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Oil-hungry China Courts Saudi King

January 22, 2006

By Emma Graham-Harrison and Chris Buckley

BEIJING — Saudi Arabia’s King Abdullah arrived in Beijing on Sunday for his first ever state visit and analysts said China wants to draw closer to the Middle Eastern oil power without challenging Saudi ties to Washington.

The world’s number two oil consumer, China has been scouring the globe for crude to feed its booming economy, tempting potential partners with aid packages, diplomatic support — and for those at odds with Washington — the prospect of a large non-U.S. market.

The Saudi King, who is in his early 80s, was crowned in August 2005. He visited China as crown prince in 1998.

His visit follows soon after Beijing’s first formal talks with the Organization of Petroleum Exporting Countries (OPEC) in late December, worrying some policy-makers in the United States who fear a showdown over access to Middle Eastern oil.

Chinese analysts said that while China is eager for stable oil supplies, it has neither the cash nor will to challenge the United States — Saudi Arabia’s top diplomatic ally outside the region and also its biggest oil customer — for its role in the Middle East.

“The United States and Saudi Arabia have a special relationship, and it doesn’t matter how good relations with India or China become, its not going to break that special connection,” said Chen Fengying of the China Institute of Contemporary International Relations, a government think-tank.

Saudi Arabia was China’s top supplier of oil in the first 11 months of last year, providing 17 percent of its imports, nearly 440,000 barrels per day (bpd).

But this was under a third of shipments to the United States over the same period, at 1.43 million bpd.

China and the United States both want to see oil flowing uninterrupted from the Middle East, said one Chinese energy expert with government connections who declined to be named.

“If the U.S. is willing to keep soldiers there, we are happy to keep quiet. This trip has potential (only) in the imaginations of people in Washington who worry about the China connection … maybe it’s in the Saudi interest to leave room for imagination.”

Saudi desires to avoid highlighting its ties to Washington, as much as long-term strategic planning, may have pushed China to the top of the king’s agenda, said Zhang Bin of the Center for Energy Strategy at the foreign ministry think-tank China Institute of International Studies.

“At the moment the United States has a lot of problems in the Islamic world. Its relationship is not very good, so they may have wanted to avoid going there first,” he said.

From Beijing, the king will fly to India — which has vied with China for several energy deals — then Malaysia and finally Pakistan.

SECURITY ON AGENDA

The monarch is traveling with a large business delegation, including Oil Minister Ali al-Naimi.

Topics on the table for discussion besides energy will be counter-terrorism and military cooperation, a Chinese foreign ministry spokesman said.

Saudi Arabia has been fighting a campaign launched by Islamists sympathetic to al Qaeda in 2003 to topple the monarchy. China also says it faces a security threat from Muslim extremists in its remote far west.

China is already in talks about establishing a free trade area with the Gulf Cooperation Council, a regional economic organization with the six member states of Saudi Arabia, Kuwait, Qatar, Oman, Bahrain and the United Arab Emirates.

The two sides, which last year saw trade volume rise over a third to $33.8 billion, expect to sign an agreement by the end of 2006, the official Xinhua agency reported.

But rivalry between the oil producers may also have helped spur the visit, after the Kuwaiti energy minister said last month the Gulf state would like to set up a second refinery in China.

“The most immediate trigger for the Saudi visit is the Kuwaiti move to make a comprehensive deal with the Chinese,” said the Beijing-based expert.

Gulf states, which produce a heavier type of oil that Chinese refineries are ill-equipped to process, may find it easier to sell to China if they also invest in refineries.

Saudi Aramco last year signed a $3.5 billion deal together with Exxon Mobil Corp. and Sinopec, China’s top refiner, to expand a refinery in south Fujian province.

It is also in talks with Sinopec about investing in a plant in the northern city of Qingdao. Industry officials have said Beijing aims to boost Saudi crude imports under term deals next year to limit the impact of spot buying on volatile prices.


Source: reuters



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