After nearly two years of preparations, Chinese leader Xi Jinping visited Saudi Arabia and attended the first China-Arab Summit and the first China-Gulf Cooperation Council (GCC) Summit. After nearly two years of preparations, Chinese leader Xi Jinping visited Saudi Arabia and attended the first China-Arab Summit and the first China-Gulf Cooperation Council (GCC) Summit.
In contrast to the muted reception Joe Biden received when visiting Saudi Arabia in the summer, Xi Jinping was given a lavish welcome, including an escort by four fighter jets from the Royal Saudi Air Force after Xi’s plane entered Saudi Arabia’s airspace. Six Saudi Hawk jets painted the sky in red and yellow, the colours of China’s national flag. But despite the ceremonial satisfaction, Xi didn’t get what he wanted from the trip. And China’s state media may have shed some light on that.
China-Arab countries relationship
Since the establishment of the People’s Republic of China (PRC), the Chinese Communist Party (CCP) has been actively engaging Arab nations. Thirteen Arab countries voted in favour of China getting a seat in the United Nations in 1971. By 1990, Beijing had established diplomatic relations with all Arab countries. This reduced Taiwan’s diplomatic space and has quietly built up the CCP’s influence in the region.
China is now the No. 1 trading partner and largest foreign investor in Arab countries. In 2021, 51% of China’s crude oil imports came from Arab countries. Sino-Arab trade during the first three quarters of 2022 increased 35% over the last year. In addition, 20 Middle Eastern countries have signed “One Belt One Road” agreements, and Beijing has established comprehensive strategic partnerships with Egypt, Algeria, Saudi Arabia and the UAE.
The centre of Beijing’s efforts in the region is the Persian Gulf, namely the six member countries of the Gulf Cooperation Council or GCC –– Saudi Arabia, UAE, Qatar, Kuwait, Oman, and Bahrain. China-GCC trade represents 70% of total Sino-Arab trade. China’s 2021 crude oil imports from the GCC countries accounted for 3/4 of the total oil imports from Arab countries.
Xi Jinping’s trip: fruitful or not?
Xi’s trip to the Middle East was his third diplomatic endeavor after the November Party Congress. The Saudi press and other foreign media widely reported the 34 investment agreements Xi signed.
On Dec. 10, the day Xi returned to Beijing, Xinhua News gave a rather brief concluding commentary, which contrasted from its elaborate coverage during the early part of his trip. The news report did not mention the 34 investment agreements. They would have been a major accomplishment for Xi, but why didn’t Xinhua even mention them? The only explanation is that the terms of the agreements are not favourable to China. If reported, they would make Xi lose face in front of his domestic audience.
The only thing mentioned on the day Xi returned to Beijing was the agreement Sinopec signed with Saudi Aramco to build an integrated oil refining facility as part of the phase II Fujian Gulai project. But the terms and the amount were not disclosed, either. Xi’s trip may be fruitful for the Saudis but not for Beijing for a number of reasons. First, Beijing’s usual tactics when dealing with other nations — using the Chinese market and investments as incentives, don’t work with the Saudis.China has a large trade deficit with Saudi Arabia.
In 2021, it exported $30 billion worth of goods to Saudi Arabia, while imports were $57 billion. Chinese need Saudi oil. But the Saudis don’t have a big demand for cheap made-in-China products. Saudi Arabia is a wealthy country with a population of 35 million, which favours European and American brands over Chinese brands. And the oil-rich country doesn’t need Chinese investment capital. In his speech at the China-GCC summit, Xi proposed the settlement of oil and gas trade in Chinese currency RMB. This was one of the goals of Xi’s visit and has attracted much attention.
But Saudi Arabia’s trade surplus with China would make it difficult to agree to a full RMB settlement. Saudi Arabia doesn’t buy enough Chinese products to pay with the RMB it would get from oil sales. So it may agree to RMB settlement for a small amount of oil sales. But in the Xinhua published joint statement of the summit, there is no mention of an RMB settlement. Saudi Arabia and the GCC member states seem reluctant to agree to an RMB settlement.
At the subsequent China-Arab summit, attended by more Arab heads of state, Xi gave another speech, but this time without mentioning the RMB settlement. In fact, in the current geopolitical tensions, it would be difficult for the Saudis to accept an RMB settlement without worrying about further alienating the United States.
If the CCP attacks Taiwan, the United States and the West will impose an oil embargo on China. The oil tankers from Saudi Arabia would not be able to cross the Indian Ocean. The passage of oil from Saudi Arabia to Japan and South Korea will also be in trouble, and the Saudis will have to rely on the United States to ensure the security of its oil exports.
