February 5, 2023

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Chinese President calls for oil trade in yuan at the Gulf Summit in Riyadh

Chinese President calls for oil trade in yuan at the Gulf Summit in Riyadh
  • Xi: Summit with Gulf and Arab League ‘milestone’
  • The United States fears the growth of Chinese influence in the Arab world
  • The Arabs are defying American pressure to restrict relations with China and cut off Russia
  • Summits show Saudi Crown Prince Mohammed bin Salman as the main leader

RIYADH (Reuters) – Chinese President Xi Jinping told Gulf Arab leaders on Friday that China would buy oil and gas in yuan, a move that would support Beijing’s goal of establishing its currency internationally and weakening the dollar’s grip on global trade. .

Xi was speaking in Saudi Arabia, where Crown Prince Mohammed bin Salman hosted two “high-profile” Arab summits with the Chinese leader that demonstrated the powerful prince’s regional heft as he seeks partnerships that go beyond close historical ties with the West.

Top oil exporter and economic giant China, Saudi Arabia, delivered strong messages during Xi’s visit about “hands-off” at a time when Riyadh’s relationship with Washington has been tested over human rights, energy policy and Russia.

Any move by Saudi Arabia to ditch the dollar in oil trade would be a seismic political move that Riyadh had previously threatened in the face of possible US legislation exposing OPEC members to antitrust lawsuits.

China’s growing influence in the Gulf has alarmed the United States. Deepening economic ties was encouraged during Xi’s visit, where he was greeted with joy and celebration. On Friday, he met with Gulf states and attended a broader summit with leaders of the Arab League countries in the Gulf, Levant and Africa region.

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At the start of Friday’s talks, Prince Mohammed ushered in a “new historic phase in relations with China,” in sharp contrast to the confusing US-Saudi meetings five months ago when President Joe Biden attended a smaller Arab summit in Riyadh.

In response to a question about his country’s relations with Washington in light of the warmth shown by Xi, Foreign Minister Prince Faisal bin Farhan Al Saud said that Saudi Arabia will 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 the two sides,” the prince said at a press conference following the talks.

Although Saudi Arabia and China have signed several strategic and economic partnership agreements, analysts said the relationship will remain anchored mostly on energy interests, despite Chinese companies making forays into the technology and infrastructure sectors.

“Energy concerns will remain front and center in the relationship,” Robert Mogielnicki, resident scholar at the Arab Gulf States Institute in Washington, told Reuters.

“The Chinese and Saudi governments will also be looking to support their national champions and other private sector actors moving forward with trade and investment deals. There will be more cooperation on the technology side of things as well, which raises familiar concerns from Washington.”

Saudi Arabia agreed to a memorandum of understanding with Huawei this week on cloud computing and building high-tech parks in Saudi cities. The Chinese tech giant has been involved in building 5G networks in Gulf countries despite US concerns about potential security risks in using its technology.

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natural partners

Saudi Arabia and its Gulf allies have defied US pressure to restrict dealings with China and break with fellow OPEC+ oil producer Russia over its invasion of Ukraine, as they try to navigate a polarized world order with an eye on national economic and security interests.

Riyadh is China’s largest oil supplier and the two countries stressed in a joint statement the importance of global market stability and energy cooperation, while striving to promote non-oil trade and promote cooperation in peaceful nuclear energy.

Beijing will continue to import large quantities of oil from Gulf Arab countries and expand its imports of liquefied natural gas, Xi said, adding that their countries are natural partners who will cooperate more in oil and gas development.

He said China will “make full use of the Shanghai Petroleum Exchange and the National Gas Exchange as a platform to implement the yuan settlement of oil and gas trade.”

Beijing has been pushing for the yuan to be used for trade instead of the US dollar.

A Saudi source who spoke before Xi’s visit told Reuters that the decision to sell small amounts of oil in yuan to China might make sense in order to pay Chinese imports directly, but “this is not the right time yet.”

Most of Saudi Arabia’s assets and reserves are in dollars, including more than $120 billion in US Treasury bonds held by Riyadh, and the Saudi riyal, like other Gulf currencies, is pegged to the dollar.

Earlier, the Chinese president said that his visit ushered in a new era in relations, expressing his hope that the Arab summits would become “landmark events in the history of Sino-Arab relations.”

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Additional reporting by Eduardo Baptista in Beijing, Reham El Kossa, Ahmed Ghaddar and Lina Najm in Dubai.

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