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