China And Saudi Arabia Intensify Energy Cooperation With Critical Deal, 9 Aug book promo

The signing last week of a multi-pronged memorandum of understanding (MoU) between the Saudi Arabian Oil Company - formerly the Arabian American Oil Company - (Aramco) and the China Petroleum & Chemical Corporation (Sinopec) is a critical step in China's ongoing strategy to secure Saudi Arabia as a client state. ...The scale and scope of the MoU is enormous, covering deep and broad co-operation in refining and petrochemical integration, engineering, procurement and construction, oilfield services, upstream and downstream technologies, carbon capture and hydrogen processes. Crucially for China's long-term plans in Saudi Arabia, it also covers opportunities for the construction of a huge manufacturing hub in King Salman Energy Park that will involve the ongoing, on-the-ground presence on Saudi Arabian soil of significant numbers of Chinese personnel: not just those directly related to the oil, gas, petrochemicals, and other hydrocarbons activities, but also a small army of security personnel to ensure the safety of China's investments.

The Embargo That Must Not be Named

The basis of this enduring relationship between the U.S. and Saudi Arabia, as analysed in depth in my new book on the global oil markets, had been struck back in 1945 at a meeting on 14 February 1945 between the then-U.S. President Franklin D. Roosevelt and the Saudi King at the time, Abdulaziz. The first face-to-face contact between the two, this landmark meeting was held on board the U.S. Navy cruiser Quincy in the Great Bitter Lake segment of the Suez Canal, and the deal that they agreed - which had been the basis for all of the U.S.'s Middle East policy up until very recently - was this: 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 US would guarantee the security both of the ruling House of Saud and, by extension, of Saudi Arabia.

The landmark deal survived the 1973 ["]Oil Crisis["] - in which the Saudi-led OPEC placed an embargo on [OPEC] oil exports to ["]various countries["] that had continued to supply arms to Israel during the Yom Kippur War against it and ["]a coalition of Arab states["] led by Egypt and Syria - although the U.S. had little choice but to do that, given the dearth of its own alternative oil supply options at that time.

post-Permian petro-dollar production boom

China used Russia's [2014-2016 Oil Price War leverage of] Saudi Arabia and OPEC to deploy its own strategy to accrete and exploit power over the Middle East's huge oil and gas reserves, with the key turning point for Beijing being its own rescue act for Saudi Arabia in the middle of 2017. As also analysed in depth in my new book on the global oil markets, it was at that point that the then-newly appointed Crown Prince, Mohammed bin Salman (MbS), was facing a huge problem at a very vulnerable stage in his rise to power. ... It was precisely when MbS was at his weakest that China stepped in and offered to buy the entire 5 percent stake in Aramco for a price that would guarantee the valuation for the whole company of the required US$2 trillion. Crucially as well, this would all be done through a private placement of the entire 5 percent share block in Aramco, which meant that none of the details surrounding the deal would ever get out publicly. As it transpired, several senior Saudis at the time - opponents to MbS's ascension to power but still powerful voices in the Kingdom at that point - opposed the deal on the basis that it would make Saudi Arabia beholden to China. Although the deal did not go ahead, the subsequent trajectory of China-Saudi relations would suggest that MbS has never forgotten Beijing's willingness to bail him out of any trouble in which he might find himself. ...

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