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Cablegate: Chinese Fm Yang Visits Riyadh

VZCZCXRO9296
PP RUEHBC RUEHKUK RUEHROV RUEHTRO
DE RUEHRH #0123/01 0271227
ZNY CCCCC ZZH
P 271227Z JAN 10
FM AMEMBASSY RIYADH
TO RUEHC/SECSTATE WASHDC PRIORITY 2389
INFO RUEHXK/ARAB ISRAELI COLLECTIVE PRIORITY
RUCNIRA/IRAN COLLECTIVE PRIORITY
RUEHBJ/AMEMBASSY BEIJING PRIORITY 0390
RUEHGH/AMCONSUL SHANGHAI PRIORITY 0006

C O N F I D E N T I A L SECTION 01 OF 03 RIYADH 000123

SIPDIS

E.O. 12958: DECL: 01/12/2015
TAGS: PREL PGOV ECON ETRD CH KWBG IR SA
SUBJECT: CHINESE FM YANG VISITS RIYADH

REF: A. BEIJING 69
B. 09 RIYADH 895
C. RIYADH 118

RIYADH 00000123 001.2 OF 003


Classified By: Ambassador James B. Smith for
reasons 1.4 (B) and (D)

SUMMARY:
----------

1. (C) Chinese Foreign Minister Yang Jiechi met with King
Abdullah and FM Prince Saud Al-Faisal on January 13, during
the last stop of a five nation Africa and Middle East tour.
During the visit, FM Yang discussed deepening Saudi-Chinese
ties in a variety of fields, emphasizing trade, in
particular, with his Saudi counterparts. Responding to
statements made by FM Saud, Yang also briefly discussed
Chinese support for Iraq, concern about Iranian nuclear
ambitions, and hopes for the Middle East Peace Process. FM
Yang's foray into regional political commentary appears to
have been a result of FM Saud's prodding, both publicly and
behind closed doors, and is a reflection of the developing
Saudi-Chinese relationship.
END SUMMARY.


TRADE TAKES PRECEDENCE
----------------------

2. (U) FM Yang arrived in Riyadh on January 13, the first
high-level visit since Chinese President Hu Jintao's February
2009 "Trip of Friendship and Cooperation." FM Yang's visit
coincided with the 20th anniversary of Saudi-Chinese
diplomatic relations, and followed three days after Chinese
Trade Minister Chen Deming co-chaired the 4th session of the
Saudi-Chinese Joint Commission in Riyadh.

3. (U) The Chinese Foreign Minister has traditionally made
his first overseas trip of the new year to Africa, visiting
with African leaders and expressing Chinese goodwill and
improvements in trade relations. This year, FM Yang extended
his visit to include not only major trading partners like
Nigeria, Kenya and Morocco, but also Saudi Arabia. In a
January 13 statement to the press, FM Yang stressed the
importance of strengthening cooperation in "energy,
infrastructure, finance and science and
technology." He said that both sides should carry out
cultural and education exchanges to deepen the bilateral
relationship and pressed the need for closer relations
between China and the GCC.

4. (U) These statements echoed similar announcements from
Chinese Trade Minister Chen who, in a January 10 press
conference, called for finalizing the Chinese-GCC free trade
agreement and increasing bilateral trade by 50%, from a total
annual value of $40 billion to $60 billion, over the next
five years (ref A). During the Joint Commission meeting,
Saudi Minister of Finance Ibrahim Al-Assaf reportedly urged
the Chinese to participate in more joint ventures, noting
that while bilateral trade increased 25 times over the past
ten years, the two countries only have 19 joint projects.
Al-Assaf also welcomed China's 44 billion riyal ($11.7
billion) worth of infrastructure projects in the Kingdom.


DUMPING CAUSES A BUMP
---------------------

5. (C) This call to increase Sino-Saudi trade comes on the
heels of a December 24 announcement that China would impose
anti-dumping tariffs of up to 13.6 percent on Saudi and
Taiwan-produced butanediol. Beijing began a dumping probe on
methanol and butanediol (BDO) from Saudi Arabia in July,
which caused an unusually public trade spat between the two
countries (ref B). Methanol and butanediol make up 10 to 15
percent of Saudi Arabia's $2 billion in annual non-oil
exports to China. A Ministry of Commerce and Industry
official told Econoffs on January 13 that Saudi Arabia was
able to convince the Chinese not to impose tariffs on
methanol, but said the BDO case was still pending. The
Ministry recently appointed a new Deputy Minister for
Technical Affairs, Dr. Hamad Al-Awfy, who will handle all
anti-dumping issues, he said. Al-Awfy previously complained
to EconCouns that the SAG was increasingly frustrated by the
growing number of Saudi companies complaining about Chinese
dumping in Saudi Arabia. Other senior SAG officials have
caustically complained about the low quality of Chinese
construction and the "short-term, extractive" approach of
Chinese companies to investments in Saudi Arabia.


