RIYADH, Dec 9 (Reuters) – China will work to buy oil and gas in yuan, President Xi Jinping told Gulf Arab leaders on Friday, in a move that supports Beijing’s aim to stabilize its currency internationally and weaken the U.S. dollar’s grip on global trade. .
Xi In Saudi Arabia, Crown Prince Mohammed bin Salman held two “landmark” Arab summits with the Chinese leader, demonstrating the powerful prince’s regional prowess in partnerships beyond close historical ties with the West.
At a time when Riyadh’s relationship with Washington has been tested over human rights, energy policy and Russia, top oil exporter Saudi Arabia and economic giant China both sent strong messages of “non-interference” during Xi’s visit.
Any move by Saudi Arabia to ditch the dollar in its oil trade would be a seismic political move, as Riyadh has previously threatened in the face of possible US legislation that would expose OPEC members to antitrust lawsuits.
China’s growing influence in the Gulf has made the US nervous. Deepening economic ties were discussed during Xi’s visit, where he was greeted with pomp and ceremony and on Friday met Gulf states and attended a wide-ranging summit with Arab League leaders spanning the Gulf, the Levant and Africa.
At the start of talks on Friday, Prince Mohammed announced a “historic new phase in relations with China”, a stark contrast to the US-Saudi Arabia meetings five months ago when President Joe Biden attended a small Arab summit in Riyadh.
Asked about his country’s relations with Washington in light of the warmth shown to Xi, Foreign Minister Prince Faisal bin Farhan Al Saud said Saudi Arabia would continue to work with all its partners. “We don’t see this as a zero-sum game,” he said.
“We don’t believe in polarization or choosing between sides,” the prince told a press conference after the talks.
Although Saudi Arabia and China have signed several strategic and economic partnership agreements, and Chinese companies have entered the technology and infrastructure sectors, ties will continue to be fueled largely by energy interests, analysts said.
“Energy concerns will be front and center in the relationship,” Robert Mogilnicki, senior resident scholar at the Arab Gulf States Institute in Washington, told Reuters.
[1/4] Saudi Crown Prince Mohammed bin Salman stands with Chinese President Xi Jinping on December 8, 2022 in Riyadh, Saudi Arabia. Manual via Saudi Press Agency/REUTERS
“The Chinese and Saudi governments want to support their national champions and other private sector actors to move forward with trade and investment deals. There will also be more cooperation on the technology side of things, which will raise familiar concerns in Washington.”
Saudi Arabia this week agreed to a memorandum of understanding with Huawei on cloud computing and the creation of high-tech campuses in Saudi cities. A Chinese tech giant has taken part in building 5G networks in Gulf countries, despite US concerns about the potential security risk of using its technology.
Natural partners
Defying U.S. pressure on Saudi Arabia and its Gulf allies to limit deals with China and break with fellow OPEC+ oil producer Russia over its aggression in Ukraine, they are trying to navigate a polarized world order with national economic and security interests in mind.
Riyadh is a major oil supplier to China and the two countries reaffirmed in a joint statement the importance of global market stability and energy cooperation, while seeking to increase non-oil trade and improve cooperation on peaceful nuclear energy.
Xi said Beijing will continue to import large amounts of oil from the Gulf Arab countries and expand imports of liquefied natural gas, adding that their countries are natural partners and that they will further cooperate in upstream oil and gas development.
China will “fully use the Shanghai Petroleum and National Gas Exchange to carry out yuan settlement in oil and gas trade,” he said.
Beijing is pushing for its yuan currency to be used in trade instead of the US dollar.
A Saudi source who spoke before Xi’s visit told Reuters that a decision to sell small amounts of oil in yuan to China to directly pay for Chinese imports would make sense, but “it’s not the right time yet.”
Most of Saudi Arabia’s assets and reserves are in dollars, including more than $120 billion in U.S. Treasuries held by Riyadh, and the Saudi riyal is pegged to the dollar like other Gulf currencies.
Earlier, the Chinese leader said his visit heralded a new era in relations, expressing hope that the Arab summits would become “landmark events in the history of Sino-Arab relations.”
Additional reporting by Eduardo Baptista in Beijing, Riham Algousa, Ahmed Kadar and Lina Najm in Dubai, Writing by Kaida Cantes and Dominic Evans Editing by Mark Heinrich, William McLean and Mark Potter.
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