The ties that bind Saudi-Chinese relations
Considerable geographical and historical foundations underpin the strong linkages between the Kingdom of Saudi Arabia and Asia
Considerable geographical and historical foundations underpin the strong linkages between the Kingdom of Saudi Arabia (KSA) and Asia. Geographically, the kingdom is part of Asia and the Gulf opens into the Indian Ocean and the Asian continent. For Westerners, Saudi Arabia is usually associated with the “Middle East” or the “Persian Gulf.”
Nevertheless, the kingdom is classified as part of “Western Asia” by the United Nations. Perhaps when considering aspects of culture, historical relations and even religion the links between Saudi Arabia and Asia are actually stronger in comparison to other regions.
Energy still dominant
Energy and trade are at the heart of the growing links between Saudi Arabia and China and centre mostly on crude oil, petrochemical industries and the involvement of Chinese companies in developing the kingdom’s infrastructure and its economy in general. Saudi Arabia has been China’s top partner in the Middle East and North Africa (MENA), for twelve consecutive years. This two-way trade between Saudi Arabia and China has over the last two decades increased almost 57 times from $1.28 billion in 1990 to about $73 billion in 2013, according to the latest official Chinese data.
Energy and trade are at the heart of the growing links between Saudi Arabia and ChinaDr. Naser al-Tamimi
The bulk of Saudi exports to China comprise crude oil and petrochemicals. China is the second largest Asian destination (after Japan) for Saudi Arabia’s exports. China also is the largest supplier of goods and services to the kingdom, while Saudi Arabia is the largest single oil supplier to China - the kingdom provided China with about 20 per cent of its oil imports in 2013 or around 1.1 million barrels a day. Saudi Arabia became China’s 9th biggest source of imports in 2013, supplying goods and services worth of almost $54 billion.
The kingdom’s exports to China include a growing segment of non-oil products, such as chemicals used to make plastic products. Cheap consumer goods, including electronics, textiles and food, account for most Saudi Arabian imports from China.
However, increasing participation by Chinese contractors in Saudi Arabia’s construction, communication, oil, gas, and petrochemical sectors is already becoming more evident. Examples include gas exploration activities in Saudi Arabia by China Petroleum & Chemical Corp. (Sinopec), and Chinese telecom and network supplier Huawei Technologies building communication networks as noted by Standard & Poor’s recent report.
It is expected that the share of the Chinese auto industry of the Saudi market will increase in the coming years. There are also promising prospects for cooperation in the field of peaceful nuclear energy and solar energy. In this regards, the Chinese ambassador to Saudi Arabia, Li Chengwen estimates that there are 140 Chinese companies operating in the Saudi Arabian market, the bulk of which are in the construction, telecommunications, and infrastructure and petrochemicals industries.
Above all, Riyadh recognizes that energy demand is shifting to Asia, and China is expected to account for much of the growing demand within the next two decades. Indeed, China will be the leading export destination for Saudi oil as it may overtake the United States as the world’s biggest crude oil importer by the end of this year. China’s oil consumption may exceed 12 million barrels per day in 2020, to hit more than 16 mb/d by 2030. As a result, oil import dependency will reach about 75 percent according to Li Wei, China’s director of the State Council’s Development Research Center, in a report published last month. Whatever the disparity in the figures for China’s oil consumption, Saudi Arabia will be a key supplier to Beijing for many years to come.
From Saudi perspective, Beijing’s political influence will increase over time with its growing economic and military powers. Militarily, China is expected to close the technological gap with the West over the next two decades and open a new market for Middle Eastern states. Economically, China is the world’s most populous country with the second largest economy. The country could surpass the U.S. by the end of the next decade to become the world’s largest economy. In terms of energy, China is already on the verge of overtaking America as the world’s largest crude importer. Ultimately, it’s logical to expect the relations between Riyadh and Beijing to deepen even further in the coming years.
Yet despite this optimistic outlook, there are significant challenges awaiting the development of Saudi-Asian relations in the medium and long term. Protectionist measures in China could represent a problem for Saudi Arabia’s exports in coming years. Another challenge is the uncertainty over China’s economic growth and oil demand. For Saudi Arabia, the impact of any major Chinese slowdown may be especially severe. Perhaps most importantly, the growing availability of oil from Russia, Iraq, and Iran could also slow down Saudi Arabia’s oil supplies to China.
Dr. Naser al-Tamimi is a UK-based Middle East analyst and author of the book “China-Saudi Arabia Relations, 1990-2012: Marriage of Convenience or Strategic Alliance?” He is an Al Arabiya regular contributor, with a particular interest in energy politics, the political economy of the Gulf, and Middle East-Asia relations. The writer can be reached at: Twitter: @nasertamimi