An article on the US-Saudi deal, PIF signs agreements with 6 Chinese institutions, Chinese analysis on BRICS+ and the Beijing Declaration

The Limits of a U.S.-Saudi Security Deal - F. Greg Gause, Foreign Affairs. I rank Gause in the top echelon of scholars working on Gulf IR; if you haven’t read his work, International Relations of the Persian Gulf and Oil Monarchies are both highly recommended, but a good general rule of thumb is when he writes something, read it. This short-ish piece for Foreign Affairs (paywalled) looks at the anticipated US-Saudi deal - his take is the Saudis want a security deal with the freedom to continue working with Russia and China on non-security related issues, while the US wants a holistic partnership. This is a dynamic we see a lot of in the Gulf, where leaders frequently say they can separate security and economic relationships, a position that is at odds with the early great power competition era. From Gause’s article:

At a time when many countries are hedging their bets amid the emerging great-power competition among China, Russia, and the United States, why would the Saudis double down on their historic reliance on Washington? In short, they want what neither China nor Russia can provide: security. The Saudis have grave doubts about the U.S. commitment to their country and their region, and they want to nail that down as best they can through a treaty that would not change from administration to administration. The problem for Riyadh is that when the United States makes a security commitment to a country, most Americans expect that country to back Washington on the whole range of international issues—economic and political, as well as military. That is where the Saudis might disappoint. They do not want to hedge on security. They want to be part of the American team. But they also want to maintain some flexibility on the economic and political fronts given the crucial importance of China as an energy customer and Russia as an energy producer.

Oil is driving both bilaterals, according to Gause’s article:

Saudi Arabia sees China and Russia as central to its future for one overarching reason: oil. These days, the driving force behind Saudi foreign and domestic policy is MBS’s economic development blueprint, known as Vision 2030, which emphasizes changing the Saudi economy and reducing its dependence on oil over the long term. Accomplishing the goals set out in Vision 2030, however, requires huge amounts of capital in the short term, which essentially requires maintaining relatively high oil prices now and sustaining Saudi Arabia’s share of sales in the global oil market. Russia is key to the Saudi strategy on prices; it is the world’s second-largest exporter of oil, and Moscow’s cooperation is essential to production agreements aimed at sustaining the price of oil. China, as the world’s leading importer of oil, is essential to the Saudis maintaining their market share—a position that has grown more vulnerable now that Russia is seeking a greater share of the Chinese market, having been shunned by its historic European customers. For this reason, Riyadh will be loath to hew to Washington’s political and economic policy toward the United States’ global rivals.

I strongly encourage you to read the whole article.

Building on that, the China-Saudi economic relationship got a boost last week with the announcement of partnerships between the Kingdom’s Public Investment Fund (PIF) and 6 Chinese financial institutions: Agricultural Bank of China, Bank of China, China Construction Bank, China Export and Credit Insurance Corporation, Export-Import Bank of China, and Industrial and Commercial Bank of China. These could be worth up to $50 billion. From South China Morning Post:

Not many details were revealed in the agreement. The partnerships seek to promote two-way capital flows between the countries through both debt and equity, and come as part of PIF’s strategy to “foster institutional partnerships globally”, the statement said. It was not immediately clear where the amount of money would be used.

Yasir Al Rumayyan, governor of PIF and chairman of Saudi Aramco, led a delegation to China in July, and this was one of the outcomes. In addition to the oil trade Gause wrote about, the visit included deals for manufacturing and renewables, highlighting the growing diversification of the China-Saudi economic relationship. The *potential* $50 billion has popped up in lots of headlines, but like I wrote in this piece from June, it’s always helpful to add some context to the numbers. PIF manages $925 billion worth of assets, and while working with China is important to its diversification agenda, whatever it does with Beijing is not coming from a position of vulnerability. Gulf SWFs want to work with China but they don’t need to.

And it’s also useful to keep in mind that FDI into Saudi is a major consideration for leaders in the Kingdom; Saudi Vision 2030, which drives everything there, needs foreign investment and expertise to be realized, and in this, China’s role so far has been less than you’d expect. According to a recent article in Bloomberg:

To be sure, the US remains by far Saudi Arabia’s most important economic and strategic partner. The stock of foreign direct investment from the US into the kingdom was almost three times greater than China’s at the end of 2022, according to the latest data available. Even Bahrain, whose $45 billion economy hardly compares to China’s $18 trillion, can claim to be a far bigger investor in Saudi Arabia.

Balancing an inflated membership - Tang Zhichao in China Daily. Tang is the director of the Middle East Development and Governance Research Center at Chinese Academy of Social Sciences, and in this piece he looks at the BRICS expansion into MENA, with Egypt, Saudi, UAE, and Iran joining. His explanation for MENA countries wanting to join:

The moves reflect a heightened emphasis on strategic autonomy and national security amid accelerated global and regional multipolarity and intensified great power competition. As Middle Eastern countries increasingly seek economic reform, political independence and diplomatic diversification in regional and global affairs, joining the BRICS is a step in keeping with their interests and strategic needs.

And how MENA representation supports BRICS mission:

In the future, BRICS needs to position itself with three major identities: a pioneer in global development, a leader of the Global South, and a major platform for global governance. The inclusion of the Middle Eastern countries will help further elevate the status of BRICS countries in global politics, economics, energy and finance. This will enhance BRICS' global representation in the Global South, promote global strategic balance, advance diversification in the international landscape, improve the global governance system, enable BRICS to play a greater role in West Asia, Africa, and the Islamic world, and address regional hotspot issues and challenges.

Chinese mediation efforts in Middle East earn credibility, trust - Global Times. Written by Zhou Yiqi, from Shanghai Institute of International Studies. He’s pushing back against the idea that last week’s Beijing Declaration from the Palestinians is less consequential than the headlines would have us believe.

The Beijing Declaration, announced at a crucial time, has the power to reignite hope and confidence within the international community for a two-state solution. This declaration comes as previous deals have failed to address the pressing issue of marginalization toward this solution, which is now facing its greatest crisis yet. The unbalanced power dynamic between Palestine and Israel hinders any real progress toward revitalizing the two-state solution. Restoring unity among the various rival factions within Palestine could help rebalance their leverage in negotiations with Israel and inject new life into the long-stalled peace process for Palestine.

I think Zhou is over-weighing the commitment for unity from the competing Palestinian factions that attended the talks in Beijing, but his piece is useful as an example of the narratives in China about what was accomplished.