China and the World

NEOM calling

Huawei inks massive deal in Saudi Arabia

Mohammed-bin-Salman-w

MBS: partnering with China

“The Muslim husband is allowed up to four wives as long as he treats them all with fairness.” Such was the analogy from Saudi Arabia’s Prince Saud bin Faisal Al-Saud in explaining his country’s decision to deepen its relationship with China in 2004.

In doing so, the then foreign minister was granting the United States the role of first wife rather than the more exclusive status it had been given by his country’s founder, Ibn Saud, who forged a marriage of convenience with US President Franklin D Roosevelt in 1945. The two agreed that the Americans would support the House of Saud in return for access to oil. But over the last two decades the relationship started to loosen as the Americans diversified their energy mix, including a huge investment in their own shale gas deposits. By then a new suitor for Saudi crude was on the scene too. For the last 20 years, China has been the largest importer of Saudi oil.

As we reported in WiC557, the trade relationship between the two has jumped from $4 billion in 2001 to $60 billion last year. China is also going to be the biggest investor in Saudi Arabia’s Vision 2030 programme, which hopes to diversify the economy in preparation for the post-oil era. The Chinese have been particularly prominent in Crown Prince Mohammad Bin Sultan’s ambitious $500 billion plan to build a futuristic megacity, called NEOM, in the Tabuk region near the Red Sea. Indeed this month Huawei announced plans for the world’s largest off-grid energy storage scheme in the city too. The projected 1,300 MWh battery energy storage system (known by the acronym BESS) is the largest order yet for Huawei’s energy storage division.

Huawei has been diversifying into new areas since US sanctions hammered its sales of smartphones (it now ranks ninth globally, down from second in 2018). This month it set up a task force to focus on four new areas: digitalised mining and energy storage; intelligent photovoltaic solutions; smarter cars and highways; and submarine cables and ports management.

The Chinese press is suitably impressed, describing the move into energy storage as visionary. “Huawei has quietly become a giant,” National Business Daily applauded, with China Everbright Securities predicting that China’s BESS sector sales will grow to Rmb450 billion ($70.5 billion) by 2025 and Rmb1.3 trillion by 2030.

Huawei has been hunting hard for other opportunities in Saudi Arabia. Last July it forged an agreement with Saudi operator STC Group to install 5G network infrastructure, including the establishment of an innovation centre at NEOM. In another major partnership, Baosteel announced a deal in September with oil giant Saudi Aramco to set up a steel mill to service the oil and gas sectors.

With more Chinese investment expected, the kingdom’s current foreign minister Prince Faisal bin Farhan Al-Saud praised the relationship with Beijing this month in a phone call with his counterpart Wang Yi. There was also a mention of his gratitude to the Chinese for “opposing external influence in Saudi Arabia’s internal affairs”. That seemed pointed: during presidential campaigning Joe Biden vowed to make Saudi Arabia a pariah because of the murder of Saudi dissident and Washington Post columnist Jamal Khashoggi. In February his administration also declassified an intelligence briefing that concluded that the Saudi Crown Prince [known by his initials MBS] had approved the killing.

In his book Inside the Kingdom historian Robert Lacey describes China and Saudi Arabia as kindred spirits: two proudly non-Western cultures; both on the rise and trying to modernise; both authoritarian and secretive; and both forced to “endure patronising lectures on that account from the all-knowing West”. Perhaps the growing closeness between the two is starting to sting at the White House, however. In late September National Security Advisor Jake Sullivan flew to Riyadh for high-level talks. The Middle Eastern news channel Al Jazeera concluded that after nine months in office, the Biden administration was looking more inclined to “maintain the long-standing partnership” with Saudi Arabia, despite recent conntroversies between the two governments.


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