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Sino-Saudi Symbiosis

By Fred Stakelbeck - May 17, 2006 12:00 AM

Chinese President Hu Jintao's first visit to Riyadh last month to meet with Saudi King Abdullah further strengthened what has become an increasingly dynamic bilateral relationship. "This [visit] will further strengthen the friendship between our two countries and our two peoples as well as expand strategic and friendly cooperation between China and Saudi Arabia," said President Hu. The president's visit comes only three months after King Abdullah's trip to China, the first by a Saudi leader since diplomatic relations were established in 1990.

Sino-Saudi cooperation in the areas of defense, trade, transportation and energy has grown dramatically over the past year, with bilateral trade reaching US$15 billion in 2005, up from US$10 billion in 2004. In the first two months of 2006 alone, bilateral trade reached $2.7 billion, up 43 percent from the same period in 2005.

The driving force behind improving Sino-Saudi relations is China's unrelenting need for energy to sustain its unprecedented 25-year economic expansion. "I think China's strategic interests in the Middle East are clear to all," said Wang Shijie, China's special envoy to the Middle East. According to the Oil and Gas Journal, a market intelligence magazine, Saudi Arabia holds approximately 262 billion barrels of proven oil reserves with crude production running slightly over 10 million barrels per day (bpd). The country also holds natural gas reserves of 235 trillion cubic feet (Tcf), ranking it fourth in the world after Russia, Iran and Qatar.

Saudi Arabia's combined oil and natural gas reserves make it an extremely attractive energy partner for China. China has quickly surpassed Asian rival Japan to become the world's second largest consumer of energy behind only the U.S., with year-to-year increases in oil demand averaging one million barrels per day. Consequently, Saudi Arabia, the world's largest oil exporter, has become an increasingly important energy provider for China, accounting for 17 percent of all Chinese oil imports in 2005, or approximately 440,000 barrels per day.

Several joint Sino-Saudi energy development and exploration projects are currently underway or under consideration. China's state-controlled energy conglomerate Sinopec won natural gas exploration rights in the Rub al-Khali Basin in 2004, while Saudi Arabia has agreed to help China upgrade its refinery capacity with the construction of a natural gas refinery in the country's Fujian Province. Discussions surrounding the creation of a strategic oil reserve in southeast China using Saudi crude and the construction of a US$9.3 billion refinery and petrochemical plant in northeastern China have already begun.

For Saudi Arabia, interest in Asia as an energy partner has accelerated over the past year. Asian countries such as China, Japan, South Korea, and India already receive 60 percent of all Saudi crude exports and that figure is expected to increase in the future. As the largest potential energy market in Asia, China is an attractive market for Riyadh, as it looks for ways to diversify its customer base away from the U.S. and the EU. "We are opening new channels, we are heading east," Saudi Prince Walid bin Talal said last month.

China has also become an appealing energy partner for Saudi Arabia because of its "hands-off" approach to foreign policy which focuses more on economics and less on political ideology. Arab governments are progressively more wary of Washington's "strings attached" foreign policy that calls for measurable improvement in areas such as democratic reforms, human rights and legal system reform before aid is guaranteed. As a result, a growing number of Arab governments view Beijing as a legitimate option to U.S. control and oversight.

As Sino-Saudi relations have become closer, U.S.-Saudi relations have become more detached and strained. It is no secret that both countries disagree on a number of issues such as Iraq, Iran and Israel-Palestinian relations which continue to complicate the relationship. In addition, the recent UAE-based Dubai Ports World controversy has soured a number of Middle East governments on cooperative agreements with U.S.-based companies. As a result, Middle East countries are more likely now than ever before to entertain offers made by Chinese or other Asian business interests.

For the U.S., China's involvement in Saudi Arabia is an emerging national security concern. In particular, reports that arms agreements were signed by Beijing and Riyadh last month permitting the exchange of Chinese weapons and technology for greater access to Saudi crude are alarming. Moreover, the Saudis have reportedly expressed an interest in replacing their aging CSS2 intermediate-range missile force with more modern Chinese-designed missiles capable of carrying nuclear warheads.

