First published: The Globalist, 20/05/2008
The emerging relationship between China and Africa has received much global attention recently. But what about relations between China and the Middle East, especially Iran and Saudi Arabia? As UBS’s George Magnus explains, there is already much more cooperation, particularly in the energy and infrastructure sectors, than most people are aware of.
China’s Relations With Saudi Arabia and Iran
To size up the relationship between China and the Middle East, first a few numbers: The volume of trade between China and oil exporting countries in 1991 was a mere $1.5 billion.
Rapidly growing trade
Since then, it has grown to about $17 billion in 2002 – and to about $37 billion in 2005. It is possible that trade volume will more than double to about $100 billion by 2010. China has also signed long-term trade agreements with Iran, valued at $100 billion, focusing on the importation of 10 million tons of liquefied natural gas over a 25-year period in exchange for a Chinese stake of 50% in the development of the Yadavaran oil field in Iran.
Twenty years ago, trade between China and the Cooperation Council for the Arab States of the Gulf (GCC) – plus Iran – was restricted to mainly arms and textiles in exchange for energy. Today, China also exports automobiles, electronic goods, industrial machinery, cement and processed foods. Meanwhile, the investment projects funded by petrodollars both in Asia and the Gulf region are unprecedented. China imports about 3.6 million barrels of oil per day – roughly half its consumption. But by 2025, imports are expected to reach about 11 million barrels per day, which is closer to 80% of expected consumption.
Planning for the future
Half of China’s oil imports today come by sea — through the rather insecure Straits of Malacca. Today, …more