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In recent years, the global political and economic landscape has undergone drastic changes, and Sino-US relations have become increasingly tense, and many countries have fallen into a dilemma.
In a chaotic global economy, there always seems to be an invisible hand that is fiddling with the scales of the economy.
The latest focus is on Saudi Arabia, the oil giant as it prepares to withdraw from China, for a staggering reason.
Bizarre! America's hand is "stretched too far"?
1. Complex political games: Saudi Arabia's dilemma
When talking about Saudi Arabia's investment strategy, it is impossible not to mention its status as an "oil giant".
As one of the world's largest oil exporters, Saudi Arabia has the world's richest oil reserves, accounting for 16% of the global total.
However, this country, which plays an important role in the international arena, is in an extremely sensitive position under the "petrodollar" system of the United States.
But in 2023, against the backdrop of escalating geopolitical tensions, the United States has stepped up pressure on Saudi Arabia.
The long-term influence of the United States in the Middle East has forced Saudi Arabia to take into account the wishes of the United States.
At this time, Saudi Arabia began to face a choice of political games.
2. The "economic clamping" of the United States: from currency to military
The United States has extremely strong military and economic influence in the Middle East.
Since the signing of the petrodollar agreement in the 1970s, the US dollar has dominated the global oil trade, and Saudi Arabia has maintained close economic ties with the United States.
1. The magic of the petrodollar
The oil trade is settled in US dollars, which gives Saudi Arabia a large dollar foreign exchange reserves, which are mainly used to buy US Treasury bonds.
As of the first quarter of 2023, Saudi Arabia held about $108 billion in U.S. Treasury bonds, making it the 15th largest holder of U.S. government bonds.
This makes Saudi Arabia extremely dependent on the US dollar, and the United States can also directly influence the state of the Saudi economy through monetary policy.
2. Military dependence
Militarily, Saudi Arabia relies on advanced weapons and defense systems from the United States.
In 2022, the United States sold $2 billion worth of Patriot missile systems to Saudi Arabia in response to Houthi attacks in Yemen.
With long-term arms sales and military cooperation, Saudi Arabia's defense system is almost entirely dependent on the United States.
These economic and military constraints have made it impossible for Saudi Arabia to be completely independent in its investment decisions.
The United States hopes to protect its interests in the Middle East by exerting pressure to prevent Saudi Arabia from leaning towards China.
3. The real motive behind Saudi Arabia's withdrawal
Although Saudi Arabia has been actively engaged in trade and investment cooperation with China, it has had to re-examine its investment strategy in the face of pressure from the United States.
In 2023, the Saudi Public Investment Fund (PIF) began to gradually reduce its direct investment in China.
1. PIF policy adjustment
As Saudi Arabia's largest sovereign wealth fund, PIF is tasked with achieving Vision 2030.
However, in the face of political pressure from the United States, PIF has been forced to adjust its strategy, gradually reducing the share of investment in the Chinese market and instead increasing investment in the technology and energy sectors in the United States.
For example, in 2023, PIF announced that it would increase its stake in Lucid Motors, a U.S. electric vehicle company, to more than 60%.
At the same time, in the field of financial technology and new energy, PIF also actively invests in local companies in the United States to seek the understanding and support of the U.S. government.
2. Careful selection of energy cooperation
As the world's largest oil exporter, Saudi Arabia is heavily dependent on both China and the United States in the energy sector.
However, geopolitical tensions have forced Saudi Arabia to carefully maintain a balance between China and the United States.
At the OPEC+ meeting in May 2023, Saudi Arabia and Russia jointly decided to cut oil production in an attempt to stabilize international oil prices.
However, the United States strongly disagrees with this decision, believing that the Saudi move will help Russia increase its revenues to continue its military operation in Ukraine.
Under pressure from the United States, Saudi Arabia has had to reconsider its energy partnership with China.
Fourth, Saudi Arabia's countermeasures
In the face of US pressure and a complex international situation, Saudi Arabia did not completely give in, but adopted a series of strategies to find a balance between the two largest economies.
1. Diversify your investments smartly
Although Saudi Arabia's Public Investment Fund has reduced its direct investment in China, it has maintained its participation in the Chinese market through diversified investment strategies.
For example, Saudi Aramco has signed a long-term oil supply agreement with Sinopec and invested in a joint venture refinery in China.
At the same time, PIF is also actively involved in infrastructure development in Asia and Africa, shifting some of its investment focus to emerging markets such as India and Africa to reduce its dependence on China and the United States.
2. Strengthen energy cooperation with the United States
In addition to reducing investment in China, Saudi Arabia has actively strengthened energy cooperation with the United States.
In 2023, the United States and Saudi Arabia signed a memorandum of understanding on energy cooperation in areas such as renewable energy, nuclear energy, and carbon capture.
This cooperation will not only help ease tensions between the two countries, but also support the energy diversification goal of Saudi Vision 2030.
3. Take the initiative to seek independence
In addition to adjusting its investment strategy, Saudi Arabia is also seeking an independent position in global affairs by strengthening cooperation with other Middle Eastern countries.
In 2023, Saudi Arabia actively participated in the affairs of the Arab League and resumed diplomatic relations with Iran, further consolidating its leadership position in the Middle East.
The "long-arm intervention" of the United States has indeed made Saudi Arabia more cautious in its investment in China.
However, as a global oil major, Saudi Arabia understands that maintaining a balance between China and the United States is critical to its future development.
Although U.S. pressure has caused Saudi Arabia to adjust its investment strategy in China in the short term, in the long term, Saudi Arabia will seek to diversify its investment between China and the United States to achieve its Vision 2030 ambitions.
In this global political and economic wrestling, Saudi Arabia's strategic adjustment is only the tip of the iceberg.
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