Riyadh and Beijing agree on a steel complex on Saudi land

Saudi Aramco and the Chinese giant Baosteel will head the project. The aim is to expand exports to other Gulf nations and the Middle East. In March, Aramco acquired a 10% stake in a Chinese oil refining company. In the background is the sale of oil in yuan instead of the dollar.

Beijing (AsiaNews) - Economic and diplomatic relations between Beijing and Riyadh are going through a phase of unprecedented development in the history between the two countries, and the birth of a steel complex is just the latest step in a chain of agreements of strategic importance.

The Saudis announced the recent signing of an agreement with a Chinese company for steel production, in a climate of growing cooperation. Already in the past year, in fact, contracts and participations of important companies in the sector had emerged, including the oil giant Aramco and the entry of the Wahhabi kingdom into the Sco.

The Saudi state-owned oil company Aramco and the sovereign wealth fund Public Investment Fund signed a shareholder agreement with Baosteel, one of the world's most important companies in the sector, for the construction of a steel plate production complex.

The state-of-the-art centre will be built in the eastern part of the Wahhabi kingdom, while the joint venture, subject to regulatory approval, will be located in the industrial city of Ras al-Khair. In a note, Aramco emphasises that '1.5 million tonnes of steel per year will be produced there using natural gas energy'.

According to initial information, Baosteel will have a 50 per cent stake in the joint venture, while Aramco and Pif will split a 25 per cent share. Saudi Arabia will be the project's target market, with future plans to export to other Gulf nations or, in a broader perspective, to the entire Middle East and North Africa region.

Analysts and experts emphasise the value of the project, which follows a long-trodden path of strengthening economic and diplomatic ties. An example of this is the Chinese mediation in March in the resumption of relations between the Saudis and Tehran. And close on the heels of this, the Saudi government's approval of membership of the Shanghai Cooperation Organisation, led by China together with Russia and Iran.

The strengthened axis between the two countries also and above all concerns the energy sector, which Beijing badly needs to support industrial production. From this point of view, it is of primary interest to cultivate friendly and cooperative relations with the Wahhabi kingdom, which in January and February confirmed that it is the world's second largest supplier of crude oil to China.

However, the agreements of the last period are the result of a path that has been consolidated over time: in March 2022, Aramco finalised plans to develop a refinery and petrochemical complex in north-east China; a few months later, in August, Aramco and Sinopec signed a memorandum of understanding on the development of hydrogen and carbon energy; in December, the Saudi energy company Acwa Power signed strategic agreements with several Chinese companies during Chinese President Xi Jinping's visit to Riyadh; in March 2023, Aramco acquired a 10% stake in the Chinese oil refining company Rongsheng Petrochemical Co. , reportedly opening the doors of Hong Kong to the Saudi giant. 

Also in the background is the issue of selling Saudi (and Gulf) oil in Yuan instead of the dollar. This is a further food for thought for the United States, whose influence in the Middle East region seems to be on the wane in the face of an ever-increasing presence of China, while Riyadh also aims to strengthen ties with Russia and Iran.

• China
• Saudi Arabia
• economy
• Sco
• Aramco
• oil
• steel
• diplomacy