SAUDI ARABIA Riyadh and Beijing agree to build a steel complex in Saudi Arabia

The project will be executed by Saudi Aramco and the Chinese giant Baosteel. The goal is to expand exports to other countries in the Gulf and the Middle East. In March, Aramco acquired a 10% stake in a Chinese oil refining company. As a backdrop, the sale of oil in yuan instead of dollars.

Beijing () – Economic and diplomatic relations between Beijing and Riyadh are at an unprecedented stage of development in the history of the two countries and the construction of a steel complex is just the latest step in a chain of agreements of strategic importance . In a climate of growing collaboration, the Saudis have announced the recent signing of an agreement with a Chinese company for the production of steel. Already in the last year, in fact, contracts and participations of important companies in the sector had emerged, including the oil giant Aramco, and the entry of the Wahhabi kingdom to the SCO.

The Saudi state oil company Aramco and the sovereign wealth fund Public Investment Fund have signed a shareholder agreement with Baosteel, one of the world’s leading companies in the sector, for the construction of a steel plate production complex. The state-of-the-art center will be located in the eastern part of the Wahhabi kingdom, while the joint venture, subject to regulatory approval, will be in the industrial city of Ras al-Khair. In a note, Aramco notes that it “will produce 1.5 million tons of steel per year with natural gas power.”

According to initial reports, Baosteel will have a 50% stake in the joint venture, while Aramco and Pif will share a 25% stake each. Saudi Arabia will be the target market for the project, with future plans to export to other Gulf countries or, in a broader perspective, the entire Middle East and North Africa region.

Analysts and experts underline the value of the project, which follows an itinerary already established some time ago to strengthen economic and diplomatic ties. An example of this has been, in March, the Chinese mediation in the resumption of relations between the Saudis and Tehran. And shortly after the Saudi government’s decision to join the Shanghai Cooperation Organization, led by China along with Russia and Iran.

The reinforced axis between the two countries also and above all includes the energy sector, which Beijing urgently needs to sustain its industrial production. From this point of view, it is of paramount interest to cultivate relations of friendship and collaboration with the Wahabi kingdom, which in January and February confirmed that it is the second world supplier of crude oil for China.

In reality, the agreements of recent times are the result of a trajectory that has been consolidated over time. In March 2022, Aramco agreed to a project to build a refinery and petrochemical complex in Northeast China; a few months later, in August, Aramco and Sinopec signed a memorandum of understanding for the development of hydrogen and carbon energy; in December, the Saudi energy company Acwa Power signed strategic agreements with several Chinese companies during the visit of Chinese President Xi Jinping to Riyadh; in March 2023 Aramco acquired a 10% stake in the Chinese oil refinery Rongsheng Petrochemical Co., which according to some rumors opened the doors of Hong Kong to the Saudi giant.

Also in the background is the question of selling Saudi (and Gulf) oil in yuan instead of dollars. One more food for thought for the United States, whose influence in the Middle East region seems to recede in the face of a growing presence of China, while Riyadh also intends to strengthen ties with Russia and Iran.