Saudi-US trade banks sign deal despite kingdom’s China links

Reuters

• US and Saudi Exim banks sign deal
• Bilateral trading ‘soaring’
• Saudi non-oil exports up 10%

The export-import banks of Saudi Arabia and the US have signed a new agreement that seeks to build on bilateral trade of SAR130 billion ($34.7 billion) between the two countries in 2022.

Saudi Exim Bank said the deal with US Exim will focus on facilitating more trade financing, supporting exports, and promoting investment opportunities in key sectors. 

Bilateral trade rose by 39 percent in 2022 compared with the previous year and despite Saudi Arabia’s growing relationship with US rival China.

“For all the talk about geo-economic fragmentation, I don’t really see Saudi Arabia and other Gulf countries engaging with China or multilateral groupings like Brics in a manner that results in an immediate, major dent in economic relations with the US,” said Dr Robert Mogielnicki, senior resident scholar at The Arab Gulf States Institute in Washington.

“Gulf governments are clearly making the calculation that they can generate additional value out of newer partnerships without losing much from their older partnerships,” he told AGBI.

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China is the biggest trading partner for five of the six GCC economies. GCC-China trade surpassed the GCC’s trade with the US and Europe combined for the first time in 2021 and trade rose to about $250 billion in 2022, according to Asia House.

But the US-Saudi Business Council (USBC) described the bilateral trade relationship as “soaring” despite China’s increasing influence.

US exports to Saudi Arabia totalled $11.6 billion in 2022, up 4 percent from 2021 despite a decline in exports of defence-related segments, the organisation’s latest figures show.

Saudi non-oil exports to the US reached $2.7 billion, rising 10 percent in the same period, the highest annual level on record for the second straight year. 

Total Saudi exports amounted to $23.5 billion as oil exports rose 84 percent through a combination of halting oil imports from Russia and growing demand from the transportation and industrial sectors. 

The USBC said Saudi non-oil exports are continuing to evolve beyond downstream petroleum industry products to metals and industrial manufactures.

Saudi Exim Bank

Reta Jo Lewis, chair and president of US Exim, said: “The relationship between Saudi Arabia and the US has always been strategically important and we aim to further enhance and solidify this bond.”

Motor vehicles remain the largest non-oil US export to Saudi Arabia, totalling $2.1 billion in 2022, up 12 percent on the previous year, USBC figures revealed. 

Nuclear reactors and aircraft were also key exports to the kingdom, while the fastest-growing exports included precious and rare earth metals, which grew 97 percent to reach $147 million.

Texas, California and Louisiana were the top US states for exports, with nearly $4 billion of goods and services provided between them, said to generate more than 17,000 jobs in the United States.

Tourism is also a growing sector. Connectivity between the US and Saudi Arabia increased to 17 direct connections per week from Los Angeles, New York and Washington to Jeddah and Riyadh – more than 255,000 inbound seats in 2023. 

Direct capacity is expected to grow by 7 percent in the first quarter of 2024. Fahd Hamidaddin, CEO of Saudi Tourism Authority, described the US as a “key market”.

Mogielnicki added: “Over the longer term, balancing relations with traditional partners like the US and less-established partners like China may become more complicated. 

“For now, the thorniest issues have to do with a small subset of Gulf-China collaboration areas that US officials consider national security risks.

“Weaker global growth expected for 2024 and ongoing concerns about the Chinese economy will pose various challenges to Gulf government officials aiming to keep the economic momentum going.”