Bank of China opens branch in Saudi Arabia

China’s most internationalized state bank on Tuesday opened its first branch in Saudi Arabia in a move to expand the use of yuan amid a growing number of economic deals between the two countries.

Bank of China (BOC), one of China’s four biggest state-owned banks, opened its branch in Riyadh, the capital city of the oil-rich Middle Eastern country, more than two years after being given approval by the Saudi Arabian government.

The branch has more than 20 staff, with a majority hired locally – a condition requested by local authorities.

It is the second Chinese bank to open a branch in Saudi Arabia after the Industrial and Commercial Bank of China (ICBC) opened its first branch in Riyadh in 2015. ICBC also opened a branch in Jeddah in May.

China’s ambassador to Saudi Arabia, Chen Weiqing, said the opening of the branch was a result of positive developments in the bilateral relations between the two countries, and new stage of financial cooperation.

“It also shows that China highly recognizes the financial regulations, investment environment, and geographical advantages of Saudi Arabia,” Chen said, as he attended the opening ceremony with Bank of China president Liu Jin.

Saudi Central Bank governor Ayman al-Sayari and Saudi Arabia’s deputy investment minister, Saleh Ali Khabti, also attended the opening ceremony along with 250 guests.

The Saudi-listed ACWA Power, Saudi Arabia’s Ministry of Investment, Ajlan & Bros Holding Group and Zhejiang Rongsheng Holding Group signed memorandums of understanding involving internationalizing the yuan and green financing with BOC during the opening ceremony, the statement added.

The move came as part of a growing series of economic activities between China and Saudi Arabia, with their bilateral relations described as being at the best stage ever following President Xi Jinping’s state visit in December 2022, with both countries facing souring relations with the West.

During the trip at the end of last year, Xi pledged to work towards widening the use of yuan in oil and gas trade in the region, amid a push to establish the currency internationally and weaken the US dollar’s grip on world trade.

Saudi Arabia is China’s largest source of crude oil imports, with 87.5 million metric tons (641 million barrels) shipped in 2022.

Amid efforts by state banks to tap potential in the Middle East, BOC’s new branch has been licensed to provide basic commercial banking services to individual consumers and small- to medium-sized businesses, ranging from deposit accounts and loans to mortgages and yuan transactions.

At the weekend, BOC president Liu also met Khaled Mohamed Salem Balama Al Tameemi, the governor of the central bank of the United Arab Emirates, to court more support for its yuan clearing in the region and potential cooperation with the nation’s sovereign wealth funds.

In an interview with local media in June, BOC said the new branch aimed to offer the yuan to the wider Middle East region to assist commercial and financial trade between China, Saudi Arabia and beyond.

As there are many Chinese companies entering the market in the region, being able to trade and make financial transactions using the yuan would encourage Chinese companies to invest in the area.

The Saudi Arabian government first agreed to allow BOC to open its branch in January 2020. At the time, Saudi Arabia had only 14 foreign banks, including ICBC.

BOC also has existing branches in Abu Dhabi and Dubai in the UAE, as well as Bahrain, Turkey and Qatar.

Li Tong, president of the bank’s investment banking unit, Bank of China International, said in June during the Arab-China Business Conference in Riyadh that the new branch in Riyadh would push for financial cooperation, and further boost economic cooperation between the two countries.

The bank has also been in discussion with local counterparts to offer panda bonds – yuan-denominated bonds sold by overseas entities in China’s onshore bond market to raise investments in China.

A number of other banking sector collaborations have also been announced this year.

In March, the Export-Import Bank of China announced a first loan cooperation with Saudi National Bank, Saudi Arabia’s largest bank, in yuan.

Hong Kong has also been named as a major hub for financial cooperation between China and Saudi Arabia.

In July, the Hong Kong Monetary Authority, the city’s de facto central bank, signed a memorandum of understanding with the Saudi Central Bank, pledging initiatives in financial infrastructure development, open market operations, market connectivity and sustainable development.

