China and Saudi Arabia have signed preliminary deals that could be worth as much as $65 billion if finalized, Xinhua reports. The news came on the first day of a four-day visit by Saudi King Salman to China.
China’s Deputy Foreign Minister Zhang Ming said that President Xi Jinping and King Salman inked a total 14 cooperation agreements, including a memorandum of understanding on 35 projects for “production capacity and investment cooperation”. Among the industries that the agreements cover are oil production, petrochemicals, and even space.
China is a crucial market for Saudi oil, and the king’s visit is widely seen as an attempt to secure future exports, preferably under long-term contracts, which is the standard approach of the Kingdom toward crude oil exports.
Outside oil exports, Saudi Arabia is also looking for opportunities to expand its refining and chemical production markets, Reuters notes, as part of its growth strategy.
One of the preliminary agreements, for example, envisages the joint development of downstream and petrochemical projects in China with local North Industries Corporation – a state company.
Another will see Saudi basic Industries Corp. and Sinopec work on petrochemical projects both in China and Saudi Arabia. The two already have a joint project – a refinery in Tianjin in northeastern China. Related: Saudi Arabia Tries To Reassure Markets After Oil Price Plunge
Besides the business aspect of the deals, they also signal Saudi Arabia’s willingness to see greater Chinese involvement in the Middle East. The Chinese Foreign Ministry said King Salman had encouraged China to play a more active role in regional affairs, quoting him as saying “Saudi Arabia is willing to work hard with China to promote global and regional peace, security and prosperity.”
Xi, for his part, acknowledged the mutually beneficial respect between China and “Islamic countries”, suggesting China would not mind a greater involvement in Middle Eastern affairs at all.
For Saudi Arabia, this greater Chinese involvement could perhaps mean additional leverage against its political and religious rival—Iran—although China is being wary: during King Salman’s visit, China’s Foreign Minister Wang Yi made a point of saying that “We hope that Saudi Arabia and Iran can resolve the problems that exist between them via equal and friendly consultations,” signaling the role of a mediator between the two is what China is aiming for.
By Irina Slav of Oilprice.com
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