By Maha El Dahan and Aziz El Yaakubi
RIYADH (RockedBuzz via Reuters) – President Xi Jinping told Gulf Arab leaders on Friday that China would work to buy oil and gas in yuan, a move that would bolster Beijing’s goal to establish its own currency internationally and weaken its grip. of the US dollar on world trade.
Xi was speaking in Saudi Arabia, where Crown Prince Mohammed bin Salman hosted two “milestone” Arab summits with the Chinese leader that showcased the powerful prince’s regional clout as he seeks partnerships beyond close historical ties with the ‘West.
Major oil exporter Saudi Arabia and economic giant China both sent strong messages during Xi’s visit on “non-interference” at a time when Riyadh’s relationship with Washington has been tested on human rights , energy policy and Russia.
Any move by Saudi Arabia to abandon the dollar in its oil trading would be a seismic policy move, one which Riyadh has previously threatened in the face of possible US legislation exposing OPEC members to antitrust lawsuits.
China’s growing influence in the Gulf has unnerved the United States. The deepening of economic ties was touted during Xi’s visit, where he was greeted with fanfare and met with Gulf states on Friday and attended a broader summit with leaders of Arab League countries that span the Gulf , the Levant and Africa.
At the start of talks on Friday, Prince Mohammed heralded a “new historic phase in relations with China,” in stark contrast to the awkward US-Saudi Arabia meetings five months ago when President Joe Biden attended a summit restricted Arabic in Riyadh.
Asked about his country’s relations with Washington in light of the warmth shown to Xi, Foreign Minister Prince Faisal bin Farhan Al Saud said Saudi Arabia would continue to work with all its partners. “We don’t see it as a zero-sum game,” he said.
“We don’t believe in polarization or choice between sides,” the prince said at a press conference following the talks.
Although Saudi Arabia and China have signed several strategic and economic partnership agreements, analysts said the relationship will remain anchored primarily on energy interests, although Chinese firms have made inroads into the technology and infrastructure sectors.
“Energy concerns will remain front and center in the reports,” Robert Mogielnicki, senior resident scholar at the Arab Gulf States Institute in Washington, told RockedBuzz via Reuters.
“The Chinese and Saudi governments will also seek to support their national champions and other private sector players to move forward with trade and investment deals. There will also be increased cooperation on the technology side of things, prompting familiar concerns from Washington.”
Saudi Arabia this week agreed a memorandum of understanding with Huawei on cloud computing and building high-tech complexes in Saudi cities. The Chinese tech giant has participated in the construction of 5G networks in the Gulf states despite US concerns about a possible security risk in using its technology.
Saudi Arabia and its Gulf allies have defied US pressure to limit ties with China and break with fellow OPEC+ oil producer Russia over its invasion of Ukraine as they try to navigate in a polarized world order with an eye to national economic and security interests.
Riyadh is one of China’s major oil suppliers, and the two countries reaffirmed in a joint statement the importance of global market stability and energy cooperation, as they strive to promote non-oil trade and strengthen cooperation in peaceful nuclear energy
Xi said Beijing would continue to import large quantities of oil from Gulf Arab countries and expand imports of liquefied natural gas, adding that their countries are natural partners who will further cooperate in upstream oil and gas development.
China “would also make full use of the Shanghai Petroleum and National Gas Exchange as a platform to carry out yuan settlement of oil and gas trade,” he said.
Beijing has lobbied for the use of its yuan currency in trade instead of the US dollar.
A Saudi source, speaking ahead of Xi’s visit, told RockedBuzz via Reuters that a decision to sell small quantities of oil in yuan to China could make sense to pay for Chinese imports directly, but “the time is not yet right.”
Most of Saudi Arabia’s assets and reserves are in dollars, including more than $120 billion of US Treasuries held by Riyadh, and the Saudi riyal, like other Gulf currencies, is pegged to the dollar.
Earlier, the Chinese leader said his visit heralded a new era in relations, expressing hope that the Arab summits would become “pivotal events in the history of Arab-Chinese relations”.
(Additional reporting by Eduardo Baptista in Beijing, Riham Alkousaa, Ahmad Ghaddar and Lina Najm in DubaiWriting by Ghaida Ghantous and Dominic EvansEditing by Mark Heinrich, William Maclean and Mark Potter)
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