Major Saudi-Chinese deals during Xi’s visit
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.