China’s Wen Jiabao to visit Persian Gulf energy powers

Lintao Zhang/Getty Images - China's Premier Wen Jiabao will visit Persian Gulf countries amid unrest across the Middle East. The turmoil has triggered concerns in China about its dependence on the region’s oil.

ABU DHABI, United Arab Emirates — China will this week launch its highest-level diplomatic visit to the Persian Gulf in more than two years, seeking to bolster its growing energy ties to the region amid jitters over possible Western sanctions against Iranian oil and Tehran’s counter-threat to block the Strait of Hormuz.

Premier Wen Jiabao’s six-day trip will take him to Saudi Arabia, Qatar and the United Arab Emirates, while China’s state-owned Sinopec is poised to sign a joint-venture deal to develop a big refinery on the Saudi Red Sea Coast.

Rising tensions between Iran and its Arab oil-producing neighbors have highlighted the delicate path Beijing needs to tread to preserve both as big oil suppliers, while unrest across the Middle East has triggered wider concerns in China about its dependence on the region’s oil.

“Half of China’s oil imports are sourced from the Middle East, so the region’s instability is a major concern,” said Ben Simpfendorfer, founder of Silk Road Associates, a Hong Kong-based consultancy. “Conflict with Iran tops the lists of worries, should it disrupt physical oil supplies. There is also the risk that the Middle East starts to call on China to play a bigger role in the region, no different to the other major powers.”

Although few details have been disclosed about Wen’s visit — the most senior Chinese mission to the Middle East since President Hu Jintao went to Saudi Arabia in 2009 — the premier’s choice of countries suggests energy will be high on his agenda. Saudi Arabia is China’s largest supplier of crude, and Beijing is expected soon to overtake Washington as the biggest buyer of Saudi oil. Qatar also recently became China’s largest supplier of liquefied natural gas.

Analysts say the expected confirmation this week of a deal between Sinopec and Saudi Aramco, Saudi Arabia’s state-owned oil company, to build a 400,000-barrel-a-day refinery at the Red Sea port of Yanbu is an early sign of an effort to deepen a relationship previously based on the simple equation of Saudi Arabia producing oil for China to consume.

The Yanbu facility is Sinopec’s first overseas refinery and follows a similar joint venture with Aramco to build a joint refinery in China’s Fujian province. Aramco has been further increasing its Chinese presence by building a refinery in the south of the country in partnership with PetroChina, and by sending students to Chinese universities — mirroring similar programs in the United States and elsewhere.

“Chinese-Saudi oil relations are expanding annually — for mutual benefit,” said Walid Khadduri, a consultant for Middle East Economic Survey, a newsletter. “It’s a commercial relationship. It’s not political.”

Elsewhere in the region, Chinese oil companies have landed several service contracts in Iraq, where the China National Offshore Oil Corp. and Sinochem are helping develop the Maysan oilfield, while the China National Petroleum Corp. is working in the Rumaila field together with BP. Chinese companies are also working in Iran, although progress has been slow there because of U.N. sanctions on the oil sector.

Although China’s diversified relationship with Middle East oil producers is in one sense a strength, the Arab uprisings and the intensifying battle between the West and Iran over Tehran’s nuclear program have highlighted its potential pitfalls.

The already cool relations between Saudi Arabia’s Sunni Muslim monarchy and the Shiite rulers of Iran have chilled further, after revelations of an alleged Iranian plot to kill Riyadh’s ambassador to Washington and thinly veiled Saudi allegations that Tehran is behind unrest in the country’s oil-producing eastern province.

China’s crude-oil purchases from Tehran have also drawn closer scrutiny this week after the United States announced sanctions against Iran’s Central Bank. U.S. Treasury Secretary Tim Geithner arrived in Beijing on Tuesday to press China to support the move.

Even though Wen is reportedly skipping Tehran on this visit, many observers say they do not expect Beijing to abandon its historic policy of seeking good relations with both Iran and the Gulf Arab states, whatever the antagonism between them.

“China wants to look long term,” said Robin Mills, an analyst at Dubai-based Manaar Energy Consulting. “And when this crisis is over, Iran will be a very important player.”

— Financial Times

Hook reported from Beijing.

 
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