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Analyzing the Growing Ties Between Saudi Arabia and China

While the U.S. attempts to broker a new nuclear deal with the Islamic Republic of Iran, the Kingdom of Saudi Arabia (KSA) and the People’s Republic of China (PRC) are increasing economic ties and cooperation.

  • On March 10, 2022, Saudi Aramco, the largest oil company globally, “finalized an investment” decision to build a major refinery and petrochemical complex in Northeast China. Aramco partnered with China-based North Huajin Chemical Industries Group Corporation and Panjin Xincheng Industrial Group and will supply the complex with 210,000 barrels of crude oil per day.
  • On March 15, 2022, the Wall Street Journal reported the Kingdom of Saudi Arabia was “in talks” with China to sell some of its oil in Yuan instead of the U.S. dollar.

Saudi Arabia exports more oil to China than anywhere else globally. The potential for Saudi Arabia to sell its oil to China in Yuan, not U.S. dollars, could lessen the dollar’s influence as the world’s reserve currency. Additionally, China’s growing relationship with the Kingdom of Saudi Arabia may increase tensions between the United States and the KSA.

For this brief, Overwatch analyzed the growing ties between Saudi Arabia and China, identifying more economic cooperation as well as their expanding relationship in defense, militarily, in Artificial Intelligence (AI) and geospatial technology. China’s stronger relations with KSA could undermine the U.S. presence in the Middle East, giving China significant influence in the region.

A timeline of relations from February 2021 – Current Day

  • In February 2021, KSA Foreign Affairs Minister Faisal bin Farhan Al-Saud told Chinese Foreign Minister Wang Yi that Saudi Arabia gives priority to the Saudi-China relationship.
  • In March 2021, Saudi Aramco said its relationship with China is its main energy priority for the next 50 years.
  • Also, in March 2021, KSA said that it supports China’s positions of Xinjiang and Hong Kong.
  • In April 2021, Saudi Crown Prince Mohammed Bin Salman asked Chinese President Xi Jinping to merge KSA’s Vision 2030 and China’s Belt and Road Initiative. Saudi Arabia’s Vision 2030 aims to create a more diverse and sustainable economy, be a driver of international trade, and further connect Africa, Asia, and Europe through trade. China’s Belt and Road Initiative is a global infrastructure program that seeks to connect all trade routes in Africa, Asia, and Europe to China. Currently, 145 countries have signed a memorandum of understanding with the PRC to join its Belt and Road Initiative.
  • In June 2021, the Saudi Chinese Business Council met via teleconference to discuss increasing bilateral trade.
  • In December 2021, a report indicated that China was providing technical assistance to Saudi Arabia in building ballistic missiles.
  • In January 2022, Saudi Arabia said it would deport two Muslim Uyghurs back to China, who have been held in the country without any trial since November 2020.
  • Additionally, in January 2022, Chinese Minister of National Defense Wei Fenghe and KSA’s Deputy Defense Minister Khalid Bin Salman agreed to improve cooperation between each nation’s military.
  • In February 2022, Huawei launched its largest overseas store in Saudi Arabia’s capital, Riyadh. In addition, the Saudi Digital Academy signed a memorandum of understanding with Huawei to develop local talent. Saudi Arabia’s goal is to send 8,000 Saudis to Huawei-approved centers to learn about AI, cyber security, 5G, and cloud computing.
  • In March 2022, Saudi Arabia’s Advanced Communications and Electronics Systems Co. signed an agreement with China Electronics Technology Group Corp to build military drones together.
  • In March 2022, Saudi Arabia’s Taqnia Ets and Taqnia Space and China’s Star Vision agreed to collaborate on research and development of geospatial and artificial intelligence technology.
  • Then in mid-March 2022, Saudi Arabia invited Chinese President Xi Jinping to visit the country.
  • In late March 2022, Foreign Minister Wang Yi said that he wants China to take its relationship with Islamic countries to “a new level.”

Currently, Saudi Arabia is China’s largest trading partner in the Middle East. An October 2021 study from King Abdullah Petroleum Studies and Research Center (KAPSARC) shows just how deep trade ties have become between the PRC and KSA. “Trade flows between China and Saudi Arabia have also grown. China’s exports of industrial products to Saudi Arabia reached $28 billion in 2020, an increase of 50% since 2013. Saudi Arabia’s exports of crude oil to China grew from 364 million barrels in 2013 to 622 million barrels in 2020. Construction contracts between Chinese enterprises and Saudi Arabia grew even more rapidly. The total value of completed contracted projects by Chinese enterprises in Saudi Arabia from 2014 to 2019 was $40 billion. This amount is twice the corresponding value for 2008 to 2013.”

Based on open-source research, China currently has 71 companies with a presence in Saudi Arabia. The companies are primarily engineering, construction, or energy-related. In addition, Huawei’s subsidiary, Huawei Tech Investment Saudi Arabia Co. Ltd. is setting up data centers in KSA.  Huawei is also working with Saudi Arabia on AI technologies.

OUR ASSESSMENT

With U.S. support for a new Iranian nuclear deal and news that the Biden administration is considering removing the Iranian Revolutionary Guard Corps (IRGC) from the Foreign Terrorist Organizations List (FTO), Saudi Arabia will likely increase its cooperation with China economically, politically, in technology, and militarily. With Saudi Arabia’s Vision 2030 and China’s Belt and Road Initiative, both nations share similar goals for developing new infrastructure and regional trade routes. These projects will draw China and KSA closer together, weakening U.S. investment and economic relations with Saudi Arabia and potentially other Middle Eastern countries in the Gulf. From 2019 to 2020 Saudi Arabia’s Foreign Direct Investment (FDI) in the United States decreased. Additionally, with the U.S. reliance on oil from the Middle East, weakened relations with Gulf countries could impact the price of gas and utilities in the states.

Further, with the U.S. support for a new Iranian nuclear deal, Saudi Arabia could potentially rely on China for critical technology to develop nuclear weapons. In March 2018, Saudi Crown Prince Mohammad Bin Salman said, “Saudi Arabia does not want to acquire any nuclear bomb, but without a doubt, if Iran developed a nuclear bomb, we will follow suit as soon as possible.” Currently, Iran has enriched its uranium to 60%, 30% from weapons-grade uranium. In July 2021, former Iranian President Hassan Rouhani said that Iran could enrich to 90%, which is 30% from the weapons-grade uranium needed for a nuclear weapon.

Overwatch analysts also assess that China will continue to prioritize ties with other countries in the Gulf to compete with the United States, including Kuwait, Oman, Bahrain, Qatar, and the UAE — all members of the PRC’s Belt and Road Initiative. As China aims to be the world superpower and its footprint expands in the Middle East, it could threaten U.S. economic interests regionally and disrupt U.S. diplomatic relations with Gulf countries.

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