RIYADH 00000123 002.2 OF 003

A MATURING ECONOMIC RELATIONSHIP?
---------------------------------

6. (C) China recently surpassed the U.S. as the largest
importer of Saudi oil. Saudi Arabia's investments in China
have increased significantly over the last few years,
including a $3.5 billion refinery in Fujian and a $2.86
billion joint-venture petrochemical complex in Tianjin.
Additionaly, President Hu Jintao commemorated the opening of
a cement plant when he visited Saudi Arabia in February 2009.
Saudi Arabia,s more forward-leaning approach, including
large-scale investments in China, indicates a maturing of the
bilateral relations and assumes a more pro-active, rather
than reactive, role towards economic engagement. (Note:
China is now the SAG's number two trade partner after the
U.S. Saudi-Chinese bilateral trade was estimated at $40
billion in 2008, while Saudi-U.S. trade was estimated at $67
billion during the same time period. End note.)


FM SAUD PRODS, FM YANG RESPONDS
-------------------------------

7. (U) While trade issues dominated FM Yang's agenda, both he
and FM Prince Saud-Al Faisal commented on the regional
political landscape in a press conference that followed their
bilateral meeting. FM Saud spoke out against Israeli
defiance of UN Security Council resolutions and called on
China, as a permanent member of the Security Council, to
"deal with world disputes in accordance to international
legitimacy...as stipulated in the Arab Peace Initiative."
The meetings with FM Yang were "part of a framework of
coordination and consultation," FM Saud continued, that
included not only the Palestinian cause but also Iran's
nuclear file, Iraq and Yemen. In particular, he emphasized
China's role as a member of the P5 plus 1 group and their
responsibility "to solve the (Iranian nuclear) crisis through
dialogue and peaceful means. "Our two nations are keen that
the Middle East and the Gulf should be free of all weapons of
mass destruction, including nuclear weapons," he stressed.

8. (U) In response to FM Saud's comments, FM Yang said China
called for serious negotiations between Israel and Palestine
that would carry out the peace process and establish the
State of Palestine. "China is ready for cooperation with the
world community to work for stability in the Middle East," he
added. In regard to Iraq, he said that China extended
assistance by reducing Iraqi debt obligations to China and
forging trade agreements between Iraqi and Chinese companies.
With respect to Iran, FM Yang said the Iranian file should
be solved through "political diplomatic channels which help
stabilize the situation in the region."


FM SAUD: CHINA NEEDS TO MORE ACTIVELY COUNTER
IRANIAN NUKES
---------------------------------------------

9. (C) Deputy Foreign Minister Dr. Prince Torki told visiting
NEA A/S Feltman on January 26 (ref C) that FM Saud had
pressed the Chinese Foreign Minister hard on the need to be
more active in working with the rest of the international
community and the UN Security Council to counter the threat
of Iran developing a nuclear weapon. FM Saud told FM Yang
that Saudi Arabia was convinced Iran intended to develop a
nuclear weapon, despite its assurances, and that only
concerted international action could stop that. While no
explicit bargain was discussed, Dep FM Torki explained that
Saudi Arabia understood China was concerned about having
access to energy supplies, which could be cut off by Iran,
and wanted to attract more trade and investment. Saudi
Arabia was willing to provide assurances on those scores to
China, but only in exchange for tangible Chinese actions to
restrain Iran,s drive for nuclear weapons.


COMMENT:
--------

9. (C) Since King Abdullah's historic visit to Beijing in
January 2006, the Saudi-Chinese relationship has focused
predominantly on energy and trade. However, the relationship
may be showing signs of political evolution. While the
Chinese would likely prefer to stay away from political
controversy, their economic power and permanent seat on the
UN Security Council has made it more and more difficult for
them to avoid politics altogether.

10. (C) COMMENT CONTINUED: The incentives for the Saudis to

RIYADH 00000123 003.2 OF 003


try and leverage their economic relationship with China for
political gain with respect to sensitive regional issues,
such as Iran and the Israeli-Palestinian conflict, are
significant and growing. After patiently focusing on
building the economic relationsip since 2006, FM Saud,s
public and private prodding of FM Yang indicates the Saudis
are ready to try and cash in some political chips. End
comment.
SMITH

© Scoop Media

 
 
 
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