The Iran chip in Sino-Saudi relations

Strong relations with Saudi Arabia are becoming an integral part of China’s strategy to achieve energy security and to further its broader foreign policy objectives in the Middle East. China’s energy and overall economic interests in Saudi Arabia and the wider Middle East, however, are inseparable from the larger geopolitical issues that loom large in the region, namely the Iranian nuclear question.



The fourth joint meeting on economy and trade convened
by China and Saudi
Arabia in January 2010 in the Saudi capital of Riyadh
came and went without
much fanfare. Yet the meeting between China, the
world’s second-largest and
fastest-growing oil consumer, and Saudi Arabia, the
world’s largest producer of
oil, cemented a burgeoning bilateral relationship that
is attracting increasing
international attention for its potential impact on
Middle East geopolitics and
as a manifestation of China’s growing power on the
world stage.



China surpassed the United States by the end of 2009 as
the top importer of
Saudi oil. The January meeting, co-chaired by Chinese
Minister of Commerce Chen
Deming and Saudi Minister of Finance Ibrahim bin Abdel
Aziz al-Asaf, saw both
countries highlight the bilateral economic and trade ties that
have witnessed a marked
expansion since the third meeting of the joint
Sino-Saudi committee held in
2006; Saudi Arabia has been China’s largest trading
partner in the Middle East
for eight years running, with bilateral trade reaching
US$40 billion in 2010.

 



In demonstrating Beijing’s commitment to strengthening
the economic ties
binding China and Saudi Arabia, Minister Chen also
called for both countries to
increase bilateral trade to $60 billion by 2015. Saudi
Arabia also committed to
allowing for an increased profile for Chinese energy
giants in joint oil and
gas exploration projects in the kingdom while China
affirmed its interest in
formulating a free-trade agreement (FTA) between
Beijing and the Saudi-led Gulf
Cooperation Council (GCC).




Strong relations with Saudi Arabia are becoming an
integral part of China’s
strategy to achieve energy security and to further its
broader foreign policy
objectives in the Middle East. China’s energy and
overall economic interests in
Saudi Arabia and the wider Middle East, however, are
inseparable from the
larger geopolitical issues that loom large in the
region, namely the Iranian
nuclear question.




While China may continue to insist that it is
conducting relations under the
principle of divorcing economics from politics, it is
becoming increasingly
clear, particularly in the Middle East, that it cannot
remain aloof to the
region’s most contentious issues. As the de facto
leader of the bloc of pro-US
Arab regimes, Saudi Arabia (along with Israel) is on
the forefront of opposing
its regional rival Iran’s nuclear program.




Recognizing the growing profile of Sino-Saudi
relations, the United States
enlisted the support of the Kingdom in convincing China
to change course on
Iran. US Secretary of State Hillary Clinton’s February
2010 trip to Saudi
Arabia and Qatar, its GCC partner and natural gas
powerhouse, aimed to rally
support for persuading China to back US-led efforts to
sanction Tehran.




The root of China’s concerns about US intentions toward
Iran lie primarily on
the impact of any potential disruption in Iranian
supplies of oil and gas -
either through sanctions or war – on Chinese and
international markets.
Washington’s efforts to engage Saudi Arabia and Qatar
were likely meant to
convince the Chinese that the Saudi-led GCC would be
prepared to offset any
disruption in Iranian energy supplies to China
following the imposition of
sanctions. The flurry of US-led diplomatic activity in
the Gulf states was
reinforced by a February visit to Beijing by Bank of
Israel governor Stanley
Fischer and former Israeli military chief of staff and
Minister for Strategic
Threats Moshe Yalon to convince China to support
sanctions on Iran.




In spite of the united front comprised of the US, Saudi
Arabia and its GCC
partners, and Israel to win over Beijing’s support on
isolating Tehran, the
latest diplomatic efforts appear to have made little
headway. To put the onus
of the Iranian nuclear tussle on China, Saudi Foreign
Minister Prince Saud
al-Faisal quipped: “China is perfectly aware of the
scope of its
responsibilities and its obligations [with regards to
Iran], including in the
position it holds on the international stage and as a
permanent member of the
[United Nations] Security Council.”




