King Abdullah's four-nation tour in January-February and Crown Prince Sultan's three-country tour in April set the stage for a dynamic relationship with Asia not only for Saudi Arabia, but also for the other Gulf Cooperation Council (GCC) countries. The visits are a recognition of the increasing significance of Asia as an economic ally at a time when, first, the GCC economies are robust following high oil prices and need new avenues to invest and diversify; and, second, when Asia's oil consumption is soaring amid an economic boom.
Let us try to identify the significance of their visit from a Saudi perspective. First, the itineraries - which included Beijing, New Delhi, Kuala Lumpur, Islamabad, Tokyo, and Singapore - targeted the capitals of influential countries in the political, economic and military spheres. That Pakistan was the only country that was common on their itinerary speaks for the unparalleled and strategic relationship between the Kingdom and Pakistan. In visiting these six countries within a span of three months and making them a part of their first tours abroad after both leaders assumed new posts, Riyadh recognizes the capability of these countries to play major roles in international stability and security. The fact that they represent more than one-third of the world from a demographic angle also gave their visit the impetus.
Second, the trip signaled a win-win situation economically, based purely on complementarity of interests. Saudi Arabia attempted to make sure that the future Asian economic growth has a Saudi contribution through uninterrupted energy supply. Saudi Aramco now does almost half its business in Asia and has more offices there than anywhere else in the world. By guaranteeing oil supplies, it could be a calculated move to prompt a decisive tilt by New Delhi, Beijing and Tokyo away from Iran, which is a big competitor in the energy market.
The economic dynamics could have a political angle as well. While it could also serve as a tool to erode Iran's ties with India, China and Japan, Riyadh definitely sought to use the influence of most of the six countries, which have reasonably good to very good relations with Iran, to defuse the current nuclear stand-off.
In a similar vein, in dealing with India without linking it to Pakistan, and warming up to China, Saudi Arabia put economic pragmatism ahead of ideology. Politically, Riyadh has now offered to play a constructive role in resolving the Indo-Pak dispute.
Riyadh also realizes that solutions to many of its problems - including unemployment, need for better education, economic diversification, advancement in the field of science and technology, etc. - lie in linking up with Asia. Apart from emphasizing that "we are on the threshold of a new age of Arab-Asian cooperation," Crown Prince Sultan highlighted Asia's role in Saudi Arabia's efforts to promote education. He said that King Abdullah had instructed the Higher Education Ministry to include Japan among the countries listed for sending Saudi students for higher studies. Singapore, Pakistan, India and Malaysia are the other new non-Western destinations that the Kingdom is keen to collaborate with in this sector.
There is the profitability of business ventures too. India and China are selling their ideas with the slogan of "more value for your money". Indian officials suggest that what costs the Saudis $100 in the West will only cost $15 in the East. This sets the stage for Saudi investment in the infrastructure projects of the Asian countries, while also opening the Saudi economy to foreign investment, which China and India are ready for. The Saudi Arabian Investment Authority is investing about $5 billion abroad annually, and India plans to build about 28 new airports. Similarly, the Kingdom has chalked $624 billion investments in various sectors over the next 5 to 10 years and two Indian oil companies are in discussions with Saudi Aramco for possible Saudi investment, which is, in turn, associated with possible investment by Indian companies in the Yanbu refinery.
Chinese President Hu Jintao - who reciprocated King Abdullah's visit in rather quick time to signal the increasing seriousness of the Sino-Saudi "mutually beneficial cooperation" - discussed a proposal to set up a Saudi-fed strategic oil reserve in China. This comes in addition to Saudi exports to China of 22 million tons in 2005, which makes the Kingdom the biggest crude supplier to China. Further, Sinopec is building a refinery with Aramco in Fujian and another joint refinery venture is planned in Qingdao. Beijing is also discussing a proposed $5.2-billion energy venture in China with SABIC. Expanding beyond oil, the two also signed a "contract on defense systems".
With Japan, Saudi Aramco signed a $9.8 billion joint petrochemical project with Sumitomo Chemical Co. in March. Saudi Arabia also stands to benefit immensely from Asia's expertise and investment readiness in the Kingdom's key sectors such as desalination, power generation, gas exploration, minerals, air transport, airports, seaports, services and telecommunications.
Third, Saudi Arabia is clearly not in favor of putting all eggs in one basket anymore. It perhaps realizes that if the 19th century belonged to the British and the 20th to America, then 21st century could well belong to Asia.
The "look East" policy is not a replacement for its traditional allies but could, however, be an effort to restrict their influence.
Fourth, the tour is an indication that Saudi Arabia is at ease dealing with the Asian countries because they carry no excess political baggage. Countries like Japan, China, and India are not interested in linking political reforms in the Kingdom to economic ties. In particular, China and India have come to terms with the need for greater liberalization and are positioning themselves to take advantage of a globalized business environment. China's emphasis on economic reforms over political reforms and its criticism of Washington's anti-terror campaign and democracy plans for the region are definitely in sync with Riyadh.
Finally, the Saudi leaders' trips also served as a platform to convey Saudi conviction to break the stereotype attached to the Kingdom in the international milieu and showcase its relentless march on the path of reform and progress.
Linking the tours to the possible benefits for the GCC as a whole is easy. After King Abdullah's tour, GCC Secretary-General Abdulrahman Al-Attiya said the visits would boost economic ties between both Saudi Arabia and the GCC with each of the four countries and will also contribute to a swift establishment of free trade agreements (FTAs) between three of them and the GCC. Now, Singapore and Japan are also interested in signing FTAs.
At a broader level, the GCC's evolving shift toward Asia is logical. It consumes 23 million barrels per day, which is 30 percent of the world's demand. The GCC exports two-thirds of its oil output to Asia, which could more than double by 2020. Further, more than half of the GCC exports go to Asian countries, while a third of the GCC imports are from Asia. Together, the GCC-Asia oil and non-oil trade is worth approximately $200 billion, which will certainly grow as FTA negotiations bear fruit.
Cooperation and greater linkages between the two regional blocs in the oil sector is thus a key element to ensuring both security of supply for Asian consumers and of demand for GCC oil producers. The rise in energy demand by Asian countries is likely to influence the long-term political economy of the GCC countries and shape international relations in the coming decades.
Beyond the oil and trade dynamic is the human element. Approximately 70 percent of the GCC's labor force is made up of expatriates, who send home nearly $30 billion as remittances annually. Again, of the 12.5 million expatriates in the region, about 70 percent of them are Asians.
Recognizing these factors, the GCC Chambers of Commerce and Industry has called for giving priority to activating economic cooperation with Asian countries. This 'Look East' policy in the economic realm comes at a time of regional introspection in the political arena too.
It is natural that increasing economic ties will impact the political and security dynamics too. But the question is if countries like India and China are willing to play a role in those realms. Will they take the same path as the United Sates or decide to adopt a distinct and non-controversial approach? Even if they are interested in a wider role, how effective will they be? How will Japan, China and India balance their ties with Iran and Israel on one side and the GCC countries on the other? More crucially, are the GCC countries looking out of the box for their security or is the US making a mountain out of a molehill while expressing long-term fears about China's intentions in the regional security architecture? Thus, while the present GCC-Asia ties are rooted in economics, in what direction are they headed next?
- Dr. N. Janardhan is the Editor of the Gulf in the Media at the Gulf Research Center in Dubai.
