In February 2019, during the Saudi Arabia-China economic forum, the two countries signed for more than 28 billion dollars deals (“Saudi-Chinese Investment Forum Signs 35 Deals During Crown Prince’s Beijing Visit”, Ashark Al Awsat, 22 February, 2019). These gigantic deals are part of the growing Saudi-China relationship. They are the economic and political continuation of the six weeks tour in Asia King Salman of Saudi Arabia made in March 2017. This tour ended with a state visit in China and a meeting with Chinese President Xi Jinping. The visit included the opportunity to start the negotiations about the integration of Saudi Arabia to the Chinese Belt and Road Initiative (BRI), actually a grand strategy (Michael Tanchum, “Saudi Arabia the next stop on China’s maritime silk road”, East Asia Forum, 22 March 2017).

This article explores how the specificities of the Chinese BRI and of the Saudi grand strategy create and deepen the existence of converging strategies for the two countries.

A Tale of Two Strategies

The integration of Saudi Arabia to the BRI, as well as the agreements and contracts signed corresponds to a convergence of the Chinese grand strategy with the “Saudi Vision 2030”. It also seems to be the start of a “Saudi-Asian pivot”, which has important geopolitical consequences. This is a massive international power shift, because it supports the meeting of Saudi and Chinese strategic interests.

Big Needs

Since 2017, Saudi Arabia and China have kept on increasing their partnerships. Their joint effort is based on two facts. First, Saudi Arabia bends towards China for new economic opportunities. Second, China needs Saudi oil and oil products in order to power its development, as well as its BRI (Martin Menachery, “Aramco Asia develops synergy between “Saudi Vision 2030”, “Belt and Road Initiative””, Refining&Petrochemicalsme.com, 06 September, 2017).

Indeed, the Arab mammoth oil producer looks for ways to diversity its economy and its alliances, while China looks for ways to satisfy its huge energy needs (Michael Klare, The Race for What’s Left, 2012). To this end, China extends the BRI to new countries, as for example, with other Gulf countries, such as the UAE and Kuwait.

This article thus focuses on the reason why the Chinese BRI and the Saudi grand strategy converge, and how they do so. It echoes a similar analysis done for the UAE (Jean-Michel Valantin, “The UAE and the Chinese New Silk Road”, The Red (Team) Analysis Society, April 24, 2017), We focus first on the convergence between the two countries’ strategies through and “oil alliance”. We detail further then what is the BRI, notably in the case of Saudi Arabia. Finally, we look at geopolitical consequences for each country, as well as for the U.S..

Huge Saudi Aramco- China Oil Deal!

Convergence of strategies through an oil alliance

The Sino-Saudi relations were established in 1990. China opened a representation in the Saudi Kingdom, as the Cold War was ending (Wang Jin, “China and Saudi Arabia: a new alliance?”, The Diplomat, September 02, 2016).

From the 1990s onwards, crude oil exports from the Kingdom to China has been instrumental in the relationship between the two countries. Things are, however, now changing, especially in regard to the Chinese BRI or New Silk Road.

The enormous 65 billion dollars Sino-Saudi investments and trade package signed during the 2017 meeting in Beijing between King Salman and President Xi Jinping exemplify that evolution (Salman Al Dossary, “King Salman in China: the New Silk Road”, Asharq Al Aswat, March 2, 2017).

Improving Saudi Arabia competitivity

The package includes a memorandum of understanding between Saudi national oil corporation Aramco and China North Industries Group Corporation.

It notably plans for the building of two refineries, one in the Chinese Fujian province, and one in Yanbu in Saudi Arabia. These refineries will further improve the petrochemical capacity of this Saudi port-city located off the Red Sea coast (Michael Tanchum, “Saudi Arabia the next stop on China’s maritime silk road”, East Asia Forum, 22 March 2017).

