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Xi meets Saudi leaders; $30 billion deals signed

RIYADH: Chinese President Xi Jinping and Saudi Arabia’s powerful crown prince met on Thursday on an Arab outreach visit that has earned a rebuke from Washington, reaching deals in areas including energy and infrastructure. Agreements worth about $30 billion were being signed on Thursday, Saudi state media said, as China seeks to shore up its COVID-hit economy and as the Saudis, long-term US allies, push to diversify their economic and political alliances.

Xi and Crown Prince Mohammed Bin Salman, the 37-year-old de facto ruler of the world’s biggest oil exporter, met at Yamamah Palace in Riyadh, flanked by high-ranking officials wearing face masks, footage aired on state television showed. They oversaw the signing of energy agreements on hydrogen as well as a plan to “harmonize” Saudi Arabia’s ambitious economic reform agenda, Vision 2030, with China’s trillion-dollar Belt and Road Initiative, the official Saudi Press Agency said.

The signed deals also covered a petrochemicals project, housing development and the teaching of the Chinese language, SPA said, though it did not detail their substance or monetary value. Earlier, state television showed Xi being greeted with a handshake by Prince Mohammed before the two men stood side-by-side as a brass band played the two countries’ national anthems. They then chatted while walking into the palace, which is the king’s official residence and seat of the royal court. Xi also met with Prince Mohammed’s father, 86-year-old King Salman, state media reported.

Upon his arrival on Wednesday, Xi said bilateral ties with Saudi Arabia had grown “by leaps and bounds” since the two countries established a comprehensive strategic partnership in 2016. This “has not only enriched both countries’ peoples but promoted regional peace, security, prosperity and development,” Xi said, according to Chinese state media.

The crown prince sees China as a critical partner in his sweeping Vision 2030 agenda, seeking the involvement of Chinese firms in ambitious mega-projects meant to diversify the economy away from fossil fuels. Saudi investment minister Khalid Al-Falih said this week’s visit “will contribute to raising the pace of economic and investment cooperation between the two countries”, offering Chinese companies and investors “rewarding returns”, according to SPA. Earlier on Thursday, Saudi state media announced 34 investment agreements in sectors including green hydrogen, information technology, transport and construction. State broadcaster Al-Ekhbariya said another 20 agreements worth 110 billion riyals ($29.3 billion) were due to be signed.

Arab outreach

Arab leaders began Thursday to converge on the Saudi capital ahead of summit meetings with Xi, the leader of the world’s number-two economy, who will hold separate talks with the six-member Gulf Cooperation Council before leaving on Friday. China, the top consumer of Saudi oil, has been strengthening ties with a region that has long relied on the United States for military protection but which has voiced concerns the American presence could be downgraded.

Egyptian President Abdel Fattah El-Sisi, Palestinian president Mahmud Abbas and Sudan’s de facto leader Abdel Fattah Al-Burhan had all arrived by Thursday afternoon, according to the Saudi foreign ministry. Tunisian President Kais Saied, Iraqi Prime Minister Mohammed Shia Al-Sudani, Moroccan Prime Minister Aziz Akhannouch and Lebanese caretaker Prime Minister Najib Mikati have also confirmed their attendance.

China’s foreign ministry this week described Xi’s trip as the “largest-scale diplomatic activity between China and the Arab world” since the People’s Republic of China was founded. It has not escaped the attention of the White House, which warned of “the influence that China is trying to grow around the world”, calling its objectives “not conducive to preserving the international rules based order”.

Budget surplus

In another development, Saudi Arabia said it recorded its first annual budget surplus in nearly a decade, beating its own projections in a year of elevated oil prices. The surplus for 2022 amounted to 102 billion Saudi riyals ($27 billion), representing 2.6 percent of GDP, according to preliminary estimates, the finance ministry said. That compared to a surplus of 90 billion Saudi riyals that had been projected for 2022 at the end of last year.

The world’s biggest crude exporter also preliminarily recorded GDP growth of 8.5 percent for the year, the finance ministry said, higher than the 7.6 percent predicted by the International Monetary Fund. The budget approved for 2023 foresees a surplus of 16 billion Saudi riyals ($4 billion) and GDP growth of 3.1 percent, the ministry said.

The strong data comes as much of the world grapples with widespread energy shocks and deepening worries about recession. The Gulf kingdom has benefited from oil price hikes triggered by Russia’s invasion of Ukraine in February. Yet in a briefing with journalists in Riyadh on Wednesday, Saudi Finance Minister Mohammed Al-Jadaan pushed back on the notion that the surplus resulted from the war.

Instead, he said it reflected investments the kingdom had made in its oil and gas sector as well as growth in non-oil sectors, as officials push the Vision 2030 agenda of economic diversification. “We invested a lot of money when people did not,” he said. “We are not celebrating the surplus. For us it’s not really big news. It’s something that we expected. We’ve been working… to curtail our spending, to increase our non-oil revenues.”

Future ‘risk’

“Much of the fiscal situation and growth story is of course directly related to high energy prices, and indirectly related to the factors and geopolitical events moving prices,” said Robert Mogielnicki of the Arab Gulf States Institute in Washington. “Yet Saudi Arabia does deserve credit for its fiscal consolidation and economic reforms, which have also helped the overall economic picture.” Yet Justin Alexander, director of the consultancy Khalij Economics, said that while the surplus was “welcome”, it could have been higher given that original projections appeared to be based on oil prices of around $70 per barrel while the average over the year will ultimately be around $100 per barrel.

Economic experts say Saudi Arabia needs a crude price of about $80 a barrel to balance its budget. The numbers are “close to the originally budgeted level,” said Alexander, who is also an analyst at the consultancy GlobalSource Partners. “Therefore almost all the windfall revenue from higher oil prices has been spent and the ministry’s projections suggest that these levels of spending will continue in the coming years, creating a risk if oil prices disappoint.”

Oil prices have fallen considerably in recent weeks despite a decision made in October by the OPEC+ oil cartel, which Riyadh leads jointly with Moscow, to cut production by two million barrels per day. This year’s surplus is the first since the 2014 collapse of oil prices from more than $100 a barrel, which prompted Riyadh to borrow heavily and draw from its financial reserves to plug budgetary shortfalls. It also imposed austerity measures like cutting fuel and power subsidies and levying a value added tax. – AFP

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