an attempt to “exploit Riyadh-Washington tensions,” that it “comes amid fraying relations with the US,” that it “steps on Washington’s toes,” and that it is the outcome of a strategy “conceived in the US.” The actions of China are being seen by some as part of a larger plan to advance “an alternative to the Western-led security system” and “a fresh scramble for the Gulf.” While Saudi Arabia’s assessment clearly includes its relationship with the United States, Xi’s visit is about much more than that. Both the breadth and depth of China’s connections with Saudi Arabia are less widely discussed than they really are.

A Growing Connection

A profound collaboration based on significant trade and investment in the oil and chemical sectors has developed between China and Saudi Arabia over the last decade. In the first ten months of 2022, Saudi Arabia supplied China with 1.77 million barrels per day of oil, or 18% of China’s total oil imports. China is Saudi Arabia’s most important trading partner and its largest buyer of chemicals (it consumes 25% of Saudi output) and oil (27% of total production). In 2021, oil, plastics, and other chemical goods accounted for 95 percent of the $87 billion in bilateral commerce. Saudi Arabia has made substantial investments in Chinese oil refineries and has exclusive supply arrangements with these facilities. The visit this week has resulted in a flurry of new memoranda of understanding and other agreements that aim to broaden and extend this collaboration into other sectors, while oil and chemicals will undoubtedly remain the bedrock of the alliance. On the first day of the visit, 34 bilateral agreements were announced, laying the groundwork for Chinese investment in fields like green energy, IT, transportation, cloud services, medical industries, logistics, construction, and housing. These deals were announced with the controversial telecommunications company Huawei. Rumors regarding Xi’s travel to Saudi Arabia have been circulating since August, and the sudden revelation of so many agreements suggests that planning started well before Biden’s own visit there in July. Although there is no legal need for China to fulfil these promises, given that Saudi Arabia received the most Chinese investment in 2022 and that those investments have proven to be rather successful, it seems likely that China will go ahead with them nonetheless. Whereas in Iran, plans to boost investment have been proposed on several occasions but have ultimately fallen through owing to pressure from the United Nations and the Gulf states, the failure of the nuclear agreement, economic sanctions, and a lack of profitability.

End-to-End Agreement

While the relationship between China and Saudi Arabia has grown in recent years, it is still constrained in important ways. The fact that Saudi Arabia continues to rely on the United States for its security, and the importance of good ties with Saudi Arabia to the United States’ Middle East policy, is the primary constraining factor. Between 2003 and 2021, bilateral arms transactions between China and Saudi Arabia totaled just $245 million, whereas sales between the United States and Saudi Arabia reached $17.85 billion. Despite China’s recent announcement of a $4 billion sale of unmanned aerial vehicles (UAVs), the United States still has a monopoly on the production and export of major military hardware such as air-to-air missiles and fighter planes. The United States would undoubtedly interfere to block the sale of more significant weapons, as it has done in the past, according to both Chinese authorities and experts sceptical of China’s activities in the Middle East.

Even if the two parties’ relationship is becoming more tense, it seems that neither one of them is prepared to make substantial adjustments to how they interact with one another. Because US President Joe Biden warned in July that the United States “would not walk away” from the Middle East and let the vacuum be filled by either of the countries, such as China, Iran, or Moscow, it seems unlikely that the struggle over the price of oil will affect the balance of power.

No one should be surprised by this development since China has shown no enthusiasm for taking over the role of security hegemon in the Middle East from the United States. Having a secure environment for commerce and investment without having to compete with Washington’s enormous military presence in the area is a major factor in China’s support for such an arrangement. Beijing simply lacks the economic and military wherewithal to construct such a network, even if it wanted to. The lone foreign military post that China has established to date is located in Djibouti, and it does not seem to have produced an excessive amount of tension between China and the United States. There is no proof to corroborate the assertions that China intends to build a second foreign military facility in the United Arab Emirates, yet there have been speculations that this may happen. The idea that the United States continues to provide security for sea routes in the Gulf, which are crucial to a nation’s oil imports but might be blocked if there was a war, frustrates China. China sees this as a threat to its ability to import oil. However, so far, Beijing has merely attempted to play a greater role in the Middle East security matters and criticize the unilateralism of the United States; it has not aspired to supplant the United States in any way.

In addition to a China Card

There is more than meets the eye when it comes to the dynamics of Sino-Saudi ties. Saudi Arabia has been trying to diversify its investment base away from China and toward other Asian nations with simpler diplomatic ties to the United States. For instance, in 2016, the Kingdom repaired diplomatic ties with Thailand in an effort to exploit these improved ties as a launching pad for investments throughout Southeast Asia. And only lately has Riyadh been trying to strike a $30 billion investment agreement with South Korea. U.S. allies include both Thailand and South Korea.

In addition, the Vision 2030 project, which aims to lessen the Kingdom’s reliance on oil exports and attract investment from a wide variety of sources, was first announced in 2016, and thus Saudi Arabia has been actively working to diversify its economy and seek a wider variety of partners since at least that time. The Saudi government’s investment arm has committed $24 billion to projects in the Middle East and North Africa. In a nutshell, Saudi Arabia wants to increase its diplomatic, economic, and military relationships with a wide range of countries, including China.

China’s diplomatic efforts with the Gulf nations and Iran need a delicate balancing act, as the country cannot afford to put all of its eggs in one basket. Instead of just using the “China card” against the US, Sino-Saudi ties are driven by a strong economic foundation and a desire by both states to diversify and globalize their economies. Both parties are pursuing this as part of an overarching plan to increase domestic stability and government support, which heavily relies on maintaining strong economic development. Mohammed bin Salman is engaging China for both internal political and economic reasons, and maybe also to persuade the United States to offer stronger assistance. In this light, the United States’ determination to control, postpone, and restrict China’s expanding economic involvement with the globe, in the Indo-Pacific and beyond, seems more to be behind the spectre of developing Sino-Saudi ties than it does with the spectre of a growing China-Iran connection. Despite these growing connections, the Saudis continue to be strong U.S. supporters, and it’s unlikely that Beijing will overtake the U.S. as Saudi Arabia’s most important ally.

[Photo by Saudi Royal Palace/Handout/AFP]

Anuj Dhyani is a second-year Master’s student in international relations at OP Jindal Global University, India.

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