China, the Arabs’ preferred partner?Mr. Xi goes to Riyadh
In retrospect Chinese President Xi Jinping’s visit to Saudi Arabia sent several messages in the broader context of the triangular relationship between the Gulf states, China and the United States. The most distinctive message was that the countries of the region are taking a more independent line toward Beijing than the Americans would like, even if there are limits to how far they are willing to go against Washington’s preferences.
Xi’s visit was his first venture beyond East and Central Asia in three years, his third overseas state visit since the COVID-19 pandemic and his first visit to Saudi Arabia since 2016. It represented an unprecedented diplomatic success, which Chinese state media touted as “China’s largest and highest-level diplomatic action with the Arab world since the founding of the People’s Republic of China”.
During his stay, Xi held bilateral meetings with nearly 20 Arab leaders. His warm welcome contrasted with the more reserved reception extended to President Joe Biden last July. During his visit, the Chinese president attended three summits – the Saudi-Chinese Summit, the first Gulf Cooperation Council (GCC)-Chinese Summit, and the first Arab-Chinese Summit. The visit attracted much attention, given the changing dynamics in global, regional and energy geopolitics.
Economic centre of gravity moving eastwards
With respect to shifting global geopolitics, the timing of Xi’s visit and the fanfare surrounding it were significant. In its National Security Strategy released in October 2022, the Biden administration stated that the greatest challenge to U.S interests came from a rising China, so that Washington’s primary focus was on sustaining and strengthening U.S. deterrence against China.
The United States is concerned about China’s growing connections with U.S allies in the Gulf and the Middle East, who were informed that their deepening ties with Beijing could hamper cooperation with Washington, their chief strategic ally and security partner.
Saudi Arabia and some other regional countries are interested in joining China-led multilateral frameworks, such as the Shanghai Cooperation Organization (SCO) and “BRICS plus”, proposed in 2017. Egypt, Saudi Arabia and Qatar have become new dialogue partners of the SCO, while Bahrain, Kuwait and the United Arab Emirates (UAE) are to follow suit.
Xi’s visit to Riyadh also came at a time when U.S.-Saudi relations have been strained over several issues, including human rights, the war in Yemen, the decision of OPEC+ to cut oil production and a range of other foreign policy matters. It is a testament to the shifting stakes in the global economic order that China is gaining greater prominence.
Most indications are that the centre of economic gravity is moving eastward toward Asia, which is on track to account for 50 percent of global GDP and 40 percent of global consumption by 2040. China reportedly relies on Gulf energy exports for about 30 percent of its annual energy needs. It is the world’s largest buyer of oil, while Saudi Arabia, the world’s largest oil exporter, has become China’s biggest trading partner and crude oil supplier. China imports around 18 percent of its oil needs from the kingdom.
While Beijing’s interests in the Middle East may have been initially driven by energy needs, the relationship is now diversifying. Over the past 20 years, China has become increasingly a significant partner for GCC states in several fields such as infrastructure, investment, trade in goods and services, digital technology, and defence.
Currency strategists say Saudi Arabia appears to be sending a political message with reports that it will consider accepting yuan payments for oil sold to China, but it changes little for the dollar https://t.co/dukRslZgNq
— Bloomberg (@business) March 15, 2022
Saudi Arabia is at the centre of such trends. Trade between China and Saudi Arabia was worth over $80 billion in 2021, and Chinese companies have earned more than $36 billion in contracting revenues in Saudi Arabia since 2005. China’s crude oil imports from Saudi Arabia stood at almost $44 billion in 2021, accounting for 77 percent of the total value of its imports from the kingdom.
China has also emerged in recent decades as a significant trading partner for many other GCC states. Most GCC governments depend on energy to support the diversification of their economies, while China needs Gulf hydrocarbons to power its economy. The coming of age of young and ambitious leaders in the Gulf and their economic diversification plans have encouraged them to look toward China as a model for future development.
Gulf states hedge superpower bets
China also provides the GCC states with a strategic opportunity to hedge their bets between the two superpowers. Xi’s visit was an important moment in Saudi Arabia’s emergence as a more dynamic player on the global stage, as well as a significant test of Saudi Arabia’s ability to balance its ambitions and other interests with the imperative of maintaining its paramount security relationship with the United States.