Evidently, however, China places a premium on
maintaining strong relations with
Iran; among other things, Iran is China’s
second-largest supplier of oil and
Beijing is looking to tap the Islamic Republic’s
abundant natural gas
resources. China is also a major investor in various
sectors of the Iranian
economy.




China’s support for Iran amid US-led calls for
crippling sanctions over
Tehran’s nuclear ambitions (and Israeli calls for
military strikes) thrusts it
into the middle of a simmering imbroglio that will test
China’s mettle as a
global power; as a veto-wielding permanent member of
the UN Security Council,
China must sign on along with its fellow permanent
members to any global
sanctions regime that would be placed on the Islamic
Republic.




At this point, China is the most resistant to adopting
any form of crippling
sanctions against Iran. In spite of Chinese President
Hu Jintao’s assurance to
US President Barack Obama during their April 2010
discussions of China’s
commitment to “working together [with the United
States] to ensure that Iran
lives up to its international obligations,” Beijing has
yet to demonstrate a
serious willingness to undermine its relationship with
Iran by backing a US-led
sanctions regime, let alone passively acquiescing to a
US (or Israeli)
invasion.




In fact, it appears that China is digging in to protect
its vital interests in
Iran. Incidentally, China reportedly opened a missile
plant in Iran in March
2010, the latest in a series of expanding military ties
between Beijing and
Tehran. China also increased exports of gasoline to
Iran in an effort to ease
pressure on Tehran amid US efforts to target Iran’s
domestic gasoline industry
through sanctions.




China also regularly counters calls for war against
Iran emanating from Israel
and some circles in the US with pleas for diplomacy and
negotiations. China’s
continued support for Iran amid growing US opposition
is also rooted in the
larger Sino-US rivalry, particularly in the context of
ongoing US military and
diplomatic support for Taiwan. China was angered when
the US announced in
January 2010 that it agreed to a $6.4 billion deal to
supply Taiwan with a host
of advanced weapons platforms. In this regard, China’s
insistence on supporting
Iran must also be seen as a form of retaliation against
US policies it deems as
threatening to its vital national interests and
security in Asia.



The oil factor

Since the establishment of diplomatic relations in
1990, Sino-Saudi ties have
become one of the most dynamic bilateral relationships
in the region. The
evolution of Sino-Saudi relations is emblematic of the
impact of China’s rapid
economic development and its pursuit of energy
resources in the Middle East to
sustain its growth. In 2009, Saudi oil exports to China
topped 1 million
barrels per day (bpd), a figure representing 20% of
China’s total oil imports
and nearly double the number of bpd imported by China
in 2008. In contrast, US
imports of Saudi oil dropped to below 1 million bpd in
the same year for the
first time in over two decades.


The peculiarities of the Saudi oil industry are also
critical to understanding
the kingdom’s drive to cultivate closer ties to China.
With one of the world’s
most developed energy sectors in terms of
infrastructure and operating
efficiency, Saudi Arabia is not desperate to attract
foreign investment to help
expand its capacity to produce and export oil. Instead,
Saudi Arabia is keen on
identifying a stream of steady, long-term demand, an
urgent priority as the
United States and other Western countries look to
decrease their consumption of
oil and incrementally adopt conservation methods and
alternative fuels [1].




Saudi Arabia and other regional oil producers are
counting on China (and other
emerging Asian powers such as India) to offset their
losses. In this regard,
the Chinese are a perfect match for the Saudis, as
China’s demand for oil will
only grow in the foreseeable future.




In June 2009, Saudi Aramco signed an agreement with
state-owned China Petroleum
and Chemical Corp (Sinopec) to increase exports of
Saudi crude to 1.5 million
bpd. Both countries also engaged in talks to allow
Saudi Aramco to expand the
capacity of Sinopec’s existing oil refining facilities
and other petrochemical
complexes in China to handle Saudi oil.




