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Saudi Arabia Vows To Stick With China As An Energy Partner

Saudi Energy Minister Prince Abdulaziz bin Salman said on Wednesday that Saudi Arabia will remain a trusted and reliable energy partner for China, state news agency SPA has reported.

Prince Abdulaziz told SPA that cooperation between the two countries had helped maintain global oil market stability. Saudi Arabia is the world’s largest oil exporter while China is the world’s largest oil importer.

"The kingdom will remain, in this area, a trusted and reliable partner for China," Prince Abdulaziz told SPA.

Prince Abdulaziz said Saudi Arabia and China would seek to boost their energy supply chains by establishing a regional center in the Gulf Arab state for Chinese factories.

Chinese President Xi Jinping is attending the first China-Arab States Summit and the China-Gulf Cooperation Council (GCC) summit in Riyadh, Saudi Arabia, and paying a state visit to Saudi Arabia from Dec. 7 to 10 at the invitation of King Salman bin Abdulaziz Al Saud.

The new push by Saudi Arabia has come at a time when Russia has replaced it as China’s biggest supplier of crude. China’s imports of Russian crude have increased massively since the Ukraine war began thanks to the generous discounts Russia is offering for its Urals. 

According to Bloomberg's oil strategist Julian Lee, Russia's flagship Urals crude oil traded at a massive discount of $33.28, or about 40% to the international Brent crude oil. In contrast, a year ago, Urals traded at a much smaller discount of $2.85 to Brent. Urals is the main blend exported by Russia. The result: Moscow is beginning to feel the heat of its war in Ukraine, and could be losing ~$4 billion a month in energy revenues as per Bloomberg's calculations.

Washington is, however, not losing sleep over it. “If Russian oil is going to be selling at bargain prices and we're happy to have India get that bargain or Africa or China. It's fine," US Treasury Secretary Janet Yellen previously told Reuters.

China, India and Turkey are the three key swing consumers of Russian crude. It’s quite likely that the three will continue importing more crude from Russia after the EU and G7 countries introduced a $60 per barrel price cap on Russian crude. 

The Wall Street Journal has reported that Russian crude exports might have fallen by as much as 50% since the launch of the price cap and additional sanctions.


By Charles Kennedy for Oilprice.com

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  • Mamdouh Salameh on December 07 2022 said:
    Saudi Arabia and China are destined to be major partners not only in energy but also in mutual trade and investment.

    China is the world’s largest economy based on purchasing power parity (PPP) and also the largest importer of crude oil while Saudi Arabia is the largest exporter of crude oil. Moreover, a big chunk of Saudi oil exports go to China. Therefore, it makes great sense for the two countries to become great partners.

    Saudi Arabia and other members of the Gulf Cooperation Council (GCC) are aiming to sign soon a free trade agreement with China. It is worth noting that the GCC countries sit on the largest proven oil reserves in the world with Qatar being the world’s largest exporter of LNG a big chunk of which goes to China. China signed two weeks ago a 27-year agreement with Qatar for the supply of 4.0 million tons of LNG annually. So the GCC is a major supplier of both oil and LNG to China.

    Furthermore, a free trade agreement between the GCC and China will bring hundreds of billions of Chinese investments to the Arab Gulf along with Chinese factories operating from the Gulf where energy prices are the cheapest in the world. In return, Saudi and other Gulf States could also invest in China the workshop of the world as part of their economic diversification.

    Of course the fast-growing relations between Saudi Arabia and China will have huge geopolitical impact on the Saudi-American relations and also on Saudi relations with Iran. China’s ascendency in the Gulf region comes at the expense of the United States. And while the US has been playing Iran against Iran since the days of the late Shah in order to sell hundreds of billions of dollars of American weaponry to Saudi Arabia, China’s very close relations with both Iran and Saudi Arabia could facilitate a rapprochement between them.

    However, there is one major development that could be the last straw in the US-Saudi relations and that is the Saudis accepting the petro-yuan in payment for their oil exports to China. Such a decision along with Russia’s selling its oil in rubles and China paying in petro-yuan for an estimated 12 million barrels a day (mbd) of oil imports will reduce US share of the petrodollar in the global oil trade by 48%. Were the GCC countries to follow suit, the loss of American share could rise to 60%. This could easily lead to a devaluation of the dollar by a quarter or a third against other major currencies thus undermining the US financial system and the economy.

    Dr Mamdouh G Salameh
    International Oil Economist
    Global Energy Expert

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