Asia tour propels Saudi partnerships as US sanctions sideline Iran
Saudi Crown Prince Mohammed bin Salman bin Abdulaziz’s high-profile tour of Asia was a highly successful trip. Visiting Pakistan, India and China, the crown prince set the tone for Riyadh’s future relationships with some of its most important partners in Asia where Iran also competes for influence.
In Pakistan, Crown Prince Mohammed received a fighter jet escort and was bestowed with the country’s highest civilian award. In India, Prime Minister Narendra Modi broke protocol and greeted the crown prince with his trademark bear hug.
Chinese President Xi Jinping said the “two countries should speed up the signing of an implementation plan on connecting the Belt and Road Initiative (BRI) with the Saudi Vision 2030.”
Riyadh has been taking growing interest in Xi’s game-changing BRI, which will redraw regional trade networks with new massive scale integrated road, rail and port infrastructures.
There is a huge increase anticipated in Chinese trade passing through the Red Sea to Europe and Africa just as Saudi Arabia is embarking on the ambitious Vision 2030.
The crown prince sees deep synergies in Vision 2030 and the BRI and the Saudis are keen on courting Chinese investment and technology transfer to tie the plans together.
Riyadh was undoubtedly buoyed by Chinese Foreign Minister Wang Yi declaring that China sees “enormous potential” in the Saudi economy and is keen to develop deeper cooperation in high-technology areas.
China is Saudi Arabia’s largest trade partner. Last year, trade increased 32% with Saudi imports from China surging to $46 billion. Some 35 economic cooperation agreements and $28 billion in joint investments were signed during Crown Prince Mohammed’s visit, building on $65 billion in trade agreements signed two years ago when Saudi King Salman bin Abdulaziz Al Saud made a state visit to Beijing.
Saudi Energy Minister Khalid al-Falih insisted Saudi investment in China was “just starting” as Saudi Aramco announced a $10 billion joint venture with giant Chinese conglomerate Norinco for a 300,000-barrel-per-day (bpd) capacity refinery and petrochemicals complex in Panjin, expected to start operation in 2024.
Saudi Aramco also finalised an agreement to buy a 9% stake in Zhejiang Petrochemical, a 400,000-bpd refinery and petrochemicals complex in Zhoushan, and aims to expand market share further with the signing of supply deals with non-state Chinese refineries.
These investments will support Saudi efforts to regain its position as China’s leading oil supplier,
a position Russia has held for three years.
Earlier, Saudi Aramco announced a highly significant $11 billion investment in Pakistan’s coastal city of Gwadar, one of the most important elements of China’s BRI, for a new refinery and petrochemicals complex.
China has invested heavily in the $62 billion China-Pakistan Economic Corridor, which is designed to connect western China with the Arabian Sea and Indian Ocean via Gwadar.
In its “first phase” of investment into Pakistan in this scenario, Saudi Arabia announced a $20 billion scheme covering energy, mining and consumer goods, its biggest ever in the long-time ally’s economy.
For Pakistan, Saudi Arabia has joined China as the main pillar on which to achieve an economic turnaround after years of poor economic governance.
India also forms an important element in Vision 2030. As Riyadh and New Delhi signed investment agreements in infrastructure, housing and tourism, Crown Prince Mohammed spoke of investment opportunities of more than $100 billion in India in the coming years.
Since 2016, Saudi Arabia has invested $44 billion in India and is keen to begin work on building the world’s largest integrated refinery and petrochemicals complex in Ratnagiri, together with Abu Dhabi National Oil Company and state-owned Indian refineries.
Adel al-Jubeir, Saudi minister of state for foreign affairs, said Saudi Arabia has a vision to transform India into a regional supply hub for crude oil by investing in downstream assets to build up refining and storage capacities along with modern infrastructure that will facilitate India’s ability to import and export petroleum products.
These long-term moves will enable Riyadh to better convert gains in market share expected in the next few months. China and India are unlikely to have waivers granted by the United States for importing Iranian oil to be renewed in May as Washington ramps up pressure on Tehran, where economic conditions are worsening.
To an extent, Iran and some partners will work out sanctions-busting oil trade. For example, Iranian oil is being traded for Indian sugar and rice but the underlying fact is that business with Iran has increasingly become a liability.
That is in contrast to Saudi Arabia, which has an energetic leadership, comes with a plan in the form of Vision 2030 and has the financial muscle to execute megaprojects at home and joint ventures abroad.