Saudi Arabia crown prince strikes oil deal in China

Saudi Crown Prince Mohammed bin Salman continued a charm offensive in a two-day visit to China, signing off on a $10 billion oil deal, and pledged assistance in the "de-radicalization of extremist thinking."

Saudi Arabia on Friday signed the next multi-billion oil refinery investment deal during Crown Prince Mohammed bin Salman's tour of Asia, this time in China.

Riyadh's state-owned oil giant Saudi Aramco announced a $10 billion (€8.82 billion) joint venture to develop a facility in China's northeast.

This, among other deals hashed out in 35 memorandums of understanding, could see it regain its place as China's main oil exporter. The countries saw a 33 percent increase in bilateral trade last year, according to the crown prince.

"Saudi Arabia's relations with China can be traced back a very long time in the past," bin Salman said.

"Over such long periods of exchanges with China, we have never experienced any problems."

His counterpart, Chinese President Xi Jinping, expressed a similar sentiment. "China is a good friend and a partner to Saudi Arabia," he said.

Bin Salman and his party arrived in the Chinese capital on Thursday after stops in India and Pakistan.

Read more: Saudi investment in China-Pakistan economic corridor may upset Iran

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01:18 mins.
Business | 21.02.2019

Mohammed bin Salman visits China

China for its part, was hoping to tap into the "enormous potential" of the Saudi economy and "deepen cooperation."

"All countries in the world have the right to develop, and Saudi Arabia is an emerging market country with enormous potential," Foreign Minister Wang Yi said.

The two countries have been pursuing separate, but equally ambitious economic plans. China has been securing partnerships for its Belt and Road Initiative – a $900 billion trade corridor from Asia to Europe.

Likewise, Riyadh has been pursuing the "Saudi Vision 2030", to diversify Saudi Arabia's economy from oil.

Hit hard by sinking oil prices

A great, big hangover

Even Norway isn't immune to the falling price of oil. For years, the wealthy Scandinavian nation had fueled its rapid growth with the oil it pumped out of the North Sea. But what once transformed a poor agrarian state into one of the richest countries in the world now has policymakers wondering if it wouldn't be wiser to allocate more resources to Norway's fishing industry.

Hit hard by sinking oil prices

Double trouble

For Russia, the falling price of oil has added insult to injury as its economy is already reeling under Western sanctions. In 2015, economic output in the country shrunk by around 4 percent. As a result, salaries have dropped and the ruble has lost half of its value against the dollar. The news service Bloomberg estimates that 2016 will be another recessionary year for Russia.

Hit hard by sinking oil prices

An uncertain future

Nigeria is Africa's largest producer of oil. Before being elected president, Muhammadu Buhari announced that he would increase government spending - but the drop in the price of oil may make that promise impossible to fulfill. The World Bank estimates that three-quarters of the Nigerian state's revenues come from the oil business. Many infrastructure projects are currently on hold.

An infographic revealing how much a barrel of oil needs to cost for oil-exporting nations to turn a profit.

Hit hard by sinking oil prices

New realities

Nigeria's not the only country that calculates its budget based on the price of oil staying high. The result has been a big gap between expected and actual revenues. The price for a barrel of oil has dropped by nearly 75 percent since mid-2014. Many experts currently have little reason to believe the per-barrel price will return to its old level of $120 (110.76 euros) anytime soon.

Hit hard by sinking oil prices

After sanctions

Now that sanctions against Iranian exporters have been lifted, the Islamic Republic plans to ramp up its oil production by half a million barrels a day - putting further pressure on an already oversupplied energy market. Iran, for its part, blames its archrival Saudi Arabia for falling oil prices.

Hit hard by sinking oil prices

Less giving, more taking

Saudi Arabia has refused to curb oil output in order to protect its market share from competition from the US fracking industry and Iran. But now, even the world's largest oil exporter is starting to get a taste of its own medicine. The International Monetary Fund is warning about a massive impending budget deficit. The Saudis want to introduce taxes and slash energy and food subsidies.

Hit hard by sinking oil prices

How long will reserves last?

Like their Saudi counterparts, other oil-rich Gulf statessuch as Qatar, Oman and the United Arab Emirates are also watching their energy reserves dwindle. These regional powers all boast large sovereign wealth funds - but altogether, the six Gulf states have already accumulated a budget deficit worth $260 billion (239.8 billion euros), according to estimates by JP Morgan Chase.

Hit hard by sinking oil prices

Winds of change in Venezuela?

Venezuela has the largest oil reserves in the world. For years, the country's socialist government used revenues from the sale of oil to fund its lavish social programs. Now, President Nicolas Maduro has declared a state of emergency for the Venezuelan economy. Popular support for the successor to Hugo Chavez has been slipping for about a year - about as quickly as the price of oil has dropped.

Hit hard by sinking oil prices

What now?

Thanks to a boost in shale gas extraction, aka fracking, the US is now the world's largest energy producer. Low oil prices, however, have made fracking widely unprofitable. The US is also one of the largest consumers of energy in the world. While motorists may celebrate having to spend less money at the pump, bigger, gas-guzzling vehicles are gaining in popularity - bad news for the environment.

Talking terror

The two sides also discussed increased cooperation in areas like anti-terrorism, law enforcement and security. China expressed interested in exchanging experiences about de-radicalization, a likely reference to "internment camps" in the country's west, set up to "educate" Muslims and Uighurs.

Such camps have drawn sharp condemnation, a UN committee describing the autonomous region as "something that resembles a massive internment camp that is shrouded in secrecy", housing some one million Uighurs.

But the Saudi crown prince said his country was against "interference by external forces in China's internal affairs", saying that it "firmly supported" Beijing's so-called security efforts.

Read more: China releases video of Uighur musician to 'disprove his death'

Some one million Uighurs and Muslims are estimated to be held in these camps

The Saudi visit comes amid global criticism over the killing of journalist Jamal Khashogghi as well as the country's human rights record and its role in the conflict in Yemen.

The crown prince is expected to leave Beijing Friday night, moving on to South Korea.

Now live
02:48 mins.
DW News | 20.02.2019

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nn/rt (Reuters, AFP, AP)

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