Limited military cooperation
Beijing has been trying to open up the Saudi arms market, but Saudi Arabia has little interest in Beijing’s low-quality weaponry supported by Russian military technology. Saving money isn’t the Saudis’ priority. But they are interested in Chinese missile and drone technology. In 2017, Saudi Arabia ordered Chinese-made Wing Loong II drones. Xinhua described the deal as the country’s largest-ever arms export.
In March 2022, Chinese and Saudi companies created a joint venture to make military drones in Saudi Arabia. Saudi Arabia has limited room for military cooperation with Beijing as the kingdom cannot afford to lose the protection of the U.S. military. Saudi Arabia is a major importer of U.S. arms. For example, the backbone of Saudis air force is the American-made F-15 fighter jets. The Saudi jets that escorted Xi’s plane were the F-15s. People’s Daily proclaimed that these escort jets gave Xi “the highest courtesy welcome.”
I think it’s somewhat ironic that the Saudis used American-made fighter jets to welcome Xi. No wonder China’s Central TV blurred the images of the jets. Another issue that makes Xi lose face is the CCP’s role in regional conflicts. Beijing has supported Iran and built relations with Israel. A Sept. 9 report in the South China Morning Post said that Beijing and Israel would sign a free trade agreement by the end of this year. This will be China’s first free trade agreement in the Middle East.
And on Jan. 14 this year, China and Iran announced the launch of a 25-year, $400 billion comprehensive cooperation agreement. Saudis are aware of China’s relations with Iran. Iranian-backed terrorist groups have attacked Saudi oil facilities with drones. The U.S. and Saudi Arabia share the same goal when it comes to dealing with Iran. The CCP’s approach to the Iranian nuclear issue is highly detrimental to Saudi Arabia’s security. So the Saudis decided to give Xi Jinping and the CCP some pressure.
The CCP often claims that it doesn’t interfere in the internal affairs of other countries and doesn’t take a stand on regional conflicts, at least nominally. But this time, Beijing has taken the unprecedented step of getting involved in Middle-Eastern conflicts. In a rare move, the Sino-Saudi joint statement mentioned several countries and issues. “The Chinese side commended the Kingdom’s initiative to end the war in Yemen” and “stressed the importance of the Houthis’ commitment to a truce, cooperation with the UN Special Envoy for Yemen.”
“The two sides also called on Iran to cooperate with the International Atomic Energy Agency, maintain the non-proliferation regime.” “The two sides discussed the developments in the Palestinian cause” and supported “the rights of Palestinian people to establish their independent state on the 1967 borders with East Jerusalem as its capital.”
The CCP’s statement at the China-GCC summit also said it “calls on Iraq to respect Kuwait’s sovereignty and territorial integrity.” At the Sino-Arab summit, China declared in a statement that “Israeli settlements in Palestine as well as in the occupied Arab territories are illegal, and Israeli unilateral initiatives aimed at changing the status quo in Jerusalem initiatives are null and void.” At the two summits, Arab countries forced Beijing to take a stand on regional issues. Xi Jinping had no choice but to comply in exchange for upgrading relations with the Saudis to a “comprehensive strategic partnership.”
Arab countries focus on terrorism at the GCC summit can also make Xi lose face. The leaders of the six Gulf states specifically discussed terrorism with Xi Jinping, which may hint at the unsavory role the CCP has played. The joint statement published by Xinhua included the following article.“
Article 8: The leaders discussed regional and international issues and agreed … to maintain an international order based on respect for the sovereignty, territorial integrity and political independence of all countries … not to use force or threaten to use force.” Did six heads of state from the Gulf countries have Taiwan in mind when talking to Xi about terrorism? Was it their way to force Xi to commit to not using force against Taiwan?
I think Xi’s visit did not achieve much substantive results for the CCP. Chinese state media focused on the ceremonial pageantry of the visit but stayed low-key on the substance of the summits. I think the Saudis and the Arab nations got what they wanted from the meetings, but Xi Jinping did not.
Does all this mean that Xi Jinping is preparing for war? Some people believe that he is making legal, procedural, and organizational preparations. But when he decides to go to war will depend on when the PLA is ready for it. China has a large trade deficit with Saudi Arabia. In 2021, it exported $30 billion worth of goods to Saudi Arabia, while imports were $57 billion. Chinese need Saudi oil. But the Saudis don’t have a big demand for cheap made-in-China products.
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