China Xi calls for oil trade in yuan at Gulf summit in Riyadh

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

Mr Xi was speaking in Saudi Arabia where Crown Prince Mohammed bin Salman hosted two “milestone” Arab summits with the Chinese leader which showcased the powerful prince’s regional heft as he courts partnerships beyond close historic ties with the West.

Top oil exporter Saudi Arabia and economic giant China both sent strong messages during Mr Xi’s visit on “non-interference” 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 its oil trade would be a seismic political move, which 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 unnerved the United States. Deepening economic ties were touted during Mr Xi’s visit, where he was greeted with pomp and ceremony and on Friday met with Gulf states and attended a wider summit with leaders of Arab League countries spanning the Gulf, Levant and Africa.

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

Though Saudi Arabia and China signed several strategic and economic partnership deals, analysts said relations would remain anchored mostly by energy interests, though Chinese firms have made forays into technology and infrastructure sectors.

“Energy concerns will remain front and centre of relations,” Mr Robert Mogielnicki, senior 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 to move forward with trade and investment deals. There will be more cooperation on the tech side of things too, prompting familiar concerns from Washington.”

Saudi Arabia agreed an MOU with Huawei this week on cloud computing and building high-tech complexes in Saudi cities. The Chinese tech giant has participated in building 5G networks in Gulf states despite US concerns over a possible security risk in using its technology.

Natural partners

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

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