This move is quite important for Saudi Arabia. Indeed, Saudi Arabia is the first oil supplier for China – almost 67% of China’s oil import has its origin in the Saudi Kingdom, while China is the main destination country for all Saudi exports (Daniel Workman, “Crude oil imports by countries”, WTEx, March 14, 2017). The Kingdom intends to secure its share of the Chinese oil market. In this regard, Saudi Arabia competes with Iran and Russia, which are also answering the growing oil needs of China (Jean-Michel Valantin, “The Russian Arctic meets the Chinese New Silk Road”, The Red (Team) Analysis Society, 31 October, 2016 and “Iran, China and the New Silk road”,The Red (Team) Analysis Society, January 4, 2016). It must be noted that those very countries have already developed deep ties with China.

Oil as a Chinese energy and environmental transition

The construction of Sino-Saudi refineries in China and in Saudi Arabia is in itself a strategic evolution. Indeed, for China, the increase in petrochemical capabilities is absolutely necessary to answer its needs, not only in crude oil, but also in oil products, for combustion engines and for the chemical industry (Manan Goel, “Vast majority of 7.1m bpd of new distillation capacity to come from Middle East, China and wider Asia-Pacific », Khaleeji Time, May 7, 2016).

Moreover, the Chinese political authorities are committed to a national energy transition, in order to alleviate the importance of coal in the Chinese energy mix. Indeed, coal ash severely pollutes not only the air, but also the water, and endangers agriculture and collective health, thus becoming for China a national health and political issue (Joseph Ayoub, “China Produces and Consumes almost as much coal as the Rest of the World Combined”, Today in Energy, US Energy Information Administration, May 14, 2014 and Jonathan Kaiman, “Chinha’s toxic air pollution resembles nuclear winter, say scientists”, The Guardian, 25 February 2014).

The Chinese BRI as a World Canal

From the Chinese point of view, integrating Saudi Arabia to the New Silk Road initiative is a major geopolitical step.

Belt and Road Initiative explained

Understanding the BRI: the Chinese approach to space and time

Related

Articles exploring the Chinese Belt and Road and its participants

The New Silk Road, also known as the “Belt and Road Initiative” (BRI), is a strategy aimed at ensuring the constant flow of energy resources, commodities and products. As it happens, those flows of resources are necessary to the current industrial and capitalist development of the 1,4 billion strong “Middle Kingdom” (Jean-Michel Valantin, “China and the New Silk Road – From oil wells to the moon … and beyond”, The Red (Team) Analysis Society, July 6 2015). Since 2013, China has been deploying the NSR initiative, which attracts the interest and commitment of numerous Asian, African and Middle Eastern countries.

The New Silk Road is a new expression of the Chinese philosophical and strategic thought (Valantin, “China and the New Silk Road: the Pakistani strategy”, The Red Team Analysis, May 18, 2015). It is grounded in an understanding of the spatial dimension of China, in the geographic sense.

Space is conceived as a support to spread Chinese influence and power to the “outside”, but also to allow the Middle Kingdom to  “aspirate” what it needs from the “outside” to the “inside”  (Quynh Delaunay, Naissance de la Chine moderne, L’Empire du Milieu dans la globalisation, 2014). This is why we qualify some spaces as being “useful” to the deployment of the BRI, and why each “useful space” is related, and “useful”, to other “useful spaces”. In the same dynamic, the different countries that are involved in the deployment of the NSR are “useful spaces” for the Chinese ” initiative”. 

From Saudi Arabia to China, and Back

Hence, the Persian Gulf and its states is a fundamental “geographic useful space” for China. As a result, Saudi Arabia is de facto of great interest for the BRI: Saudi Arabia becomes a useful space. Indeed, it increases the Saudi capabilities to respond to the Chinese energy needs. Furthermore, the geography of Saudi Arabia furthers the opening of the maritime BRI to the Red Sea, thanks to the Saudi ports, such as Yanbu and Jeddah. In other words, the BRI improves the access of the Chinese civil fleet to the Red Sea. As a consequence, the Chinese convoys can access the Suez Canal and thus the Mediterranean Sea. Thus, coupling the BRI and Saudi Arabia opens the markets of the Middle East, the Near East, the Maghreb and Southern Europe to the BRI and thus China.

