It’s hard to overstate the potential impact of a move underway that – thanks to Biden’s catastrophic diplomacy — could result in China replacing the US a security guarantor for the petro-monarchies that control so much of the world’s oil reserves. Bloomberg reports:
Oil-rich gulf monarchies are leveraging their wealth to deepen ties with China amid anxiety about the future of their longstanding security partnership with the US.
Seven months after President Xi Jinping participated in the first China-Gulf summit in Riyadh, economic exchanges between the world’s second largest economy and nations like Saudi Arabia and the United Arab Emirates have been accelerating — moving well beyond crude purchases where Beijing has been dominant for years.
One of the deals that could benefit from closer ties in the coming months is Chinese-owned seed giant Syngenta Group’s planned $9 billion Shanghai IPO. The state-backed company’s advisers have been having discussions with Middle Eastern sovereign funds including the Abu Dhabi Investment Authority and Saudi Arabia’s Public Investment Fund about becoming cornerstone investors, people with knowledge of the matter have said.
The value of acquisitions and investments by Gulf companies in China has climbed more than 1,000% year-on-year to $5.3 billion, according to data compiled by Bloomberg.
For decades, the oil states of the Middle East have relied on the United States as their primary economic partner and security guarantor. Their holdings of dollar-denominated US debt and settlement of sales contracts in dollars keeps the dollar as the world’s reserve currency. That status enables to US to run massive deficits, print money to pay for them, and not suffer a foreign exchange crisis and severe devaluation.
China is currently suffering economic doldrums, probably in a recession with high youth unemployment, and the loss of markets and manufacturing investment as the US and Europe are decoupling from the Chinese economy. But the petro-monarchies, with their massive resources and substantial markets, could at least partially replace the Western powers and relieve domestic political pressure on Xi Jinping to behave himself better on the world stage.
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