China’s Xi requires oil commerce in yuan at Gulf summit in Riyadh

  • Xi says Gulf-Arab League summit is ‘milestone’
  • US fears growing Chinese influence in the Arab world
  • Arabs are resisting US pressure to cut ties with China and cut off Russia
  • Summit meetings show Saudi Crown Prince Mohammed as key leader

RIYADH, Dec 9 (Reuters) – President Xi Jinping told Gulf Arab leaders on Friday that China will work to buy oil and gas in yuan, a move that would support Beijing’s goal of expanding its currency internationally establish and weaken the influence of the US dollar on world trade.

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

Leading oil exporter Saudi Arabia and economic giant China both sent strong “non-interference” messages during Xi’s visit at a time when Riyadh’s relationship with Washington on human rights, energy policy and Russia was being tested.

Any move by Saudi Arabia to abandon the dollar in its oil trade would be a staggering political move that Riyadh had previously threatened to take in the face of possible US legislation that would expose OPEC members to antitrust lawsuits.

China’s growing influence in the Gulf has unsettled the United States. The deepening of economic ties was touted during Xi’s visit, during which he was greeted with pomp and ceremony and met with Gulf countries on Friday and attended a broader summit with leaders of League of Arab States countries covering the Gulf, Levant and include Africa.

Earlier in the talks on Friday, Prince Mohammed announced a “historic new phase in relations with China,” a sharp contrast to the awkward meetings between the US and Saudi Arabia five months ago when President Joe Biden attended a smaller Arab summit in Riyadh attended.

Asked about his country’s relations with Washington given the warmth shown towards Xi, Foreign Minister Prince Faisal bin Farhan Al Saud said 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 in choosing between sides,” the prince said at a press conference after the talks.

Although Saudi Arabia and China signed several strategic and economic partnership deals, analysts said the relationship would remain anchored mainly by energy interests, although Chinese firms have made forays into the technology and infrastructure sectors.

“Energy issues will remain at the heart of 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. Saudi Press Agency/Handout via REUTERS

“The Chinese and Saudi governments will also seek to support their national champions and other private sector actors to push trade and investment deals. There will also be more collaboration on the technical side, which raises well-known concerns from Washington.”

Saudi Arabia this week agreed a memorandum of understanding with Huawei on cloud computing and building high-tech complexes in Saudi cities. The Chinese tech giant has gotten involved in building 5G networks in the Gulf states, despite US concerns about a potential security risk in using its technology.

NATURAL PARTNERS

Saudi Arabia and its Gulf allies have resisted US pressure to cut deals with China and break with OPEC+ oil-producer Russia over its invasion of Ukraine while trying to transform a polarized world order over national economies – and security interests to navigate.

Riyadh is a leading oil supplier to China, and the two countries in a joint statement reiterated the importance of global market stability and energy cooperation, while striving to boost non-oil trade and enhance peaceful nuclear energy cooperation

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

China will also “make full use of the Shanghai Petroleum and National Gas Exchange as a platform for settling oil and gas trades in yuan,” he said.

Beijing has advocated using its yuan currency in commerce instead of the US dollar.

A Saudi source speaking ahead of Xi’s visit told Reuters that a decision to sell small amounts of oil to China in yuan might make sense to pay for Chinese imports directly, but “it’s not the right time yet.”

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

Earlier, the Chinese leader said his visit heralded a new era in ties and expressed hope that the Arab summits would become “landmark events in the history of Sino-Arab relations.”

Additional reporting by Eduardo Baptista in Beijing, Riham Alkousaa, Ahmad Ghaddar and Lina Najm in Dubai Writing by Ghaida Ghantous and Dominic Evans Editing by Mark Heinrich, William Maclean and Mark Potter

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