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41 the national bureau of asian research nbr conference report | october 2009 Energy and Trade Relations between China and Saudi Arabia: A Continuing Evolution Jean-Francois Seznec Jean-FrancoIS SEZNEC is a Visiting Associate Professor at Georgetown University. His research focuses on the growth of energy-based industries in the Persian Gulf. He can be reached at . 43 ENERGY AND TRADE RELATIONS BETWEEN CHINA AND SAUDI ARABIA u SEZNEC R elationsbetweenSaudiArabiaandChinahavebeenincreasingdramaticallyoverthepastten years. The king of Saudi Arabia travelled to China in January 2006, the first Saudi monarch to do so and his first state visit as king. The Chinese president reciprocated by visiting Saudi Arabia in April 2006 and again earlier this year. There are important Saudi investments in refining in China, and Sinopec was chosen over U.S. firms as one of the oil companies charged with finding dry gas in Saudi Arabia. Trade with China is increasing very rapidly, up 77% in 2008 alone.1 Between 2002 and 2004, Saudi imports from China rose by 160%. In 2007, China was the second largest exporter to Saudi Arabia and the fifth-largest buyer of Saudi exports. China is the country’s third largest trading partner after the European Union and is almost at par with the United States, after starting from almost zero in the mid-1980s. China’s growth and ability to export to the rest of the world, and the United States in particular, are very much linked to its ability to obtain crude oil for its refineries and feedstock for its chemical manufacturing. China needs about 7 million barrels per day (b/d) to fuel its economy. According to the Energy Information Administration (EIA), oil production in China averaged 3.973 million b/d in 2008, whereas imports were 3.957 million barrels per day. This deficit has led the country to embark on a worldwide search for crude oil. China has become the largest investor and oil producer in Sudan and has made expensive deals for offshore oil in Angola. Beijing is negotiating large deals with Tehran. China has built a one million b/d pipeline in Kazakhstan to tap into that country’s production, and is even negotiating with Russia to ensure that the trans-Siberian pipeline to Vladivostok for supplying Japan with oil is built with a branch through Manchuria for supplying Northern China. Of course, for China the simplest, cheapest, and quickest way to get oil is to buy it from the national oil companies (NOC) of the Gulf Cooperation Council. The Arab NOCs, especially Saudi Aramco, are known to be reliable suppliers less subject to political variables. Hence, over the past ten years Saudi Arabia has become the largest supplier of crude oil to China, shipping over 500,000 b/d in 2007 and 700,000 b/d in 2008. China’s appetite for resources partly explains the increase in contacts with Saudi Arabia. However, it does not fully explain why Saudi Arabia decided to intensify relations with a country that had previously been seen as an adversary. After the 1950s Saudi Arabia saw China as a Communist, heathen country like the Soviet Union, eager to spread its ideology and seeking the downfall of the traditional regimes in the Persian Gulf. Further, at this time the Gulf had no need for China, which was seen as being too distant and lacking products needed by the Gulf that could not be provided by the West. The Western countries, and the United States in Saudi Arabia in particular, were responsible for the discovery of oil, economic development, and military protection of the region against the potential aggression of the Communist world through its client-states of South Yemen, Syria, and, until President Sadat, Egypt. This essay will present why Saudi Arabia has decided to forgo its long-standing dislike of Communist regimes and the implications of this evolution on the relations between Saudi Arabia and the United States in particular. The essay will argue that there are three major causes to the Saudi evolution: • First, Saudi Arabia wants to become a major world power but cannot do so by relying on military power. Instead, the kingdom is seeking to become an indispensible economic power, based on the natural advantage of low-cost energy and plentiful capital. Saudi Arabia is slated to be the largest 1 “Improved Trade Relations between Saudi Arabia and China, SABB Reports,” Zawya, February 23, 2009, sidv52n08-3NC27/Improved%20Trade%20Relations%20Between%20Saudi%20Arabia...


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