 

 

United States makes attempt to mend relations with United Arab Emirates

US President Joe Biden seems to have initiated efforts to mend its relationship with Abu Dhabi. Lately, some cabinet members led by Vice President visited to the United Arab Emirates, an oil-rich nation in the midst of a critical leadership change.

Rejection and perceived disinterest from Washington has led the UAE to recently act more boldly on the global stage. It abstained from a US-led resolution at the United Nations that condemned Russia’s invasion of Ukraine. Emirati officials have also refused to increase oil production in an effort to lower gas prices and continue to pursue closer ties with China.  

Following the death of Sheikh Khalifa bin Zayed al-Nahyan, the country’s second president, who had officially ruled since 2004, Biden this week dispatched his most senior cabinet officials led by Vice President Kamala Harris. She was joined by Secretary of State Antony Blinken, Defense Secretary Lloyd Austin and CIA Director William Burns.

The visit by the Biden administration’s top brass was one to express condolences — and congratulations — to the new leader, Crown Prince Sheikh Mohammed bin Zayed al-Nahyan. Known as MBZ, he is the late president’s half-brother.

Harris, in remarks after a meeting said the purpose of the trip was to reaffirm the shared commitment we have to security and prosperity in this region and also how the American people have benefited from this relationship in terms of security and prosperity.” She called the UAE a friend and partner.

The trip came as US officials attempted to woo the monarchy amid a long list of strains between Abu Dhabi and Washington. Another issue is that of a longtime American foe Iran, as the UAE has rejected the Biden administration’s pursuit of a nuclear deal with Tehran. The tensions stand in stark contrast to the close ties the UAE held with the former administration.

Abu Dhabi welcomed then-President Trump’s exit from the Iran nuclear deal. Most notably, the Gulf state benefited from normalizing relations with Israel through American proposed military sales and Washington pulling its support from Israeli plans to annex the West Bank. 

“MBZ, because he sees himself as a man of vision, and Abu Dhabi of being a significant and important country, he expects respect and certainly under Biden, doesn’t think he’s been treated with respect,” said Simon Henderson, Director of the Bernstein Program on Gulf and Energy Policy at The Washington Institute.

“Trump and Jared Kushner the president’s son-in-law and senior advisor sort of treated him with respect.”

Experts said that the trip by Biden officials signals the administration knows it has some work to do.

“I think the high level delegation signals that Washington would like to repair the relationship and it’s really important that they do that,” said Hussein Ibish, a senior resident scholar at the Arab Gulf States Institute in Washington.

Mohammed, 61, has been considered the de-facto ruler of the Emirates for nearly 10 years, since then-President Khalifa suffered a stroke in 2014 and was largely sidelined from power up until his death. 

Mohammed has held tremendous sway throughout the region during his time as crown prince of Abu Dhabi and is described by regional watchers as having a vision, focused on growing the Emirates wealth, making its economy an important global player and pushing back against what it views as the threat of political Islam, in particular in neighboring Iran and Qatar.

Gerald Feierstein, former ambassador to Yemen and a distinguished senior fellow on US diplomacy at Middle East Institute, said Mohammed’s influence on the Trump administration’s Abraham Accords — the normalization agreements between Israel, the UAE and Bahrain — signaled the crown prince’s desire to be a driver of events of the region more broadly, than just the Gulf.  

The UAE has also garnered greater independence from the US

“For the Emirates, they consider the US a less reliable security and regional partner than it has been considered in the past and so they’re willing to craft their own independent foreign policy,” said Courtney Freer, nonresident fellow with the Brookings Institution.

Abu Dhabi took issue early on in the Biden administration with what it viewed as a weak response to threats and attacks the Emirates faced from Yemen’s Iran-backed Houthi rebels, including Biden removing the Houthi terrorist designation.