Cooperation between China and Saudi Arabia in oil sector boosts relations

Powering cities and provinces: Xiamen and the Yunnan

Furthermore, since 2017, Aramco, the state-owned Saudi oil company, has multiplied industrial partnerships, especially with the China National Petroleum Company. As a result, Aramco can develop downstream business, from refining to retail. Xiamen, in the Fujian province, as well as the Yunnan province are two important instances of this trend. It must be noted that these two provinces are of strategic importance to implement the Chinese strategy. As it happens, the city of Xiamen is the port city facing Taiwan. Thus, developing its oil infrastructure sustains the importance of Xiamen both for commercial and military purpose (Menachery, ibid).

The Yunnan province neighbours Myanmar, Laos and Vietnam. Let’s remember that Laos is deeply involved in the development of the land BRI (“Laos-China Belt and Road Initiative Kicks Off, focusing on development, cooperation”, XinhuaNet, 2018-02-02). Thus, multiplying gas stations in Yunnan will support the development of transport and trade between the Chinese province and Laos.

In the same time, Myanmar and China are actively discussing the involvement of Myanmar in the BRI (Charles Williams, “Myanmar is set to embrace Xi’s Belt and Road Initiative”, Global risk insights, January 04 2019). Should discussions succeed, they would open a new window on the Indian Ocean for BRI. In other words, “powering” Yunnan with oil refineries and retails means “powering” the Belt and Road initiative from Southeast Asia to South Asia.

Geopolitical meaning

Chinese political clout

The integration of Saudi Arabia to the BRI has powerful geopolitical consequences for both countries. For China, the fact that the Saudi Kingdom joins its grand strategy installs China even more strongly as the centre of attraction for Gulf Countries (Jean-Michel Valantin, “The UAE and the Chinese New Silk Road”, The Red (Team) Analysis Society, April 26 2017). This confers an important political clout to China. The “Middle Kingdom” thus becomes a de facto “balancing influence” between the Gulf uneasy neighbours and energy actors.

China also thus settles “in the middle”, between OPEC and non-OPEC oil producers, such as Russia. As it happens, those Middle Eastern energy actors want to involve themselves in China’s growth. And this, even if they compete with each others (Martin Jacques, When China Rules the World, 2012). This international competition for access to the Chinese market is also reinforcing the attraction of the New Silk Road.

An Asian and “far from the U.S ” pivot for the Saudi Kingdom

For Saudi Arabia, integrating the New Silk Road, which has already reached out to more than seventy-one countries, especially in Asia and the Middle East, is tantamount to an “Asian pivot”.

Saudi-American historical relations

It also allows for the creation of some political and economic distance between the Kingdom and the United States. Considering the relationship between Saudi Arabia and the U.S., given the importance of the U.S. for Saudi Arabia since 1944, is essential to decrypt the evolution of the Sino-Saudi cooperation. Then, an alliance was struck between King Abdulaziz Saud and President Roosevelt. Accordingly, the U.S. committed itself to the defense of the Kingdom. In exchange, Saudi Arabia established a privileged partnership on oil. (Michael Klare, Blood and oil, the dangers and consequences of America’s growing dependency on imported petroleum, 2004).

The U.S., its shale energy policy and its Saudi supplier

A key to understanding what is currently happening lies in the U.S. energy policy. The latter supports the development of shale oil and gas operations. As a result, it competes with the Saudi production, while forcing energy prices down. The U.S. becoming an economic threat, the Kingdom is looking for new alliances to support its own development. Thus, it implements an economic strategy of diversification. (Jean-Michel Valantin, “Oil Flood (1): The Kingdom is Back” and “Oil Flood (2)- Oil and Politics in a (Real) Multipolar World”, The Red (Team) Analysis Society, December 15, 2014, January 12, 2015). For now, the military component of the alliance with the U.S. remains as it is, because Saudi Arabia remains a main oil exporter for America.

