A stronger Sino-Saudi tie emerged from the official visits of Prince Mohammad bin Salman to Pakistan (February 17-18, 2019) and China (February 21-22, 2019).
China Can Certainly Help the Saudis
President Xi Jinping told the Prince in Beijing that China is a good friend and partner to Saudi Arabia. China firmly supports Riyadh in its drive for economic diversification and social reform and has offered to connect China’s Belt and Road Initiative (BRI) with Saudi Vision (SV) 2030. Announced in 2016, the Vision is about diversifying Saudi Arabia’s economy, upgrading supply networks and strengthening its defense industry. Part of the Vision includes transforming the country into a major industrial powerhouse and an international logistics hub. The focus will be on industry, mining and energy. So far, the project has not attracted many investors — and that is why China’s interest is welcome to the Saudis.
The admiration is mutual. The Prince even invoked “history” to laud stronger Sino-Saudi ties. The Arabian Peninsula is a part of the ancient Silk Road, he said, as he declared support for the BRI.
The China-Saudi tie is set to expand. China is Saudi Arabia’s largest trading partner. Bilateral trade between the countries increased by 32 percent in 2018, touching a high of USD 63.3 billion. At the G-20 meeting in December 2018, China hailed Saudi Arabia’s stability as the cornerstone of prosperity and progress in the Gulf. During Mohammad bin Salman’s visit to Beijing, China and Saudi Arabia signed 35 economic cooperation agreements worth a total of USD 28 billion.
The two countries plan to construct the China-Gulf Cooperation Council free trade zone. Economic cooperation with well-connected China will open doors for Saudi Arabia to strengthen bonds with other Asian countries, draw investment from them and increase its share of their markets.
Energy Ties and How China Could Handle Saudi-Iranian Rivalry
China and Saudi Arabia want to strengthen their energy ties. Having been surpassed by Russia as China’s largest oil retailer, Saudi Arabia, the biggest global oil exporter, wants to sell more energy to China and more generally to Asia.
The Saudis can help to meet the energy needs of Asia’s strongest but energy hungry economy. This could have both economic and strategic implications, not least because China is one of the largest importers of oil from Iran, which is Saudi Arabia’s arch rival.
Having good ties with both Iran and Saudi Arabia, China must decide how to deal with Saudi-Iranian competition; China will also have to contend Riyadh’s close military ties with the US, and their hostility to Iran.
Iran is a crucial milestone on China’s BRI. Since 2016, the Silk Road Train has connected Urumqi in western China’s Xinjiang Uygur autonomous region to Tehran. The railway line runs via Kazakhstan, Kyrgyzstan, Uzbekistan and Turkmenistan, increasing the connectivity of all the countries involved.
China’s BRI in South Asia will progress with Saudi investment, while China will enhance its influence in the Middle East as it cultivates both US-friendly Saudi-Arabia and US-hostile Iran.
In cultivating Riyadh, Beijing pays attention to regional disputes. Having good ties with Riyadh and Tehran, China is trying to build amicable ties with two friends who are adversaries. That is why the Saudi-Iranian hostility does not block economic cooperation between China and Saudi Arabia. One of the most important of their recent agreements envisages Saudi Arabia building a USD 10 billion oil refinery in the northeast Chinese coastal area near Panjin, in the province of Liaoning, which has straggled behind most other provinces in recent years.
Yet even as Beijing’s stresses “more high-tech cooperation” with Riyadh, it affirms that “China won’t be a geopolitical player in the Middle East. It has no enemies and can cooperate with all countries in the region”.
Sino-Saudi Ties and Pakistan
Pakistan was Mohammad bin Salman’s first stop. As China’s partner in the China-Pakistan Economic Corridor (CPEC) and an old friend of Saudi Arabia, Pakistan will benefit from their expanding relationship. Both China and Saudi Arabia have since long provided financial support to Pakistan. Salman offered Islamabad a USD 6 billion bailout package for Pakistan’s ailing economy. The package includes USD 3 billion balance of payments support and another USD 3 billion in deferred payments on oil imports.
Saudi Arabia and China have shared interests in giving aid to Pakistan and advancing the CPEC. That is natural. Diplomacy is about maximizing options and all three countries have a long history of friendly ties.
Now, with Saudi Arabia stepping forward to invest in CPEC, Pakistan becomes a connection for the BRI as well as for SV 2030. As a crucial milestone on the BRI, Pakistan has already gained USD 19 billion of the USD 62 billion that China reportedly plans to spend on CPEC. The Corridor is one of several economic corridors being developed by China as part of its BRI. It comprises several infrastructure and energy projects.
Additionally, China’s development of Gwadar port in north-west Pakistan gives it a vantage point in the Arabian Sea and Indian Ocean. China and Saudi Arabia both have a strong interest in the development of Gwadar port. China’s interest in Gwadar dates back to 2001 when Beijing and Islamabad formally agreed to develop it as a deep-water port. But it was not until 2013 that China started upgrading the port.
Since then, Gwadar has emerged as a hub linking the geo-economic interests of China, Pakistan and Saudi Arabia. Soon after Pakistan-trained terrorists killed Indian security personnel in February 2019, Riyadh announced that it would invest USD 20 billion in Pakistan’s infrastructure and energy. About USD 8 billion of the USD 20 billion of Saudi investment in Pakistan will be spent on an oil refinery in Gwadar. The Saudis have also been offered a stake in gold and copper mines and a power plant in Gwadar.
True, China could face economic competition from the Saudis in Gwadar. But it cannot prevent Pakistan from trying to diversify its options. There are reports that Pakistan does not wish to focus only on the Chinese infrastructure projects, which have made it indebted to China. It wants more of its own socio-economic projects in CPEC. But given that SV 2030 will develop with China’s support, it is unlikely that Saudi Arabia will elbow China out of Gwadar.
The chances are that the Saudi investment in Gwadar would be welcome to both China and Pakistan. For China, Gwadar is a major economic and strategic connection to the Arabian Sea and the oil resources of West Asia. About half of China’s imported oil comes from the Gulf region, which includes Saudi Arabia. The oil passes through the Strait of Hormuz, a passage for at least one third of the world’s petroleum trade. Gwadar is a mere 650 kilometers from the Strait. Xingjian, the Chinese port nearest to the Strait, is 15,000 kilometers away. Both oil-importing China and oil-exporting Saudi Arabia can only benefit from the development of Gwadar port.
China will have to tread the diplomatic tightrope between Riyadh and Tehran. But given that it has much to offer both economically, it will be able to balance itself between the two.
Meanwhile, the Sino-Saudi interest in Pakistan makes clear that is useful to both. Pakistan has supplied Saudi Arabia with 70,000 military personnel, which no other country can replace. And over several years, China has helped Pakistan to set up modern defense factories, which have produced military aircraft. Some 42 percent of all Chinese weapons go to Pakistan, which is China’s largest single arms buyer. The all-weather Sino-Pak friendship has been further strengthened by China’s sale of submarines for USD 5 billion, the largest arms sale by China. Pakistan has also bought naval patrol vessels and surface to air missiles from China. More generally, as part of the larger regional visions of China and Saudi Arabia, Pakistan can be helped by their investments in CPEC. The triangular China-Pak-Saudi relationship appears stable.
China and Saudi Arabia are two of Asia’s highly developed countries. Their mutual support for each other’s projects could signal the development of a strong Sino-Saudi arch across West and South Asia. China’s BRI in South Asia will progress with Saudi investment, while China will enhance its influence in the Middle East as it cultivates both US-friendly Saudi-Arabia and US-hostile Iran. The strengthening tie between China and Saudi Arabia will be mutually advantageous and enduring.