China’s Xi Jinping 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.

Xi was speaking in Saudi Arabia where Crown Prince Mohammad 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 Xi’s visit on “non-interference”.

At the start of Friday’s talks, Crown Prince Mohammad heralded a “historic new phase of relations with China”.

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,” 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...”

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.

Natural Partners

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

China would also “make full use of the Shanghai Petroleum and National Gas Exchange as a platform to carry out yuan settlement of oil and gas trade,” he said.

Beijing has been lobbying for use of its yuan currency in trade instead of the US dollar.

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

Earlier, the Chinese leader said his visit heralded a new era in relations, voicing hope he Arab summits would become “milestone events in the history of China-Arab relations”.