GRM 2010 GRM 2011

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Chinese and South Korean Relations with Saudi Arabia
Paper Proposal Text :
ABSTRACT: Chinese and South Korean Relations with Saudi Arabia

China has recently emerged as the world’s second largest economic powerhouse, and its advance seems unstoppable, with its economy expected to grow by 7% in the year 2011. As for South Korea, the world’s eleventh largest economy, it is poised to pull itself up to an even better position among these global powers.
Trade between the two countries is experiencing a continued boom, and the figure of bilateral interchanges reaching $US 207.2 billion in 2010, accounting for one fifth of South Korea’s total trade volume. Although Chinese per capita income stood at less than one seventh of South Korea’s last year, China surpassed Japan as the world’s second-largest economy during the same period, achieving a total GDP almost five times that of South Korea’s. In relation to China, South Korea’s trade surplus had hit a record US$ 35 billion that same year. As these growing ties play an important part in the economies of both countries, they are bound to develop even further in future.
In terms of their oil imports, China and South Korea rank second and fifth worldwide, respectively. The former’s daily use of oil reaches 7.8 million barrels, including 3.991 million produced locally, and its energy needs are projected to increase by 150 % by 2020. As for the latter, it consumes 2.2 million barrels per day (bpd), whereas its own total production is a mere 40.180 barrels daily. In both cases, the above figures point to the countries being heavily dependent on foreign energy resources to fuel and expand their booming economies.
Of the nations that hold such energy sources, Saudi Arabia ranks second with a daily production of 9.764 million barrels per day (bpd), and even comes first among all OPEC (Organization of Petroleum Exporting Countries) member countries. It has a daily consumption of 2.4 million barrels, and its reserves are estimated at 266.751 billion, accounting for one fifth of the world's proven oil deposits, the largest single amount globally. Therefore, it is seen as an important, if irreplaceable partner by such energy-hungry countries as China and South Korea.
Since the establishment of diplomatic relations 1990, China’s ties with Saudi Arabia have strengthened more than with any other Middle East country. In 2009, China surpassed the United States as the top importer of Saudi oil, and in 2010, Riyadh provided 20% of Beijing’s total imports. The thriving trade relations between the PRC (People’s Republic of China) and the Kingdom of Saudi Arabia have reached $40 billion and efforts are in place to increase them to $60 billion by 2015. Aramco, the Saudi oil giant, is set to expand the capabilities of the existing oil refineries and petrochemical complexes of Sinopec, China’s biggest oil company.
.South Korea is one of Saudi Arabia’s 10 largest trading partners with bilateral trade totalling $40 billion annually. The balance of trade is in favour of Saudi Arabia because of its oil supplies. Riyadh is Seoul’s largest oil supplier, providing it with one third of its total oil imports. The advances in South Korea’s science and technology are reflected by the wide range of high-quality products such as automobiles, electronics and communication equipment that are flooding Saudi retail markets (South Korea’s export to Saudi Arabia stood at $4.6 billion in 2010). Around 100 joint venture deals have been concluded by both countries, with more projects expected to come on line in the near future.
Due to the complementary nature of their economies, China and South Korea have managed to keep their ideological differences, especially in relation to tensions on the Korean Peninsula, from adversely affecting their booming economic interchanges. Both see their future tied in maintaining the rapid growth of their respective economies. In keeping the momentum, their economic engines need to be fuelled, and this is where relations with Saudi Arabia come in, as the latter is the largest oil supplier to both countries.
In relation to Riyadh, they only differ by the levels of the technologies offered, and consequently, there seems to be little or no competition between them for the time being. But as the Chinese economy makes huge strides, so will do its technological know-how, and thus the two countries are bound to become competitors eventually as they bite in one another’s niche.
At present, they are already vying with each other to attract Saudi investments, for example in oil refinery or petrochemical plant constructions. Further evidence thereof is the Chinese active presence in the Saudi construction sector where South Korea had little competition to face for a long time.
The procurement of energy supplies will get more difficult if and when Riyadh lowers its oil production, or needs to cater to its rising domestic consumption as the country modernizes. Then again, it is a well-known fact that Saudi oil fields are getting old and need to be overhauled in order to be able to maintain their present production volumes. Their renovation will require very large investments which will cause oil prices to increase sharply.

Behzad Shahandeh,
Graduate School of International Area studies, Hankuk University of Foreign Studies,
Seoul, South Korea
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