RIYADH, Dec 9 (Reuters) – China will try to buy oil and gas in yuan, President Xi Jinping told Gulf Arab leaders on Friday, a move that would support Beijing’s goal of building the yuan internationally and weaken the dollar control of world trade.
Xi Jinping spoke in Saudi Arabia as Crown Prince Mohammed bin Salman held two “landmark” Arab summits with Chinese leaders, showing how the powerful prince seeks to move beyond close ties with the West Regional influence when partnering with historical relationships.
Top oil exporter Saudi Arabia and economic giant China have both sent strong messages about “non-intervention” during Xi’s visit, as Riyadh’s relationship with Washington is tested over human rights, energy policy and Russia.
Any move by Saudi Arabia to ditch the U.S. dollar in its oil trade would be a shock political move, with Riyadh previously threatening antitrust lawsuits in the face of possible U.S. legislation that would expose the OPEC member.
China’s growing influence in the Gulf region makes the United States uneasy. Xi has touted deepening economic ties during his visit, where he received a lavish welcome, met with Gulf states on Friday, and attended a broader summit with leaders of Arab League states in the Gulf, the Levant and Africa.
Prince Mohammed announced a “historic new phase in relations with China” at the start of Friday’s talks, a stark contrast to the awkward U.S.-Saudi talks five months ago when President Joe Biden was in Riyadh for a smaller Arab summit Compared.
Saudi Arabia’s foreign minister, Prince Faisal bin Farhan Al Saud, was asked about the relationship between Saudi Arabia’s enthusiasm for Xi and Washington’s, saying the kingdom 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 two sides,” the prince told a news conference after the talks.
While Saudi Arabia and China have signed several strategic and economic partnership agreements, analysts say their relationship will remain largely based on energy interests, despite Chinese companies’ forays into technology and infrastructure.
“Energy issues will remain front and center in the relationship,” Robert Mogielnicki, 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 in Riyadh, Saudi Arabia, December 8, 2022.SPA/REUTERS Handout
“The Chinese and Saudi governments will also seek to support their state champions and other private sector players in advancing trade and investment agreements. There will also be more cooperation on technology, raising familiar concerns in Washington.”
Saudi Arabia this week struck a memorandum of understanding with Huawei on cloud computing and building high-tech parks in Saudi cities. The Chinese tech giant is involved in building 5G networks in the Gulf state despite U.S. concerns about possible security risks from using its technology.
natural partner
As Saudi Arabia and its Gulf allies defy U.S. pressure to limit a deal with China and break with fellow OPEC+ producers over Russia’s invasion of Ukraine, they seek to navigate a polarized world order with national economic and security interests in mind .
Riyadh is China’s largest oil supplier, and the two countries reaffirmed the importance of global market stability and energy cooperation in a joint statement, while working to boost non-oil trade and strengthen cooperation in peaceful nuclear energy
Xi said Beijing will continue to import large quantities of oil from the Gulf Arab countries and expand imports of liquefied natural gas, adding that these countries are natural partners and will further cooperate in the field of upstream oil and gas development.
China will also “make full use of the platform of the Shanghai Petroleum and Natural Gas Exchange to carry out RMB settlement business for oil and gas trade,” he said.
Beijing has been lobbying to use the yuan instead of the dollar for trade.
A Saudi source told Reuters ahead of Xi’s visit that a decision had been made to sell small amounts of oil to China in yuan to pay for Chinese imports directly, but “it’s not the time yet”.
Most of Saudi Arabia’s assets and reserves are held in dollars, including Riyadh’s holdings of more than $120 billion in U.S. Treasuries, and the riyal, like other Gulf currencies, is pegged to the dollar.
Earlier, the Chinese leader said his visit heralded a new era in relations between the two countries, expressing hope that the Arab summit would become a “milestone event in the history of Sino-Arab relations”.
Additional reporting by Eduardo Baptista in Beijing and Riham Alkousaa, Ahmad Ghaddar and Lina Najm in Dubai Editing by Ghaida Ghantous and Dominic Evans Mark Heinrich, William Maclean and Mark Potter
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