Saudi Arabia’s Entry Into the SCO: Strategic and Economic Implications

Saudi Arabia’s Cabinet, which met under the chairmanship of King Salman bin Abdulaziz in Jeddah, gave its approval for the Gulf nation to join the Shanghai Cooperation Organization (SCO) on March 30, 2023. The SCO, founded in 2001, currently consists of eight member states, including China, India, and Russia, four member observer states, including Iran and Afghanistan, and six dialogue partners. Pakistan and four Central Asian countries – Kazakhstan, Kyrgyzstan, Uzbekistan, and Tajikistan – are also members of the SCO. New Delhi will hold the presidency of the SCO from September 2022 to September 2023.

Set up as a political, social, and economic organization, the SCO focuses on regional security issues, and in recent years, there has been a growing focus on connectivity as well as closer economic linkages between members. Initially, the SCO began as the Shanghai Five in 1996 and consisted of China, Kazakhstan, Kyrgyzstan, Russia, and Tajikistan. In 2001, Uzbekistan was admitted as the sixth member of the SCO.

The decision of Saudi Arabia to join the SCO as a dialogue partner is important for several reasons. First, Saudi Arabia’s decision to join the SCO is a strong example of Riyadh’s growing proximity with Beijing. One of the reasons cited for Riyadh seeking to strengthen ties with Beijing is the deterioration of US-Saudi bilateral relations during the presidency of Joe Biden. The other factor for Saudi Arabia seeking to improve ties with China has been a growing perception that Washington has been paying less attention to the security situation in the Middle East in recent years.

While Biden included Saudi Arabia in his Middle East visit last year, and the US along with other nations has been asking Saudi Arabia as the chair of the Organization of Petroleum Exporting Countries (OPEC) to raise oil production, Riyadh refused to do so. In October 2022, Saudi-led OPEC and its allies (OPEC+) announced its decision to cut oil production. Biden had said that this move would have “consequences”.

In December 2022, Chinese President Xi Jinping visited Saudi Arabia and also attended the first China-Gulf Cooperation Council (GCC) Summit, which is a strong reiteration that not just Saudis but even other Gulf nations like UAE are keen to enhance linkages with Beijing – much to the chagrin of Washington DC. The Chinese President said that Beijing would not only continue to import large quantities of crude oil from the Gulf but also “.. firmly support the GCC countries in maintaining their own security … and build a collective security framework for the Gulf.”

Another strong example of China’s growing clout in the Middle East, as well as Saudi Arabia’s growing ties with China was the deal between Riyadh and Tehran, signed on March 10, 2023, brokered by Beijing. Both countries will resume diplomatic relations and re-open embassies. Riyadh’s decision to be part of the SCO will be closely watched by the West. 

 Saudi Aramco also recently announced that it will acquire a 10% stake in  China’s Rongsheng Petrochemical Co. Ltd (this purchase is estimated at $3.6 Billion). It would be important to mention here that Aramco will also be supplying 480,000 barrels per day to Rongsheng affiliate Zhejiang Pettroleum and Chemical Co. Ltd. Aramco also announced, that it would be part of a petroleum project  — Huajin Aramco Petrochemical Company (HAPCO). This project will be a joint venture between Aramco (which will hold 30% stake), NORINCO (51%) and Panjin Xincheng Industrial Group.

Second, Saudi Arabia has been seeking to send out a clear message, that its foreign policy is not based on old binaries not just in the context of the US and China, but even in the context of ties with Russia and Iran. The decision of Saudi Arabia last year to cut oil production was an example of Saudi Arabia and Russia being on the same page – to the displeasure of Washington.

Joining the SCO would give it an opportunity to further strengthen ties not just with India, China and Russia which are members, but also Central Asian member states and Iran. Apart from oil and gas, Saudi Arabia could also seek to explore synergies with SCO member states in the sphere of infrastructure and connectivity. 

Saudi Arabia-US economic ties 

While it is true, that the above developments highlight the changes in Saudi policy, it is important to bear in mind that days after the Saudi-Iran deal,  two Saudi Arabian airlines – Saudia and Riyadh air – placed an order for 121 Boeing planes. 

White House Press Secretary, Karine Jean Pierre had described this Saudi announcement as “ another milestone in eight decades of cooperation between Saudi Arabia and American industry.”

This clearly underscores the point that Saudi Arabia while seeking to strengthen ties with Beijing understands the importance of maintaining robust economic relations with the west.

In conclusion, the Saudi decision to join SCO is important, and will be beneficial for furthering its aims of a balanced foreign policy as well as its economic objectives. It is important however to not just view it in the context of Saudi ties with China but also its objective of cultivating close ties with other countries.

[Photo by Bandar Al Galoud, via Wikimedia Commons]

The views and opinions expressed in this article are those of the author.

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