Fighting the oil economy disruption

2017 and 2018 have seen growing tensions between the U.S. and their historic oil supplier. On the U.S. side, those tensions are growing because of the Saudi “pivot” towards Asia. Meanwhile, the Yemen war is losing support in Congress (Patricia Zengerle, “U.S lawmakers seek to force Trump decision on Saudi Yemen war”, Reuters, January 30, 2019). On the Saudi side, those tensions arise from the diminishing U.S. oil imports because of oil shale production. Moreover, the U.S. oil production is very elastic. The shale producers are massively extracting and selling each time OPEC and Russia hike the oil barrel prices. Consequently, after a brief moment of high profit, prices are dragged down (Tom Kool, “Oil Price Under Pressure as U.S Shale Supply Soars”, OilPrice.com, Oct.16, 2018).  This situation is very disruptive for the Saudis, the OPEC and the Russians. Thus, it is a key factor for the Saudi “Chinese pivot”.

Oil prices react to US shale output forecast

The U.S., a Sino-Saudi common problem?

The heightening defiance between China and the U.S. is also boosting the economic and political synergy between Saudi Arabia and China. It is the consequence of the “trade war” launched by the Trump administration against Beijing in April 2018 (“The US Economy, Between the Climate Hammer and the Trade war Anvil – The US Soybean Crop case”, The Red (Team) Analysis Society, October 8, 2018). As a result, the U.S. is becoming the common problem of both Saudi Arabia and China.

Towards a Sino-Saudi long-term relationship

Thus, the Kingdom needs to insure its oil exports, while the Middle Kingdom needs to strengthen its BRI ties in the Middle East.

The 28 billion dollars agreement deals signed during the China-Saudi economic cooperation forum held in Beijing on 22 February 2019 results from these twin needs. The Crown Prince Mohamed Bin Salman and the President Xi Jinping attended the forum in person.

Beyond oil

Prince Salman then also expressed its understanding about the necessity for China to fight terrorism in the Xinjiang province (“Future opportunities between Saudi Arabia and China are very big: Crown Prince”, Arab News, 22 February, 2019). There, the Uighurs Muslim minority is said to be under a strict scrutiny and repression. This has particularly started since 2014, because of the attempts of the Islamic State to advance its influence in the region, while the Xinjinag province becomes an important new industrial region.  (Joseph Hope, “Returning Uighurs Fighters and China’s National Security Dilemma”, The Jamestown Foundation, July 25, 2018).

Furthermore, some of the 12 agreements signed are about the development of renewable energy, as announced in the “Saudi Arabia 2030 strategy”.

Meanwhile, during the meeting in Beijing, the Crown Prince also announced a plan for implementing Chinese language training in Saudi schools. Thus, the Saudi-China relationship acquires a long-term perspective (Arab News, ibid).

Djibouti and the Grand convergence

The “Saudi-Asian pivot” finds an interesting expression with the building of a Saudi naval base in Djibouti, which already hosts French and American bases, while China is completing the construction of its own naval base (Jean-Michel Valantin, “Militarizing the Maritime New Silk Road – in the Arabian Sea”, The Red (Team) Analysis Society, April 19, 2017).

One of the potential fundamental geopolitical uncertainty generated by this development is how other strategic Middle East countries, are going to position themselves towards BRI. This is especially the case for Egypt, which owns the key access to the Mediterranean Sea through the Suez Canal.

Chinese Military Launches Artillery Shooting Exercise in Djibouti

In the same time, the U.S. Congress is studying the “NOPEC” bill that would open OPEC members, thus Saudi Arabia, to U.S. antitrust regulations (Stephen Cunningham, “Anti-OPEC Deal Allowing U.S To Sue Oil Cartel Moves Forward“, Bloomberg, 7 February 2019 . It appears safe to assume that this U.S. legislative and political evolution is only going to further power the cooperation strategies between China and Saudi Arabia.

About the author: Dr Jean-Michel Valantin (PhD Paris)

Dr Jean-Michel Valantin (PhD Paris) leads the Environment and Security Department of The Red (Team) Analysis Society. He is specialised in strategic studies and defense sociology with a focus on environmental geostrategy. He is the author of "Menace climatique sur l’ordre mondial" (Climatic threat on the world order), "Ecologie et gouvernance mondiale" (Ecology and world governance), "Guerre et Nature, l’Amérique prépare la guerre du climat, "(War and nature: America gets ready for climate war) and of "Hollywood, the Pentagon and Washington".

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