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Saudi Arabia and China
Looking east
The Saudis are hedging their bets
Dec 9th 2010 | JEDDAH | from PRINT EDITION CHINA, the world’s second-largest consumer of oil, is poised to buy more Saudi oil than the United States does. Last year it actually did so, though this year’s figures suggest that the Americans may again be level-pegging as the biggest buyer. In the next two years, however, China looks set to become consistently the Saudis’ key customer. Moreover, the Saudis are also now buying more Chinese goods—mostly food, textiles, hardware and heavy industrial stuff—than American ones.
Since he came to the throne in 2005, King Abdullah has adopted a pro-Asian, “look east” trade policy. More than half of Saudi oil now goes to Asia, against around 14%, at the latest count, to the United States. Saudi Aramco, the world’s largest oil company, owns a refinery in Qingdao province and has another, in Fujian, as a joint venture with Sinopec, a Chinese petroleum giant, and ExxonMobil, an American one. Meanwhile, Chinese firms have begun to invest in infrastructure and industry in Saudi Arabia, including in an aluminium smelter in the southern province of Jizan, at a cost of $3 billion. Saudi Arabia now sends students on scholarships to Chinese universities, and some rich Saudis, more used to shopping for Gucci in New York or London, are heading to once-obscure Chinese cities to buy furniture.
Like many African countries, the Saudis like the lack of political conditions that China attaches to its economic relations. Although American officials these days do not seem to press the Saudis very hard to become democratic or to uphold human rights, America’s media and its rights lobbies are relentlessly critical. Meanwhile, Saudis in general dislike what they see as America’s bias towards Israel. Recent American visa curbs against Arabs, including Saudis, have made matters worse.
But this reorientation should not be exaggerated. While widening their market for oil sales, the Saudis still need arms, military support and technology. Here China still lags far behind America, which remains the Saudis’ military mainstay: an arms deal worth $60 billion is about to be clinched. The presence of American troops in the Gulf, though no longer on Saudi soil, reassures the Saudis—and China, since it can bank on America’s presence.
As a net capital exporter with only a basic education system, Saudi Arabia needs foreign know-how and training more than it needs foreign cash for investment. Except for building infrastructure, it still looks for skills from the United States, Europe and Japan. (The Gulf’s other economic heavyweight, the United Arab Emirates, has asked a South Korean consortium to build the emirates’ first nuclear power plant.)
Moreover, the Chinese and Saudis do have some bones of contention. China has accused Saudi Arabia of dumping petrochemicals on its markets. And a much-heralded project, a railway between Mecca and the holy sites of Mina and Mount Arafat, recently built by the Chinese, has ended in a row, with China Railways threatening to sue the Saudi authorities for the losses it has made on the investment. Some firms would have been put off by the fact that non-Muslims are barred from working in Mecca, so China simply converted hundreds of railway workers to Islam. But the project ran into problems over the allocation of land, cost overruns and even workers’ riots, which rarely occur in Saudi Arabia.
from PRINT EDITION | Middle East & Africa Since he came to the throne in 2005, King Abdullah has adopted a pro-Asian, “look east” trade policy. More than half of Saudi oil now goes to Asia, against around 14%, at the latest count, to the United States. Saudi Aramco, the world’s largest oil company, owns a refinery in Qingdao province and has another, in Fujian, as a joint venture with Sinopec, a Chinese petroleum giant, and ExxonMobil, an American one. Meanwhile, Chinese firms have begun to invest in infrastructure and industry in Saudi Arabia, including in an aluminium smelter in the southern province of Jizan, at a cost of $3 billion. Saudi Arabia now sends students on scholarships to Chinese universities, and some rich Saudis, more used to shopping for Gucci in New York or London, are heading to once-obscure Chinese cities to buy furniture.
Like many African countries, the Saudis like the lack of political conditions that China attaches to its economic relations. Although American officials these days do not seem to press the Saudis very hard to become democratic or to uphold human rights, America’s media and its rights lobbies are relentlessly critical. Meanwhile, Saudis in general dislike what they see as America’s bias towards Israel. Recent American visa curbs against Arabs, including Saudis, have made matters worse.
But this reorientation should not be exaggerated. While widening their market for oil sales, the Saudis still need arms, military support and technology. Here China still lags far behind America, which remains the Saudis’ military mainstay: an arms deal worth $60 billion is about to be clinched. The presence of American troops in the Gulf, though no longer on Saudi soil, reassures the Saudis—and China, since it can bank on America’s presence.
As a net capital exporter with only a basic education system, Saudi Arabia needs foreign know-how and training more than it needs foreign cash for investment. Except for building infrastructure, it still looks for skills from the United States, Europe and Japan. (The Gulf’s other economic heavyweight, the United Arab Emirates, has asked a South Korean consortium to build the emirates’ first nuclear power plant.)
Moreover, the Chinese and Saudis do have some bones of contention. China has accused Saudi Arabia of dumping petrochemicals on its markets. And a much-heralded project, a railway between Mecca and the holy sites of Mina and Mount Arafat, recently built by the Chinese, has ended in a row, with China Railways threatening to sue the Saudi authorities for the losses it has made on the investment. Some firms would have been put off by the fact that non-Muslims are barred from working in Mecca, so China simply converted hundreds of railway workers to Islam. But the project ran into problems over the allocation of land, cost overruns and even workers’ riots, which rarely occur in Saudi Arabia.
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