- Saudi Arabia and China have renewed discussions over a refining and petrochemical complex that were shelved in 2020 due to the oil price crash.
- This deal is yet another sign of the strengthening alliance between China and Saudi Arabia, a development that will worry the Biden administration.
- Worryingly for the U.S., the Chinese company that will be involved in this deal with Saudi Arabia is also one of China’s major defense contractors.
Plans for a joint Saudi Arabia-China refining and petrochemical complex to be built in northeast China that were shelved in 2020 are now being discussed again, according to sources close to the deal. The original deal for Saudi Aramco and China’s North Industries Group (Norinco) and Panjin Sincen Group to build the US$10 billion 300,000 barrels per day (bpd) integrated refining and petrochemical facility in Panjin city was signed in February 2019. However, in the aftermath of the enduring low prices and economic damage that hit Saudi Arabia as a result of the Second Oil Price War it instigated in the first half of 2020 against the U.S. shale oil threat, Aramco pulled out of the deal in August of that year.
The fact that this landmark refinery joint venture is back under serious consideration underlines the extremely significant shift in Saudi Arabia’s geopolitical alliances in the past few years – principally away from the U.S. and its allies and towards China and its allies. Up until the 2014-2016 Oil Price War, intended by Saudi Arabia to destroy the then-nascent U.S. shale oil sector, the foundation of U.S.-Saudi relations had been the deal struck on 14 February 1945 between the then-U.S. President Franklin D. Roosevelt and the Saudi King Abdulaziz. In essence, but analyzed in-depth in my new book on the global oil markets, this was that the U.S. would receive all of the oil supplies it needed for as long as Saudi had oil in place, in return for which the U.S. would guarantee the security both of the ruling House of Saud and, by extension, of Saudi Arabia.
