Yuan-based trade for Saudi, Dubai investment in China, Iranian disappointment with Chinese energy trade, China-Egypt naval drills, media training for Arabs in China, Chinese solar in MENA, and more...
Growing Saudi-China ties make case for yuan-based trade but challenges remain, S&P says - The National. I don’t have access to the original report from S&P but it inspired another round of ‘end-of-the-petrodollar’ headlines, which is an extreme leap to take. There are already currency swap agreements in Saudi, the UAE and Qatar, and these are used mostly to pay for contracting, which Chinese firms do a lot of in the region. That Gulf countries, whose currencies are pegged to the US dollar and who have massive dollar holdings, would switch to energy trade in the renminbi, is unrealistic in any near-term scenario. From this article from The National (Abu Dhabi) it seems the S&P report is measured, so a grain of salt when you see the stories from other outlets claiming the Saudis are getting ready for a petroyuan.
Yuan-based oil trade between Riyadh and Beijing faces “significant challenges” and may take decades to grow to a “meaningful scale”, but the deepening bilateral ties and aligning long-term interests may boost this process, the ratings agency said in a report on Wednesday.
“Aside from the booming oil trade that continues to anchor their core relationship, long-term plans such as Saudi Arabia's Vision 2030 are driving new institutional, financial and cultural linkages between the two countries,” said Charles Chang, Greater China country lead for corporates at S&P.
“These new linkages will provide the Saudis more outlets for the renminbi's use, such as paying for Chinese engineering and construction services in the kingdom or investing in Chinese firms across a widening range of sectors."
The potential for more renminbi-based oil trade hinges on exporters' willingness to accept the Chinese currency for payment and that depends on their ability to use the resulting proceeds, the report said.
However, since the yuan is not widely used in international trade and finance, there are relatively fewer spending opportunities, the agency added.
This piece from Arab News (Saudi Arabia) gives a realistic look at the considerations:
The shift toward yuan-based oil trade may depend on non-economic factors, such as strategic and geopolitical considerations. The diversification of global trade relationships, particularly among emerging economies, has prompted some countries to explore alternatives to the US dollar.
During the BRICS summit in August 2023, member states expressed intentions to increase local-currency transactions, with some Gulf states, including Saudi Arabia, exploring non-dollar trade options to enhance economic diplomacy.
While challenges remain, incremental progress in yuan-based trade could occur, particularly in sectors other than crude oil, such as natural gas and other traded goods. The geopolitical landscape and strategic interests may gradually facilitate the yuan’s role, although it remains uncertain how quickly or extensively this will happen.
For Saudi Arabia, the prospect of renminbi-based oil trade is closely linked with its broader economic transformation under Vision 2030. The Kingdom's ambitious plans, including diversifying its economy and establishing new international partnerships, could offer more outlets for spending yuan, such as investing in infrastructure projects like the $500 billion NEOM giga-city and collaborating with Chinese firms in sectors like renewable energy and manufacturing.
Saudi Arabia’s engagement with China could extend beyond oil trade, with significant investments in Chinese firms and projects offering additional avenues for utilizing yuan proceeds. While the potential for yuan-based oil trade exists, it is constrained by considerable economic and financial challenges.
The future of such trade will likely hinge on the evolution of broader strategic ties between the two nations, the development of new financial and institutional linkages, and the management of associated risks. As these factors unfold, the renminbi may gradually gain a more prominent role in Saudi-China trade, though it is expected to be a slow and uncertain process, according to the ratings agency.
Dubai firms invest $1.4bn in China between 2015-2023: top official - Arab News.
Dubai-based Emirati companies invested $1.4 billion in China between 2015 and 2023, reflecting a strengthening trade and economic relationship, according to a senior official. ..
Lootah also revealed that Chinese foreign direct investments in Dubai have reached $5.4 billion over the past eight years. However, a detailed year-by-year breakdown was not provided.
The number of Chinese companies registered with the Dubai Chamber of Commerce has risen to 5,400 by the end of the second quarter of this year.
“While Chinese companies have traditionally focused on sectors like trade, logistics, and business consulting in Dubai, there is now a noticeable increase in their interest in emerging sectors such as artificial intelligence, and green technologies. These future-oriented sectors are expected to witness significant growth in Dubai,” said Lootah.
Government expert admits Iran gains little from oil deals with China - Iran International. In January Iran began withholding oil shipments to China complaining that the discount was too large; there’s clearly been frustration in Iran with the oil-for-goods barter as well as the lack of expected trade and investment from China. It is, like I wrote last week, a fraught bilateral relationship with a lot of tension beneath the surface. This article shares insights from an interview with an Iranian researcher and gives a good overview of some of the concerns from Iran’s side.
"Today, we are selling oil under deplorable conditions—at low prices with steep discounts—and in return, we are importing substandard Chinese goods at best," Morteza Behrouzifar from the Institute of International Energy Studies remarked in a candid discussion with a local website about the ongoing challenges facing Iran’s oil industry.