While its premium grade light sweet crude reserves are
highly sought after,
Saudi Arabia is keen on securing a market for its
medium grade crude oil – a
product that is plentiful in the kingdom – in China, as
well as other parts of
Asia. Medium grade crude oil, while cheaper than its
premium grade
counterparts, is far denser and contains a higher
amount of impurities and
sulfur content compared to light sweet crude, meaning
that it will yield less
gasoline, diesel, and other finished products after
what entails a more complex
refining process.




Maximizing the potential of medium crude requires
specialized refineries. While
the United States and other countries have demonstrated
no serious interest in
expanding their respective refining capacity to tap
medium crude (or heavy
crude) sources in Saudi Arabia and elsewhere, the
kingdom seems to have found a
willing partner in China. Close relations driven by
China’s demand for oil will
continue to shape Sino-Saudi ties in the foreseeable
future.



Looking to China

While firmly bound in a strategic relationship with the
United States, a
relationship that continues to be underlined by energy
interests and
longstanding diplomatic and security ties, Saudi Arabia
is nevertheless keen on
diversifying its foreign relations to capitalize on
China’s growing reach in
the region.




Saudi Arabia also understands that the global shift in
economic and financial
gravity away from the West toward Asia will drive up
energy demand,
particularly for oil, and will profoundly impact energy
markets for decades to
come. In addition, with the United States entangled in
two simultaneous wars,
there is a growing perception that American influence
is on the decline in the
Middle East and beyond, thus prompting Saudi Arabia to
look for alternative
partners.




The rise of Iran as the Gulf’s most powerful actor
following the overthrow of
Saddam Hussein in Iraq is also impacting Saudi Arabia’s
strategic calculus.
While Iran’s nuclear program remains a concern for its
neighbors in a military
sense, in reality it is the brand of revolutionary
Islamism couched in a
resistance discourse that poses the greatest threat to
the stability of Saudi
Arabia and other pro-US Arab regimes in the region that
enjoy little or no
popular legitimacy among their citizens. Indeed, if
Saudi Arabia represents the
embodiment of the pro-US status quo in the Middle East,
Iran signifies its
polar opposite.




Indications that the United States may have come to
accept – albeit reluctantly
- the reality of a nuclear Iran are also likely
figuring into the kingdom’s
strategic calculus with respect to its efforts to
engage China. A leaked report
of a secret memorandum drafted in January 2010 by US
Secretary of Defense
Robert Gates that was publicized in April suggests that
senior officials in the
Barack Obama administration have concluded that the
United States has few
realistic long-term options to preventing Iran from
achieving a nuclear
capability. As a result, a perception exists at least
in some American
policymaking circles that the United States will
eventually be compelled to
shift its focus from actively working to prevent Iran’s
acquisition of a
nuclear capability to containing a nuclear Iran.




As Israel continues to threaten to attack Iran in the
absence of the imposition
of harsh sanctions, there is no evidence to suggest
that Israel is capable of
reversing, let alone limiting, Iran’s nuclear course
and potential. Moreover,
the fallout of an Israeli attack, especially for US
forces in Iraq and
Afghanistan – who would surely bear the brunt of
Iranian retribution – would be
catastrophic for US interests in the region, as Iran is
sure to retaliate for
any potential Israeli strikes on its soil against
Israel’s chief ally in the
region.




Saudi Arabia will continue to depend on US security
guarantees and its
longstanding diplomatic ties to Washington, areas that
Beijing has steered
clear of disrupting in any meaningful sense. At the
same time, the kingdom has
also concluded that engaging its regional rival’s main
ally in Beijing will
help ensure that its interests are taken into account
with respect to Iran and
the shifting sands of Middle East geopolitics.



Notes 1. Jon B. Alterman and John W.
Garver, The Vital Triangle:
China, The United States, and the Middle East, Center
for Strategic and
International Studies, Significant Issues Series
(2008), Vol. 30, No. 2, p. 58.



Chris Zambelis is an Associate with Helios
Global, Inc., a risk analysis
firm based in the Washington, DC area. The opinions
expressed here are the
author’s alone and do not necessarily reflect the
position of Helios Global,
Inc.





(This article first appeared in The Jamestown
Foundation
. Used with permission.)




(Copyright 2010 The Jamestown Foundation.)

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