By Chasen Richards, '19Late last month, a House oversight committee released a report indicating that the Trump administration was exploring selling nuclear energy technology to Saudi Arabia, who has long been the regional linchpin for US strategy in the Middle East. These talks have continued through the recent souring of US-Saudi relations as a result of the murder of Washington Post columnist Jamal Khashoggi in late 2018, an event that disillusioned many who had hoped that the KSA’s young new leader, Mohammed bin Salman, would bring an end to the regime’s repressive practices. The White House has defended an ongoing relationship with the KSA, citing the country’s importance to US economic and geopolitical goals and the risk that pulling back would pressure Saudi Arabia to pursue its goals with the help of Russia or China, two actors who are often less scrupulous with technology transfers.China has long courted Saudi Arabia, the crown jewel of the American Middle East theater, but the rise of MBS and his commitment to diversifying the Saudi economy has opened up new opportunities for the development of the Sino-Saudi relationship.Oil, Stability and PetrocurrencyChina has a distinct interest in increasing its footprint in the Middle East, motivated not only by the energy needs of its growing economy, but also by the stabilizing effect that petrocurrency provides, which the US has benefited from for decades. After the fall of the Bretton Woods system and the rise of free-floating currency regimes, the US negotiated a deal with Saudi Arabia in the mid-1970’s to denominate oil sales in USD for all OPEC countries. This agreement contributed to the rise of the US dollar as the global reserve currency, and the ability of the US government to sustain high deficits and maintain financial market liquidity.Since 2016, China has pursued similar currency internationalization strategies, loosening capital controls and promoting the RMB into the reserve currency baskets of the IMF and other major international financial institutions. Unfortunately, this has had the unintended effect of creating downward pressure on the RMB as investors move assets outside of the country. The PBOC, China’s central bank, has expended upwards of $500B USD annually since 2015 protecting the RMB from further devaluation, and has withdrawn from additional currency liberalization. The creation of a petroyuan, an oil sale market denominated in RMB, would provide free liquidity and ease pressure off the PBOC. China has attempted to do this independently through the sale of oil futures contracts, but these proved too volatile for the market. Saudi sales of oil denominated in RMB or priced by a currency basket including the yuan would be a cheap and effective means of bolstering the RMB, and thus has become point of interest for Beijing.Bringing The KSA into the 21st CenturyMohammed bin Salman (often referred to as MBS) has been a polarizing figure on the international stage. His rise to power began with instigating the Saudi-led military campaign in Yemen, which has resulted in the deaths of over 56,000 individuals. At the same time, he has been lauded internationally, especially by Western countries, for de-emphasizing religious fundamentalism in Saudi Arabia, allowing women the right to drive for the first time in the country’s history. This coupling of aggressive security measures with internal liberalization has been a mainstay of MBS’s governing strategy, exemplified in the boycott of Qatar and the establishment of his key developmental policy Vision 2030, a wide-ranging socio-economic policy platform intended to reembrace moderate cultural practices an, most importantly diversify the Saudi economy away from its iconic oil fields.This is a capital-intensive platform which would require significant assistance from the KSA’s allies. As those traditional allies distance themselves in the wake of MBS’s aggression, Beijing finds itself in a position to provide capital and expertise in exchange for oil and stability guarantees. China, the world’s second largest consumer of oil, is highly dependent on the Middle East to satisfy its energy needs and the KSA is not only the world’s largest oil producer, but it also wields significant influence in OPEC, the intergovernmental organization that controls production levels among major petrochemical producers. In 2017, Beijing poured $65B USD into the KSA, largely through the state-owned oil company Saudi Aramco, sparking off a renewed economic relationship that has led to the development of a $10B Saudi-run oil refinery in China. China is the KSA’s largest trading partner by volume and in light of the synergies between development spending and oil access, it seems that the Vision 2030 platform can easily dovetail with Beijing’s enormous Belt and Road Initiative.Playing Both SidesUntil quite recently, Saudi Arabia had the best of both worlds, geopolitically. The social and economic reforms pushed by MBS earned the approval of the US and other Western allies, the Yemeni war was largely absent from mainstream discussion, and new development was attracting immense financial and political interest from Beijing and other major financiers. The murder of the journalist Jamal Khashoggi fundamentally disrupted that dynamic. The Saudi journalist, who was a permanent resident of the US and columnist for the Washington Post, had written criticisms of the House of Saud and bin Salman personally. Seemingly in retaliation, he was lured to the Saudi consulate in Turkey, where he was tortured and killed by men who we now know were members of the Saudi intelligence establishment.Though the Trump White House initially resisted calls to hold Saudi Arabia accountable, intense pressure from Congress and international allies have forced him to take a harder stance towards the KSA, even in light of its importance to the American economy. The idea that icing the US-Saudi relationship would lead to deleterious geopolitical ramifications has some merit. According to some security analysts, the US should remain close to Saudi Arabia, since the controls it would institute in a technology transfer may not be exercised by Russia or China, who maintain ties with the KSA and could provide the same technology. Simply put, the US can’t exert any meaningful control over Saudi Arabia without driving it towards America’s geopolitical adversaries.Already the ties that bind MBS’s modernization goals to Western allies have been strained. As a result of the Khashoggi murder, major financial and technological leaders like The Blackstone Group, Softbank and Google pulled out of the Davos in the Dessert investment conference, signaling that political differences may impede their support of the KSA’s developmental goals. Worse yet, the long-awaited $2 Trillion USD Aramco IPO, a project worked on by a slew of the US’s most prestigious banks, has stalled out under a haze of valuation and accounting discrepancies. As the traditional mutual interest between the US and the KSA are weakened further, Saudi Arabia may reevaluate its relationship with other geopolitical players.The Way ForwardBeijing has made its interest in closer relations with the KSA very clear. Through being both a major oil producer and a regional security guarantor, in addition to the monetary stability that a petroyuan would offer, Saudi Arabia has the potential to further Beijing’s economic and geopolitical goals. At the same time, with Western relationships becoming more strained by the day, China may be the only remaining significant partner available to MBS as he endeavors to pull his country into the modern era.