China and the Tough Choices

Mar 12, 2017

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King Salman’s tour of Asia (specially China) is significant. Not only in its size (1,500 people, among them 25 princes and ten ministers), but, more importantly, in the messages which Saudi Arabia wants to convey to its Asian friends and partners.

The majority of Saudi Arabia’s non-oil exports end up here, as do two-thirds of its oil exports. The economic path and development of Asia will have a major effect on Saudi Arabia’s trade profile, especially in the current, somehow difficult, economic situation. The trip can be divided into two parts: South East Asia (Malaysia, Indonesia and Brunei) and the Far East (China and Japan).

Let’s look at China. From an economic point of view, China gained added importance because its economic progress is shifting the balance of global economic power to Asia. From a diplomatic point of view, it recently has played a carefully balanced hand between Iran and Saudi Arabia. Since sanctions have been lifted on Iran, China has been a willing purchaser of Iranian oil and gas, lessening its reliance on Saudi Arabia.

In 2016, Russia overtook Saudi Arabia to became China’s biggest crude oil supplier for the first year. According to custom data this was boosted by robust demand from independent Chinese “teapot” refineries. The Saudis were surely not amused.

Yet, Saudi Arabia’s heavy weight remains its religious influence. One can argue whether the Saudis – although not the only ones on planet Earth – spreading their version of Islam, in order to maintain the Sunni Wahhabi leadership globally.

China is and always has been nervous about the emergence of Islamic radicalism among the Hui Muslim and Uygur minorities in its western provinces at the borders with Kazakhstan.

In this regard, friendly links with Saudi Arabia are helpful for Beijing as it anxiously seeks support for its efforts to stabilise the increasingly unstable Central Asian Islamic countries – the “stans” so important to its “One Belt, One Road” strategy.

For King Salman, the tour through Asia’s Islamic nations is a grand opportunity to remind them of the magnificent opulence of the 200-year old House of Saud kingdom, and of the country’s iconic importance as the home of Islam, and champion of the ultra-conservative Salafi-Wahhabi branch of Islam. There you go.

China has been watching the growing tensions between Saudi Arabia and Iran, hoping not to jeopardize relations with either of the two major oil exporters. Therefore, one could explain, Beijing has taken tentative steps to try and ease the situation by sending a diplomatic envoy to both Riyadh and Tehran, though China’s preference is to steer well clear of the sectarian tensions in the region.

Amid the tensions, China sent Vice Foreign Minister Zhang Ming in January 2016 – after the beheading of Nimr Al Nimr that lead to a big upset with Iran – to Saudi Arabia and Iran for an exchange of views on the regional situation. This is a difficult feat given the two states’ antipathy toward each other. Both, for example, signed on to join the Chinese-led Asian Infrastructure Investment Bank as founding members. Saudi Arabia and Iran both see increased ties with China as a useful counterweight to relations with the United States, though for very different reasons – Riyadh wants to avoid over-reliance on its major ally, while Tehran needs to find diplomatic support elsewhere given the enmity between it and Washington. Lots of cogent reasons.

While energy underpins the China-Saudi relationship, Beijing wants to expand cooperation in other fields as well, including having Saudi Arabia join China’s Silk Road Economic Belt and Maritime Silk Road.

China has historically stepped back from interfering in international relations, but this changed in the wake of this project. This mega-investment initiative aims to build increased trade links with Africa and Asia, reportedly in order to best transfer commodities back to China.

Meanwhile, China has always been friendly with Iran, though Beijing acquiesced to support UN sanctions designed to cripple Iran’s nuclear programme. With the successful negotiations of the Joint Comprehensive Plan of Action to end Iran’s pursuit of nuclear weapons and roll back sanctions, China foresees a bright future for the relationship. China has also bumped up the amount of oil it imports from Iran, foreseeing the end of sanctions. Before 2012, Iran was China’s third-largest source of crude; when sanctions took effect, it dropped to sixth place.

China is a long-term economic partner of both Iran and Saudi Arabia and backs Iran’s plans to build a nuclear power plant. Based on the above, China’s approach to the current tensions can be neatly summed up that China considers Saudi Arabia and Iran two important and influential countries in the Middle East, and that it wants to develop friendly and cooperative relations with the two.

But how can this be done and what does it mean in practice?

It means that China cannot be seen to take sides in the current dispute, and if we look into the media the Chinese Foreign Ministry has been careful not to address the cause of the tensions, instead calling for both sides to show restraint.

Riyadh’s look eastward is not sudden. It is part of a strategic plan incorporating the priorities of the National Transformation Program and Saudi Arabia’s broader global agenda, that includes China as a geopolitical counterweight to the USA. Sino-Saudi relations have been stable and, so far, progressive. There are increasing numbers of successful Chinese investments in Saudi Arabia. With world power shifting and economic needs changing, new partners will find each other. Economically there is no doubt that the Chinese economy with a forecast of about 6.7% growth (the lowest in 25 years) is an important partner, whether as an investor, exporter or importer.

The question is whether that is the only aspect the Saudis aim to gain from their relationship with China. Do they want deeper political relations? Will China want to get involved? There is no clear example of major Chinese intervention around the world. It remains to be seen after the visit and the outcome of the talks.

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