Saudi-China bilateral relations took a notable upswing this March after Saudi King Salman and Chinese President Xi Jinping signed landmark economic deals worth approximately $65 billion. The Cipher Brief’s Bennett Seftel spoke with Gary Grappo, former U.S. Ambassador to Oman, about Saudi Arabia’s and China’s economic strategies as well as China’s growing role in the Middle East.
TCB: What is the current level of bilateral relations between Saudi Arabia and China? In what sectors (economic, defense, military, etc.) is cooperation between the two countries most prominent?
Gary Grappo: Currently, Saudi-Chinese ties are focused within the economic sphere. Oil provides the foundation, of course. China is now the Kingdom’s largest importer of oil, exceeding the U.S., and it may not be long before the Saudis supplant Russia as China’s biggest supplier. So, the oil connection is pivotal for both states, both of whom would like to lock down long-term supply contracts.
But both sides want to see the relationship go beyond oil and gas. The Kingdom has been investing in China for two decades and is now hoping to see Beijing reciprocate in Saudi Arabia. With the Vision 2030 economic plan upper most on the minds of King Salman and his son, Deputy Crown Prince Mohammed bin Salman, Chinese capital and know-how in manufacturing, especially petrochemicals, and energy are being strongly encouraged. China is investing hundreds of billions of dollars in renewable energy, and the Saudis would love to see some of that directed their way. Vision 2030 has big plans for solar energy development and expansion.
Since China sold CSS-2 missiles and launchers to Saudi Arabia in 1998, we haven’t seen much activity on the military side. However, as Riyadh begins casting a wider net for military equipment suppliers, we should expect interest here to pick up as well.
TCB: Have Saudi Arabia and Iran competed to sell oil to China? How has China’s relations with Iran affected its ties with Saudi and vice versa?
Grappo: China will try to build a firewall between its two large Gulf oil suppliers. Reliable oil is the key, and China will work mightily to prevent politics from interfering. So, for the time being, we shouldn’t see competition for the Chinese market creating a problem for Beijing. Ditto for Riyadh and Tehran, who both seek those long-term supply contracts. Beijing will be sure to keep both mollified, despite predictions of low oil processes continuing. Barring a major unforeseen confrontation, neither Riyadh nor Tehran wants to see their relationships with Beijing upset either. So, they’re likely to keep their political feelings in check. But a confrontation inside the Gulf could throw things off balance, and that includes Iran’s continuing dangerous provocations of U.S. naval vessels inside and just outside the Gulf. This may be an opportune issue for the Chinese to politely insert themselves by quietly suggesting to Iran that such actions are not in anyone’s interest and threaten Gulf stability.
TCB: How significant was the signing of $65 billion worth of deals between Saudi and China back in March? What does this say about economic cooperation between the two moving forward? Does this pose a threat to U.S.-Saudi economic ties?
Grappo: The deals signed last spring are yet another illustration of this growing relationship. We should expect it to continue. It presents no threat to overall U.S-Saudi ties at the moment, as the Saudis still remain heavily dependent on the American defense umbrella. Moreover, on U.S. President Donald Trump’s recent visit to the Kingdom, the two leaders themselves inked economic deals estimated at some $110 billion. So, for now, there’s enough business in the Kingdom to go around for both the economic powerhouses.
U.S. business activity has tended to concentrate in defense and oil. Look for China to carve out its own space in alternative energy and manufacturing. I have already mentioned alternative energy, and solar especially, is an area of considerable interest to both Riyadh and Beijing. It is a target for major investment and development in China and could offer Beijing a real opportunity to one-up the Americans in the Kingdom, where American business has ruled the roost for decades. Moreover, unlike the American approach, the Chinese approach may have a way of insinuating the always-patient Chinese into other areas. That will be something for the Americans to keep an eye on.
TCB: How could increased economic activity between Saudi and China affect China’s role in the Middle East? What are China’s objectives in the Middle East? Does this fit into their one belt, one road initiative?
Grappo: The growing economic ties between the two nations are fully in line with the One Belt One Road and Vision 2030 strategic initiatives of China and Saudi Arabia, respectively. For China especially, it secures that all-important petroleum link. More broadly, ties between the two regional economic centers enhance growth opportunities and provide greater opportunities for inter-regional trade and investment. Others in the Middle East should see the expanding Saudi-China ties as opportunities for them as well and beyond just oil. The Middle East is desperate to see greater and faster economic growth, and China can provide the capital and know-how for that.
Longer term, however, that will mean Beijing has a much more vested interest in the security and stability of the region. The continued instability, including within the Gulf itself, makes Beijing nervous. The question still remains: will the increased investment ultimately mean Beijing steps up on the security account as well? If that happens, it may mean choosing sides in the Saudi-Iran confrontation, which Beijing has been loath to do up this point.
It also points up something that both Washington and Beijing have in common: keeping the Gulf and broader region stable and ultimately ridden of extremism.
TCB: As Saudi Arabia maneuvers to implement its Vision 2030 economic plan, what role could China play in helping to achieve this goal? What about the U.S.?
Grappo: As has already been suggested, both nations bring capital, technology, and know-how to the Kingdom. In the American case, there is also a history of strong ties and a familiarity dating back more than 70 years.
For now, both nations will be enthusiastically welcomed in the Kingdom as strong ties with both nations ought to provide the Saudis with ample opportunity to implement their Vision 2030 plan.
Areas to watch will be the cultural and social impact of increased activities of those two very different nations and cultures – both separately and jointly – on the traditionally conservative and closed Saudi society, and the potential political/security implications of China’s growing role in Saudi economic development.