China and Arab states are increasingly building broader ties, such as the establishment of the China-Arab States Cooperation Forum in 2004 and the China-Arab States Expo in 2013. Over the past decade, the Belt and Road Initiative (BRI) has added to this momentum.
Xi’s visit to Saudi Arabia aimed to cement existing relations while building on China’s popularity in the Arab countries. Beijing has also reiterated its support for these Arab partners’ independent development paths. China and Arab countries signed multiple multi-sector agreements covering energy, infrastructure, finance, education, technology and other important fields with Arab leaders during Xi’s visit.
The parties also included references in their joint declarations to sensitive regional issues such as the Iranian nuclear programme, the Syrian crisis, the Israel-Palestine peace process, and the Iran-UAE islands dispute, which provoked a backlash from Iran.
China and Saudi Arabia in particular agreed to upgrade their bilateral relations to a “comprehensive strategic cooperative partnership” following the UAE, Iran, Egypt and Algeria, as well as deciding to hold leaders’ meetings biannually. Saudi Arabia’s closer ties with China suggest greater prospects for China-Arab relations in the future. Yet some Arab states were concerned with the 25-year strategic cooperation agreement between Iran and China, which was signed in March 2021.
The Saudis and Emiratis are hoping to use closer ties with China to offset Iranian influence with Beijing as the Chinese begin to extend their economic and strategic influence in the Gulf. Saudi Arabia has been expressing a keen interest in joining the BRI, and “harmonising” it with Riyadh’s own Vision 2030 development plans.
Xi also proposed five major areas for cooperation between China and the GCC countries in the next three to five years, including energy, finance and investment, innovation and new technologies, aerospace, language and cultures. Xi said his country welcomed the participation of the GCC in the Global Security Initiative he proposed earlier this year, which is seen as a challenge to U.S. influence in the region.
As a further sign of how the Saudis are rebalancing relations, the kingdom has been sending strong messages that it is considering selling its oil in Chinese yuan or other currencies, in the face of possible U.S. legislation exposing OPEC members to antitrust lawsuits. Saudi anxieties were further compounded in early December when the Group of Seven nations and Australia joined the European Union in adopting a $60-per-barrel price cap on Russian oil, mainly to limit Russia’s ability to fund its war in Ukraine. Oil exporting countries are uneasy with the sanctions mechanism as it could potentially be applied to OPEC countries.
Playing on the potential for differences between oil exporters and Western countries, Xi called for China and the Gulf nations to make full use of the Shanghai Petroleum and National Gas Exchange as a platform to carry out yuan settlements of oil and gas transactions. However, any move by the Saudis and other oil producing states to use the yuan instead of the U.S. dollar for oil transactions would be a bold move that could negatively impact U.S-Saudi relations. That is why it is unlikely to happen soon.
U.S. fears Chinese telecommunications security risk
Another concern for the United States is the extent to which its Gulf allies might adopt Chinese telecommunications technology. U.S. officials have repeatedly warned their Gulf allies about the security risks of working with Huawei, a Chinese telecommunications giant.
The Chinese Belt and Road Initiative’s Digital Silk Road is pertinent to the current national digital plans in GCC countries and China is also eager to work with Gulf governments to bolster cooperation on 5G and 6G technology for broadband cellular networks. Chinese 5G projects in Saudi Arabia, the UAE, and elsewhere in the region have progressed despite U.S objections and Huawei signed an agreement with Saudi Arabia during Xi’s visit.
The White House has described Xi’s attempt to expand Chinese influence in the Gulf as “not conducive to maintaining international order” and the Americans saw the visit as a sign that Riyadh was abandoning its traditional relationship with Washington and pivoting to Beijing. Nevertheless, Xi’s reference to the “multipolar world” implied that China does not have to challenge the United States in the Middle East to play a larger role with respect to the Arab countries.
China cannot replace the U.S. presence in the Gulf, especially Washington’s security posture in the region, nor is it in any hurry to do so. Saudi Arabia and its Gulf partners are not looking to replace the decades-long friendship with Washington. Yet they feel they have to respond to geopolitical reality by diversifying their relations.
Abdullah Baabood is a non-resident scholar at the Malcolm H. Kerr Carnegie Middle East Center. Baabood holds the chair of the state of Qatar for Islamic area studies and is a visiting professor at the Faculty of International Research and Education at Waseda University in Tokyo.