Saudi Arabia and China’s Baosteel to establish steel complex

Saudi Arabia announced on Monday a steel manufacturing agreement with a Chinese company. The deal constitutes the latest example of growing cooperation between Saudi Arabia and China.

Saudi Arabia’s state-owned oil company, Aramco, and its sovereign wealth fund, the Public Investment Fund, signed a shareholders’ agreement with Baosteel to establish a steel plate manufacturing complex in eastern Saudi Arabia. The joint venture, which is subject to regulatory approval, will be located in the Ras al-Khair Industrial City. They plan to produce 1.5 million tons of steel per year via natural gas power, Aramco said in a press release.

Why it matters: Saudi Arabia and China are rapidly strengthening their relations. In March, China brokered the relations resumption agreement between Saudi Arabia and Iran. Later the same month, Saudi Arabia’s Cabinet approved the decision to join the China-led Shanghai Cooperation Organization alongside Russia and Iran.

The friendship between the two countries involves energy as well. Saudi Arabia was China’s second-largest oil producer in January and February of this year. The following are some notable energy developments between Saudi Arabia and China in the past year or so:

  • March 2022 — Aramco finalized its plan to develop a refinery and petrochemical complex in northeast China.
  • August 2022 — Aramco and Sinopec signed a memorandum of understanding on developing hydrogen energy and carbon capture.
  • December 2022 — The Saudi energy firm ACWA Power signed strategic agreements with several Chinese firms during Chinese President Xi Jinping’s visit to Saudi Arabia.
  • March 2023 — Aramco acquired a 10% stake in the Chinese oil refining firm Rongsheng Petrochemical Co. This promoted speculation Aramco could list in Hong Kong, Al-Monitor reported last month.

Saudi Arabia’s cozying up to China could be worrisome for the United States. The kingdom has traditionally aligned itself with the United States, but it is now seeking better relations with not only China but Russia and Iran as well.

Know more: Saudi Arabia and other Gulf states are also considering pricing oil sales to China in yuan instead of the US dollar. This will not necessarily end the global dominance of the US dollar, however, Sabena Siddiqui wrote for Al-Monitor in April.

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