Major Saudi-Chinese deals during Xi’s visit

Friday 22/01/2016
Saudi Arabia is China’s largest Middle East trading partner

LONDON - Saudi Arabia and China signed 14 agreements dur­ing President Xi Jinping’s first visit to the Middle East, including a deal to build a nuclear reactor.

Most of the agreements were economic, including one for strate­gic cooperation between oil giants Saudi Aramco and China Petroleum and Chemical Corporation (Sin­opec).

Xi and Saudi King Salman bin Abdulaziz Al Saud on January 20th marked the inauguration of a joint-venture oil refinery in Yanbu Indus­trial City on the Red Sea. The YAS­REF refinery is 62.5% held by Saudi Aramco and Sinopec holds the bal­ance. The facility is one of five joint-venture refineries for Saudi Arabia. Four are overseas, including one in Fujian, China.

Aramco has also been in talks to acquire a stake in a China National Petroleum Corporation refinery as well as retail assets, Reuters said, a deal that would help Aramco sell more of its output to China amid growing competition. The deal is estimated to be worth $1 bil­lion-$1.5 billion.

Officials announced on January 19th a memorandum of under­standing (MoU) for the construc­tion of a high-temperature, gas-cooled nuclear reactor. Neither the location nor the expected capacity of the plant was disclosed. Another MoU concerned renewable energy.

Xi’s visit also had political dimen­sions, with China giving support for the internationally recognised and Saudi-backed Yemeni government, which is fighting Iran-allied Houthi rebels.

In a statement released after Xi’s meeting with King Salman, the two countries affirmed their support for the unity, independence and sover­eignty of Yemen, and that all social, religious and political groups in the country should maintain their national solidarity and avoid any decisions that may cause social dis­ruption and chaos.

“Both sides stressed support for the legitimate regime of Yemen,” the statement said.

The Saudi-Chinese statement expressed deep concern over the “grave” situation in Syria and re­newed calls for a political resolu­tion to the fighting. It also stressed the need for humanitarian aid to Syrian refugees to continue, en­couraging the international com­munity to provide greater support.

The visit of China’s president to Saudi Arabia comes at a time when the economies of both countries are in the international spotlight.

China, after posting rapid growth for more than a decade, has seen a significant slowdown in the last two years. In 2015, the Chinese economy grew 6.9%; its slowest growth in 25 years. But some ana­lysts say official government data have been inflated and that growth is much weaker. The International Monetary Fund (IMF) has predicted China’s economy to grow by 6.3% in 2016 and 6% in 2017.

The IMF has meanwhile slashed its forecast for Saudi economic growth for 2016 and 2017 to 1.2% and 1.9%, respectively. The IMF blamed the expected slowdown on the slowing Chinese economy and low oil prices.

Saudi Arabia cut government spending at the end of 2015 after posting a record $98 billion budget deficit for the year. The kingdom also introduced a number of meas­ures regarding subsidies, including an increase in domestic petrol pric­es of more than 50%. Water, elec­tricity, diesel and kerosene prices also went up.

The austerity measures are ex­pected to save the kingdom $7 bil­lion annually, according to Riyadh-based Jadwa Investment. The firm said savings from the Saudis’ hike on diesel fuel are estimated at $2.75 billion and petrol levies are expect­ed to save $2.5 billion.

Saudi Arabia is China’s largest Middle East trading partner, with bilateral trade estimated at more than $71 billion for 2014, according to the Saudi Ministry of Finance.

Xi was also to visit Iran and Egypt on his current trip.