The sale of missile technology and sophisticated weapons by Beijing to countries such as Iran, Syria, Libya and the Sudan is already a highly-charged issue for Washington; adding Saudi Arabia to the list of Chinese military clients will certainly elicit a strong response form the Bush administration as well. To counter China's growing influence in Saudi Arabia, Washington will likely arrange for high-level diplomatic meetings in the coming months to clarify existing strategic arrangements and identify areas for possible revision. Discussions covering new or accelerated U.S. defense sales aimed at modernizing the Saudi armed forces, expanded intelligence sharing capabilities, increased U.S. economic investment and trade incentives and greater cooperation in the areas of energy research and development are possible. Above all, the Bush administration will stress its own superior abilities to supply Riyadh with the necessary intelligence and military hardware to repel any prospective regional threat, namely, Iran.

Although both the U.S. and China are not engaged in open conflict, both countries' dependence on Middle East oil makes open confrontation possible. China has concluded that unobstructed access to Middle East oil and natural gas is integral for its continued economic expansion. This, coupled with the diminished prospects for greater U.S. energy diversification by the end of the decade, has resulted in an inevitable global race for precious resources. Tensions will slowly rise and competition will become more acute, as traditional strategic relationships are tested and reconfigured to meet existing challenges.

King Abdullah's close relationship with Beijing reflects a gradual movement by Riyadh away from the West towards the East. A general undercurrent of dissatisfaction with the Iraq War and U.S. foreign policy in general now saturates the Middle East. "We need to maintain links to America, but we are not a gas station," noted Khaled al-Maeena, editor of the Arab News daily. China's insatiable appetite for energy and Saudi Arabia's desire to explore new defense and energy partnerships will influence U.S. Middle East policy in the years ahead.

Fred Stakelbeck is an expert on bilateral and trilateral alliances as they relate to China foreign policy. His writings address the implications of China's emerging regional and global strategic influence and relationships upon U.S. national security. He can be reached at Frederick.stakelbeck@verizon.net.

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3 Comments

The Flaws of Saudi Appeasement
I've said it many times before -- we can not win the "War on Terror" until we deal directly with Saudi Arabia's financial backing of Al Qaeda:

Towards a Saudi Constitutional Monarchy
by Stephen Schwartz
The Weekly Standard. June 17, 2005

Serious issues include, "the financing of al Qaeda by Saudi subjects, who walk the streets of the kingdom's cities with impunity, to the high rate of Saudi-Wahhabi participation in Sunni terrorism in Iraq, to official Saudi-subsidized indoctrination in hatred of Muslims around the globe. And then there is the recent Saudi rejection of U.S., European Union, and Australian calls for nuclear inspections in the kingdom, reinforcing previous reports that the Saudis have dealt in nuclear technology and know-how with Pakistan."

http://www.weeklystandard.com/Content/Public/
Articles/000/000/005/731gjgjg.asp

Pandoras Box
Nuclear arms is and was a pandoras box. So the question of war and confrontation is pointless. The issue is one of oil and gas supply, and in free market economies, the supplier sells and the needy pay whatever is asked.

What is the real issue of the article. So china is kissing butts to get what she wants. Why not? What is wrong with that?

Why do we associate this financial arrangements with 'Anti Americanism?' And in the financial analysis, why should America been viewed as the saviour of the world and therefore deserving of any special treatment.

The question should be, what is America doing now to ensure that it does not continue to rely on foreign provision of energy.

The Muslim world and China combined total two fifths of the worlds population, and if they choose not to be democratic, do we have a right to FORCE them to change?

Chinese missiles already there
"For the U.S., China's involvement in Saudi Arabia is an emerging national security concern. In particular, reports that arms agreements were signed by Beijing and Riyadh last month permitting the exchange of Chinese weapons and technology for greater access to Saudi crude are alarming. Moreover, the Saudis have reportedly expressed an interest in replacing their aging CSS2 intermediate-range missile force with more modern Chinese-designed missiles capable of carrying nuclear warheads."

Maybe he was bragging but a Saudi Air Defense Warrant Officer told me he went to China in the mid 90s and they had Chinese ballistic missiles years ago.

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