x Abu Dhabi, UAESaturday 22 July 2017

Energy discussions to be central in China premier visit to GCC

Wen Jiabao arrives in Saudi Arabia on Sunday on a six-day trip where he will also visit the UAE and Qatar, just as pressure grows on Beijing to limit its purchase of Iranian oil.

BEIJING // The Chinese premier, Wen Jiabao, arrives in Saudi Arabia on Sunday to visit three states that supply energy to the world's second-largest economy, just as pressure grows on Beijing to limit its purchase of Iranian oil.

The six-day trip to Saudi Arabia, the UAE and Qatar is likely to include discussions about oil and gas as Beijing looks to further shore up its supplier base as a way of reducing its dependence on Iran.

China is the number one purchaser of oil from Iran, taking up more than one fifth of the country's production, but western states are attempting to strengthen sanctions against Tehran over its uranium-enrichment programme.

The visit, reportedly planned before a recent increase in tensions over uranium enrichment, will see Mr Wen meet the leaders of all three countries.

While China's Xinhua news agency said talks would focus on "bilateral relations and international and regional issues", analysts believe energy supplies will form a central part of discussions.

"On any visit to the Middle East, these issues will be discussed," Lin Boqiang, director of an energy research centre at Xiamen University, told Reuters.

Beijing has supported UN Security Council resolutions condemning the uranium enrichment, but has criticised sanctions against the increasingly isolated Tehran regime.

The likely outcome, according to analysts, is that China will continue to purchase Iranian oil but will not increase the amount it buys and may adopt a tougher line in price negotiations.

US sanctions on Iran were strengthened at the end of last year, with the oil exports targeted by measures that will impose sanctions on financial institutions dealing with Iran's central bank. Similarly, the European Union may this month impose a ban on Iranian crude purchases.

Iran has warned, however, that it will prevent oil shipments through the Strait of Hormuz if sanctions, which the Chinese vice foreign minister, Cui Tiankai, this week reiterated Beijing's opposition to, are imposed.

In this context, another important part of the visit for Mr Wen, according to Theodore Karasik, director of research at the Institute for Near East and Gulf Military Analysis in Dubai, is to find out "what the three countries are thinking about Iran".

"China will want to make sure that it will receive needed energy supplies if there is a conflict," he told Bloomberg.

As a way of expanding its supplier base, China has in recent years strengthened energy ties with countries in Central Asia, especially Kazakhstan and Turkmenistan, where Beijing has been sealing agreements to build infrastructure and provide loans in return for supplies.

Yet despite this, China remains strongly dependent for energy on both Iran and GCC nations, with the UAE, Saudi Arabia and Qatar accounting for nearly a quarter of China's crude oil imports.

On Saturday, China's Sinopec and the Saudi Arabian state-owned oil company Saudi Aramco are due to sign an agreement to build an oil refinery in Yanbu, a Red Sea port city in Saudi Arabia.

Qatar is also an important natural gas supplier to China, which has seen energy use increase substantially in recent years on the back of near double-digit economic growth.

During his visit to the UAE, the first to the Emirates by a Chinese leader in two decades, Mr Wen will give a speech about China's energy policy at the World Future Energy Summit in Abu Dhabi.

China is the world's largest producer of greenhouse gases but has pledged to produce 11.4 per cent of its energy from renewable sources by 2015 as part of its goal by that year to cut carbon output per unit of gross domestic product by 17 per cent.

Mr Wen is visiting the UAE at the invitation of Sheikh Mohammed bin Rashid, Vice President of the UAE and and Ruler of Dubai.

dbardsley@thenational.ae