The ‘look East’ policy of Riyadh — born out of necessity — is beginning to take a concrete and formidable shape.

And the manifestations of this policy are now in open.

The tectonic shift occurring at this point in the realm of ‘oil politik’ — without much drum beating and fanfare — is carrying its impact that could be felt in the realm of ‘realpolitik’ too.

In the current times, oil is intertwined with the fortunes of the Kingdom.

And despite the impulse in Riyadh to keep oil and politics separate, as much as possible, oil has been an asset that has helped the Kingdom forge foreign alliances — over the past many decades — one can’t deny too.

Black gold has definitely played a significant role in determining the future course of the oil kingdom — that Saudi Arabia is.

For decades, ever since King Abdulaziz called on US President Franklin D. Roosevelt onboard US Navy cruiser Quincy in the Great Bitter Lake segment of the Suez Canal, on February 14, 1945, crude has been the binding force, helping glue the bondage between the otherwise two distinctly different nations, despite upheavals and impediments.

In the intervening decades, this crude bond between the two countries survived several tremors, including the 1973 oil shock and the 911 events. Indeed oil had a significant role in chartering the bondage and friendship.

But now for various understandable reasons, the glue is peeling off.

The US, for its own strategic and indeed domestic political compulsions, wanted to get off the ‘Saudi addiction’ — for some time now. And the consequences are apparent.

Today Saudi Arabia is no more the largest supplier of crude to the US.

Riyadh is fairly down the list. On the other hand Saudi Arabia too, needed to have a ready made market for its dominant export — crude.

The ‘look east’ policy of Riyadh was thus born out of necessity. And it is starting to bear fruits too.

Momentum on the new track is building up — with crude playing an important contributory role — as before.

Saudi Arabia is now the top crude seller — to the world’s rapidly rising economy — China, often dubbed as the new global power in making.

Riyadh has now been the top crude supplier to China for the sixth month in a row in February and is set to retain the position for the foreseeable future too — as it is increasingly (forced to) divert crude from markets in the west to the world’s second largest oil consumer.

China imported 3.98 million MT (1.04 million bpd) of crude oil from Saudi Arabia in February, up 9.8 percent year on year, figures from Chinese General Administration of Customs showed.

In the first two months of the year, China’s crude imports from Saudi Arabia totaled 8.19 million MT, a quarter more than in the same period of 2010.

Over calendar 2010, China imported a total 44.63 million MT of crude oil from Saudi Arabia, or an average of 896,267 bpd, with Angola in second place at 39.4 million MT (790,875 bpd).

“China is growing into a 12 million barrel (per day) market, and geographically we are the supplier of choice,” Aramco CEO Khalid Al Falih underlined recently.

“We are the most reliable, we have the largest reserves, the largest spare capacity, so I think 20 percent of the market will not be unthinkable, and certainly somewhere along those lines would be something that we’re working toward,” he underlined.

And thus with strategic justifications and indeed ramifications, Saudi Aramco continues to build on its ties with China.

Saudi Aramco has now plans in hand to supply crude to a refinery in the southwest of the country, where Beijing is building an oil and gas pipeline that slices through Myanmar.

Aramco Overseas Company recently signed the memorandum of understanding with PetroChina Company Ltd, a subsidiary of China’s oil giant CNPC.

The deal involves the “planned development” of a 10 million MT per annum “grassroots full conversion refinery” in Yunnan, the Chinese province that borders on Myanmar.

“Saudi Aramco will supply the project company with up to 200,000 barrels per day of Arabian crude via a long-term contract,” Aramco said.

The proposed Yunnan refinery will produce ultra low-sulphur gasoline, diesel and other refined products.

Saudi Aramco has already partnered with Sinopec, another Chinese oil giant, at a joint venture Fujian plant in southeast China.

The announcement did not say how oil would be delivered to land-locked Yunnan.

But it appears likely the oil could ultimately come through Myanmar, formerly called Burma.

CNPC is building the China-Myanmar oil and gas pipelines, intended to bring energy supplies overland from the Middle East, via a crude oil port in Myanmar, which CNPC is also building.

This pipeline will make the Saudi crude very competitive because it would slash the journey time through the congested Malacca Strait that links Asia with the Middle East.

And though this has been in offing for some time now, it has just been announced that Saudi Aramco has signed an MOU with Sinopec Group to jointly build a $10-billion, 400,000 bpd, Yanbu refinery, replacing ConocoPhillips, which pulled out of the project last year.

All these developments did not take place overnight.

The building blocks of this budding relationship were laboriously put in place, brick after brick, over a considerable period of time.

In May 2010, Saudi Aramco’s annual board meeting was held in Shanghai, a significant shift after several earlier such gatherings were held in Houston, Texas.

China is the emerging superpower next door and its energy needs are growing fast.

It needs energy resources and Saudi Arabia is looking to ensure long term markets for its crude resources.

Beijing also has no qualms about its dependence on Saudi or Arab oil.

A win-win situation indeed!

Both Riyadh and Beijing seem to honor and appreciate this momentum.

They want the train to move — with real steam.

In the longer run, this budding relationship could be pivotal to the emerging ‘new world order,’ — that is currently in an embryonic stage.