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June 23, 2017

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China forges Arab ties, hedging bets in the Gulf

DUBAI, United Arab Emirates -- To celebrate Chinese New Year last month, Dubai's swankiest hotel bathed its sail-shaped facade in red lighting accented with an image of a twisting golden dragon.

The gesture by the US$2,300-a-night Burj al-Arab was a not-so-subtle nod to the tightening bonds Beijing is forging with the kings and sheiks who rule the oil-rich Arab Gulf states, even as it stands firm in support for their regional rival Iran.

In many ways, China is following a course of keeping its business options open as it rolls ahead with securing the energy it needs to fuel its rapid growth. That complicates U.S.-led efforts to force Tehran to abandon its suspected nuclear weapons program, but it also allows China to expand its influence in Saudi Arabia and other Gulf states long allied to the West.

"If you were to look at the Iran-China relationship in a vacuum, you'd say China imports fairly large quantities of oil" from Iran, said Afshin Molavi, a senior fellow at the New America Foundation specializing in the Middle East.

But "when you zoom out and look at it, (you see) the Saudi-China relationship is a strategic relationship. The China-Iran relationship is a transactional one," Molavi said. "The China-Iran relationship is going to be really tested" as the U.S. and Europe ramp up efforts to isolate Tehran.

As the world's biggest energy consumer, China's roaring appetite for stable oil and gas supplies is driving its Gulf push — a relationship made clearer last month when Premier Wen Jiabao traveled to Saudi Arabia, the United Arab Emirates and Qatar. In Saudi Arabia, Wen specifically called for the two countries to "deepen their energy partnership" and increase trade in oil and gas.

State oil giant Saudi Aramco and Chinese refiner Sinopec just finalized plans to jointly build a refinery in the Red Sea city of Yanbu capable of handling 400,000 barrels of oil a day. The two companies and Exxon Mobil Corp. are already partners in a refinery in eastern China.

Aramco last year signed a deal with PetroChina, China's biggest oil and gas company, to supply 200,000 barrels of oil a day to a refinery planned for southern Yunnan province. Aramco CEO Khalid al-Falih said at the time: "We don't consider ourselves simply sellers of oil to China, but rather strategic partners."

Nearby Iran was not on Wen's January itinerary even though China remains Iran's trop crude oil buyer and its powerful state energy companies have rights to exploit untapped Iranian oil reserves.

The Chinese Ministry of Commerce's most recent figures show US$43 billion in Sino-Saudi trade in 2010, and a combined US$49 billion more with the other five Gulf Cooperation Council countries. That compares with just over US$29 billion in trade with Iran over the same period.

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