was a great year for the Arab Gulf States, as high oil and LNG prices increased
government revenues, generated large budget surpluses and contributed to some
of the highest economic growth rates in the world. Political activities were on
steroids: several world leaders, including President Biden and several European
and Asian leaders, visited the region, while some of the most prestigious
summits and conferences have or will be held there, including COP 27, which was
held in Egypt and COP 28, which will be held in the United Arab Emirates (UAE).
On Dec. 7,
Chinese President Xi Jinping arrived in Saudi Arabia, where he met with top
officials and attended the first China-GCC summit and the first Arab-Chinese
summit in the kingdom. Xi spoke of cooperation between his country and
GCC states, saying China will maintain its oil imports from Gulf producers and
will also expand imports of LNG, while bolstering cooperation in various energy
projects. One thing is clear: Xi's visit was not about oil. In
addition, the Saudis do not want their oil policy to be part of the discussion.
Saudi Arabia’s largest
trading partner, and when
it comes to oil specifically, the kingdom is officially China’s top supplier of
crude oil. (However, counting the Russian oil laundering, Russia could be the
largest supplier.) In 2022, Saudi Arabia exported an average of around 1.6 MMbpd
of crude to China, similar to the rate of exports in 2021. Meanwhile, in a sign
of growing Saudi-Chinese energy cooperation, Saudi Aramco and China's Shandong
Energy Group, signed
an MoU on Dec. 9 that
includes a potential crude oil supply agreement and chemical products offtake
For the Arab
countries, especially in the Gulf, distancing China from Iran is a big win.
Iranian leaders were furious at what was perceived as a betrayal by the Chinese
leadership; the joint
statement between the Gulf Cooperation Council and the Chinese made a reference to
three small islands in the Persian Gulf that Iran annexed from the United Arab
Emirates in 1971. Regardless, Chinese relations with the Iranian regime are
strategic, and such a statement will not affect Iranian-Chinese relations.
China will continue to import cheap Iranian crude, while it continues with its
long-term infrastructure plan in the region.
leader called on countries in the Gulf region to use the Chinese yuan for oil
and gas sales. He said China “will make full use of the Shanghai Petroleum and
National Gas Exchange as a platform to carry out yuan settlement of oil and gas
trade.” Although this may sound like a good idea, it is not practical.
Non-dollar oil pricing and revenues demystified. Oil will continue to be priced in U.S.
dollars for several reasons, including:
EDITORIAL@WORLDOIL.COM / DR. ANAS ALHAJJI is
an independent energy economist and the former chief
economist at NGP Energy Capital Management. He is a well-known
researcher, author, speaker, and award-winning academician and