In an interview with ILNA, Behrouzifar further highlighted that Iran's current situation leaves it heavily reliant on China, which poses significant risks to the nation's economic sovereignty. This starkly contrasts with official claims that Iran sells crude oil to 17 nations, including some in Europe.
The expert also criticized the broader strategic missteps within the oil sector, describing them as rooted in "showmanship" rather than substantive achievements.
Over the past three years, he said there have been claims of massive foreign economic contracts—exceeding $100 billion—but these were often mere memorandums of understanding presented as binding agreements.
He argued that this has led to the depletion of national resources, including the National Development Fund (NDF), without any significant return on investment. "We did not achieve any results proportionate to the money invested," he noted, underscoring the inefficacy of these deals.
NDF, Iran's national wealth fund, is intended to reserve around 30% of oil profits for future generations. However, due to international sanctions and an inefficient economy that have perpetually strained the government's budget, the majority of the over $100 billion in savings has already been depleted.
China, Egypt hold joint naval exercise in Mediterranean Sea - Global Times. More China-Egypt news:
After completing a five-day friendly visit to Egypt, the Type 052D guided missile destroyer Jiaozuo and the Type 903A comprehensive replenishment ship Honghu of the PLA Navy's 46th escort task group embarked from the Egyptian port city Alexandria on Monday local time and held a joint maritime exercise in the Mediterranean Sea with the Egyptian side, the PLA Navy said in a press release on Wednesday.
The joint exercise took place in waters to the north of Alexandria, as the Jiaozuo and the Honghu joined forces with the Egyptian Navy's FREMM multipurpose frigate Al-Galala and carried out training courses including communications coordination, formation maneuvering and maritime replenishment positioning, the PLA Navy said.
During the drill, the two navies' ships took turn to command in close coordination, and successfully completed all scheduled trainings before holding a flotilla separation ceremony, according to the PLA Navy.
Media training for young Arab professionals launches in Beijing - Jordan Times. This is an interesting development, and I have more coming in a translated article that I’ll likely post tomorrow. This article has this media training program as an outcome of the China-Arab States Cooperation Forum.
A comprehensive media training programme for young Arab media professionals has started in Beijing, running from August 15th to 28th. Organised by the Chinese Ministry of Commerce and hosted by China Broadcasting International Economic and Technical Cooperation Co., Ltd. (CBIC), the two-week programme has brought together 32 journalists from Jordan, Bahrain, Iraq, and Palestine.
This initiative underscores China’s ongoing efforts to enhance media cooperation with Arab nations, promoting mutual understanding, knowledge exchange, and collaboration in journalism.
China’s solar manufacturers eye Middle East as haven from US, EU trade barriers - South China Morning Post.
Manufacturers in China's solar sector, which controls more than 80 per cent of the global supply chain, have been struggling to survive amid increased US tariffs on Chinese solar exports and the EU's investigation of alleged "distortive" state subsidies. Meanwhile, the overcapacity and competition at home have forced companies to launch price wars at the expense of low profit margins in order to stay in the game.
"The Middle East offers an alternative market where trade barriers and tariffs imposed by the US and EU are not as prevalent," said Nishant Kumar, analyst at Rystad Energy.
Algeria inducts Chinese-made YJ-12B anti-ship cruise missiles - Military Africa.
The YJ-12B is an improved version of the Chinese supersonic anti-ship missile, the YJ-12. Designed to engage surface ships at great distances, this missile enhances maritime strike capabilities. Capable of reaching speeds between Mach 2 and Mach 3, the YJ-12B is particularly difficult to intercept for conventional air defenses. With an effective range of about 500 kilometers, it allows for long-range attacks. The YJ-12B can be deployed from various platforms, including aircraft, ships, and mobile coastal launch systems.
The YJ-12 is a recent addition to Algeria’s portfolio of anti-ship cruise missiles (ASCM), and was acquired to replace the aging Soviet-built SSC-3 Styx P-15 anti-ship missile.
The YJ-12B ASCM will complement another deadly Chinese-made cruise missile in Algerian service, the mach 3 capable CX-1 ASCM acquired in 2018 after more than a decade of negotiations.
Algeria had intended to procure the Russian Bastion missile system which is based on the Yakhont missile, however, due to the high cost of the Bastion system, the service may have instead opted for the cheaper Chinese products.
The YJ-12 is considered the “most lethal anti-ship missile China has manufactured thus far,” according to a 2014 Pentagon report, with a range of 400 kilometers, mach 3 speeds, and can undertake evasive maneuvers before striking its target.
Experts sure of upcoming FOCAC summit's success - China Daily. This is just a puff piece, but it’s here as a reminder that the Forum on China-Africa Cooperation (FOCAC) is coming up, held in Beijing from September 4-6, and several North African countries will be participating. There will be relevance for MENA, so I’ll be tracking it pretty closely.
Relatively keen reader of this blog - will you be in or around FOCAC? Would be nice to say hello if so.