Identifier
Created
Classification
Origin
09RIYADH895
2009-07-07 14:01:00
CONFIDENTIAL
Embassy Riyadh
Cable title:  

CHINESE DUMPING PROBE OUTRAGES SAUDIS

Tags:  ECON ETRD ENRG WTO SA 
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PP RUEHDE RUEHDH RUEHDIR
DE RUEHRH #0895/01 1881401
ZNY CCCCC ZZH
P 071401Z JUL 09
FM AMEMBASSY RIYADH
TO RUEHC/SECSTATE WASHDC PRIORITY 1126
INFO RUEHZM/GULF COOPERATION COUNCIL COLLECTIVE PRIORITY
RUEHBJ/AMEMBASSY BEIJING PRIORITY 0382
RUEHJA/AMEMBASSY JAKARTA PRIORITY 0235
RUEHKL/AMEMBASSY KUALA LUMPUR PRIORITY 0062
RUEHWL/AMEMBASSY WELLINGTON PRIORITY 0003
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RUEHGV/USMISSION GENEVA PRIORITY 0738
C O N F I D E N T I A L SECTION 01 OF 02 RIYADH 000895 

SIPDIS

DEPT FOR NEA/ARP (HARRIS),EAP/CM, EEB/TPP, AND EEB/ESC/IEC

E.O. 12958: DECL: 07/07/2017
TAGS: ECON ETRD ENRG WTO SA
SUBJECT: CHINESE DUMPING PROBE OUTRAGES SAUDIS

Classified By: DCM David Rundell, reasons 1.4 (b) and (d).

C O N F I D E N T I A L SECTION 01 OF 02 RIYADH 000895

SIPDIS

DEPT FOR NEA/ARP (HARRIS),EAP/CM, EEB/TPP, AND EEB/ESC/IEC

E.O. 12958: DECL: 07/07/2017
TAGS: ECON ETRD ENRG WTO SA
SUBJECT: CHINESE DUMPING PROBE OUTRAGES SAUDIS

Classified By: DCM David Rundell, reasons 1.4 (b) and (d).


1. (SBU) Summary: Saudis responded sharply July 4 after
Beijing began a dumping probe on two of the Kingdom's
petrochemical products. Newspapers published unusually
critical statements, probably in part to signal the
displeasure of government and industry leaders to the PRC. A
Saudi Deputy Minister of Commerce was dispatched on short
notice to Beijing to talk through the issue. A Chinese
Embassy spokesman attempted to mollify Saudi concerns in a
press conference July 5 by explaining that the dumping
investigation was at its earliest stages and Saudis would
have a chance to make their views known, and implicitly, to
resolve the dispute. This spat is a rare exception to the
two countries' otherwise successful efforts to improve
bilateral economic ties in recent years. End summary.

Saudis express outrage over Chinese dumping probe
-------------- --------------


2. (SBU) Saudi petrochemical producers called for duties on
industrial imports from China on July 4 after Beijing began a
dumping probe on petrochemical products from Saudi Arabia,
Indonesia, Malaysia, and New Zealand. The dispute is limited
to methanol and butanediol (BDO),which make up between 10
and 15 percent of Saudi Arabia's $2 billion in annual non-oil
exports to China. Press reports quoted Saudi Export
Development Center (SEDC) executive council chairman and
former Deputy Minister of Commerce Abdul Rahman al-Zamil
reiterating the Kingdom's longtime message that Saudi Arabia
does not "subsidize" its petrochemicals exporters, and he
called China's protection policy "unacceptable."

3. (SBU) Al-Zamil warned that petrochemical producers would
oppose a free trade agreement between the Gulf Cooperation
Council and China if China imposes an anti-dumping duty. He
also called for a working group composed of representatives
from the Saudi Ministries of Foreign Affairs, Commerce, and
Finance to respond to the Chinese decision. A Ministry of
Commerce official told Econoff July 5 that Deputy Minister
for International Trade Abdullah al-Hamoudi was traveling to
China that day on very short notice. Press reports later
confirmed that the Ministry sent a delegation to China to
discuss the matter.

China attempts to diffuse anger
--------------


4. (SBU) The Chinese Embassy spokesman in Riyadh told
reporters July 5 that "China is still undecided about
imposing an anti-dumping charge on Saudi petrochemical
exports, as the investigation into dumping of Saudi
petrochemicals to China is at the preliminary stage." Either
a punitive tariff or a "guarantee fund" charge of less than
five percent of the goods' value could be levied, he said.
The spokesman emphasized the importance of the Sino-Saudi
economic relationship and said China would "consider the
Saudi view" on the issue. (Note: Two-way trade between
China and Saudi Arabia exceeded $41.8 billion in 2008, and
according to some reports had been increasing at a rate of 30
percent annually before the financial crisis. End note.)

Comment
--------------


5. (SBU) The Saudis and Chinese have worked assiduously to
strengthen bilateral relations over the past several years.
Despite deep cultural differences between the two countries,
their governments share an appreciation for the mutual
benefits that could be accrued from closer trade ties (Saudi
oil for cheap Chinese products and turnkey construction
projects). King Abdullah's first official foreign travel
upon his 2005 accession was to China (followed by India) in

2006. The Saudis then successfully amplified positive
domestic publicity for President Hu's February 2009 visit to
Saudi Arabia.


6. (C) Therefore we view the public nature of this trade spat
as somewhat unusual and probably designed in part to signal
Saudi government and industry's displeasure over the Chinese
decision to open a dumping investigation on a product
category that the government views as key to its development
strategy to move up the petrochemical value chain away from
simply exporting crude oil. The strength of the reaction
also reflects the Kingdom's desire to counter swiftly any

RIYADH 00000895 002 OF 002


assertions that cheap feedstock prices are a subsidy, much
less part of a strategy of petrochemical dumping. To our
knowledge this dispute is the first hitch in the growing
Sino-Saudi economic relationship in several years. End
comment.

ERDMAN