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China And Saudi Arabia Agree To Boost Oil Trade As Xi Visits Riyadh

China and Saudi Arabia agreed to expand crude oil trade as the world’s largest oil importer and the top global crude exporter upgraded their relations to a strategic partnership during the visit of Chinese President Xi Jinping in Riyadh.

“China will increase communication and coordination with Saudi Arabia on energy policy, expand the scale of crude oil trade, enhance cooperation on exploration and development, and deliver on the Sino-Saudi Gulei Ethylene Complex Project and other large-scale energy cooperation projects,” China’s Xinhua news agency quoted Xi as saying.

The Saudi Press Agency reported a joint statement at the end of the Saudi-Chinese summit, in which Xi met with King Salman and Crown Prince Mohammed bin Salman, “The two sides commended their oil trade volume and the great foundations of the cooperation due to the Kingdom’s ample oil resources and China’s broad markets.”  

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China and Saudi Arabia also agreed to explore joint investment opportunities in petrochemicals sector and boost cooperation in hydrogen, electricity, PV energy, wind energy, and other sources of renewable energy. 

China—a major customer of Saudi Arabian crude—and the Kingdom have deepened ties in recent years, including in the energy sector.

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In October, Saudi Arabia and China jointly stressed the importance of stable long-term crude supply to the market. Saudi Arabia’s Energy Minister, Prince Abdulaziz bin Salman, and Zhang Jianhua, the director of China’s National Energy Administration (NEA), have also agreed to continue cooperation in their efforts to keep the global crude oil market stable.

Xi’s visit to Saudi Arabia at a time of major turmoil in the oil market and geopolitics with the Russian invasion of Ukraine signals China’s intention to increase its influence in the Middle East, where the U.S. was, until recently, the world superpower with the biggest influence. The Chinese president’s visit also suggests that Saudi Arabia considers its relationship with China one of strategic importance.

While the Chinese and the Saudis are strengthening their relations, U.S.-Saudi relations are at a low point, especially after the U.S. Administration slammed in October Saudi Arabia and the OPEC+ group for what it described as a “short-sighted” and “misguided” decision to reduce their target oil production by 2 million barrels per day (bpd) as of November.

By Tsvetana Paraskova for Oilprice.com

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  • Mamdouh Salameh on December 09 2022 said:
    Chinese President Xi Jinping’s visit to Saudi Arabia elevates the relations between China and Saudi Arabia to a strategic partnership. This means that China will become a cornerstone of Saudi foreign policy encompassing not only the rising oil trade between the two countries but also mutual investments, defence, and trade in general.

    A few geopolitical and economic results could soon emerge from the growing strategic Saudi-Chinese relationship’

    1- A free trade agreement between the Gulf Cooperation Council (GCC) could soon be signed with China. This could open the way for the flow of hundreds of billions of Chinese investments to the Arab Gulf region along with free zones for Chinese factories to operate from the Gulf where energy prices are the cheapest in the world. In return, Saudi and other Gulf States could also invest in China as part of their economic diversification.

    2- There will be a permanent market in China for the GCC countries’ oil and gas (Qatar's) exports well into the future.

    3- China will very soon demand that GCC countries accept the petro-yuan as payment for its oil imports. The GCC countries can’t refuse such a legitimate request particularly that the Chines yuan has been an international reserve currency since October 2019. Such a decision will cut the petrodollar’s share in global oil trade by an estimated 21%. And with Russia selling its oil exports in rubles and China paying for its oil imports in petro-yuan, the petrodollar share could plummet by 60%. This could easily lead to a devaluation of the dollar by a quarter or a third against other major currencies and will undermine the US financial system which is the core of the US economy.

    4- China’s very close relations with both Iran and Saudi Arabia could facilitate a rapprochement between them.

    Dr Mamdouh G Salameh
    International Oil Economist
    Global Energy Expert
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