Ibish, of the Arab Gulf States Institute, said the robust US response to support Ukraine following Russia’s invasion underscored the feeling that Washington was abandoning its security commitments in the Middle East.  

“They look at the firm and united and resolute response to the invasion of Ukraine and compare it to those missile attacks by the Houthis and they feel very second best and not particularly looked after,” he said.

That has left leaders in the Emirates looking for help elsewhere.

“Whatever Washington wants, MBZ will make his own deal with Iran because they’re neighbors across the waters of the Gulf. And Dubai in particular, has important contacts with Iran at least on a commercial level,” Henderson said. 

Also at issue are negotiations that were reportedly rejected by the UAE to buy 50 F-35 fighter jets from the US amid defense security conditions for the acquisition, a UAE official told Reuters in December. 

A State Department spokesperson, requesting anonymity, told The Hill. “The administration remains committed to the sales and are continuing consultations with the UAE to ensure that we have a clear, mutual understanding with respect to Emirati obligations and actions before, during, and after delivery.” 

Before the Biden administration visit this week, the US had already started to take steps toward repairing the diplomatic relationship, Ibish noted, in the form of an apology by Blinken to MBZ last month for the Biden administration’s delay in responding to Houthi attacks in Abu Dhabi this year.

“It’s the apology that goes a long way because the response really did seem insufficient and particularly in the light of the Ukraine invasion, where the difference of the Western response is very stark,” Ibish added.

Feierstein added that the Blinken-MBZ meeting in Morocco was a step in the right direction that cleared away a lot of the underbrush in the relationship.

“No two states ever see anything eye to eye, there are always differences in opinion and of position. But what you do want is a strong institutional link that allows you to work through those issues,” he added.

 

Abu Dhabi to invest US$10 billion in Israel

The biggest news from Israeli President Isaac Herzog's visit to the United Arab Emirates was not to do with diplomacy or defense but the huge amount Abu Dhabi plans to invest in Israel.

According to the sources privy to the details, UAE Crown Prince Mohamed bin Zayed has decided to unfreeze US$10 billion in Israeli companies that he had promised to former Prime Minister Benjamin Netanyahu.

The UAE's large sovereign funds will divide the investments between them, including the ADIA Fund and the Mubadala Fund, although the first fund that will enter the Israeli market is the ADG (Abu Dhabi Growth) Fund, part of the ADQ Group. This fund plans investing US$200 million in Israeli companies during the year 2022, and a similar sum each year over 10 years.

A senior source, Abu Dhabi has been waiting patiently for the Israeli political scene to stabilize before renewing the process of fulfilling bin Zayed's promise. Herzog's visit, personal, diplomatic but not political, meant that he was the right person at the right time to officially initiate the investment process.

ADG Fund Chairman Faris Mohammed Al Mazrouei met with several members of the small Israeli delegation that accompanied President Herzog. At meetings in Abu Dhabi, the Israelis and Emiratis spoke about the mechanisms for the investment and how organizations like the Manufacturers Association of Israel and the Israel Export Institute would help direct the investments.

Another important link in the chain will be Start-Up National Central, which in recent years has specialized in matching up Israeli startups with investors. Start-Up National Central CEO Avi Hasson, who traveled to the UAE as part of President Herzog's delegation, informed that the unfreezing of the US$10 billion by the UAE for investment in Israel was highly significant for both the countries. He said that the Emirati use the investment funds as a strategic tool and are expressing through the funds the importance with which they see relations with Israel.

Hasson thinks that Israel is perceived by the Emirati as a symbol of innovation and progress due to the companies located here, and therefore it represents a good investment. "This is not philanthropy or a political investment fund," he said. "The Emirati are seeking profits from their investments. We do not have a commercial agenda but extensive knowhow of the abilities in the advanced technology sector and the ability to connect Israeli companies with the precise needs of investors."

Hasson stressed there has to be a match between the Israeli ‘here and now’ approach and the slower UAE approach of first building trust through a genuine connection between the parties and only then moving forward.