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Justine Salam / Hany Besada
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SBE, Vol.20, No.1, 2017
ISSN 1818-1228
©Copyright 2017/College of Business and Economics,
Qatar University
alternative to the “seemingly capricious”
66
consuming markets of the United States. Saudi
Arabia exports more than half of its crude oil
to Asia and less than fifth to the Americas. Yet,
in 2012, Saudi Arabia was the second-largest
petroleum exporter annually to the United
States after Canada. Although the United States
remains an important partner, Saudi Arabia has
an even more important market in Asia.
Historically, relations between China and Saudi
Arabia started with the ascendance to power
of Deng Xiaoping in 1978. Xiaoping was
determined to accelerate economic reforms,
growth, productivity, and efficiency in order
to rebuild China and Saudi Arabia became part
of the solution.
67
Later on, several political
exchanges and diplomatic visits between China
and the Kingdom took place. In 1999, Chinese
President Jiang Zemin visited Saudi Arabia
and signed the Strategic Oil Cooperation
Agreement. In 2006, Chinese President Jintao
Hu visited the Kingdom as well, and Chinese
Middle East envoy stated that the visit “laid a
solid foundation for the growth of bilateral ties
in the years ahead.”
68
President Jintao made
another visit in 2009, and another agreement
was signed, including a partnership in oil, gas,
and mining. In 2012, Chinese Prime Minister
Wen Jiabao went to Saudi Arabia; at the same
time Saudi Arabia’s state-run oil company
Aramco signed an agreement with China’s
Sinopec to build an oil refinery in Yabu, Saudi
Arabia. That agreement became the first major
Chinese investment in Saudi oil industry.
Saudi Arabia also found a great trading partner
in China regarding its heavy crude oil. Saudi’s
66 Alterman & Garver, The Vital Triangle, China, The
United States and the Middle East, CSIS,Centre for
Strategic and International Studies, Washington DC. 2008,
Pg 57-58.
67 Olimat Muhammad S., China and the Middle East:
From Silk Road to Arab Spring,
Reprint Edition, NewYork,
Rougtledge, 2015. Pp. 43
68 Al-Tamimi (2012), pp. 5.
heavy crude oil consists of a “distressed
medium-grade crude oil,”
69
consuming a
viscous, acidic, and often sulphurous product
that Saudi Arabia has in abundance but that has
few buyers internationally. In fact, although it
sells 15% to 25% cheaper than premium grade
of oil, heavy crude oil is hard to refine and only
a few refineries have the capacity to transform
it into usable products such as heating oil or
gasoline. The United States has refused to buy
heavy crude oil as processing it into usable
oil has great environmental concerns, while
China saw a great opportunity to obtain oil at
a cheaper price. Consequently, Saudi Arabia
has been trying to develop new partnerships
with China by investing in specific refineries in
Chinese territory, allowing China to purchase
inexpensive oil and Saudi Arabia to ensure a
steady demand.
The Enduring Rivalry between Saudi Arabia
and Iran
Despite a long history of supplying oil to
Western powers, one of Saudi Arabia’s policies
is to isolate Iran. Through “petro-political
partnerships,”
70
SaudiArabia has been trying to
contain Iran’s political and economic influence.
Saudi Arabia is ready to do whatever it takes to
dismiss Iran and strengthen its own ties with
China. For example, Saudi Arabia’s ability to
increase its oil production is certainly a card
that Saudi Arabia could use to marginalize
Iran, but also to calm world markets and boost
economic growth during crises
71
.
As per China, when SaudiArabia finally opened
up its upstream sector, Chinese investments
69 Alterman & Garver, The Vital Triangle, China, The
United States and the Middle East, CSIS,Centre for
Strategic and International Studies, Washington DC. 2008,
Pg 58.
70 Al-Tamimi (2012), pp. 10.
71 Olimat Muhammad S., China and the Middle East:
From Silk Road to Arab Spring,
Reprint Edition, NewYork,
Rougtledge, 2015. Pp. 62