Xi's visit to Saudi Arabia and Peru's political instability

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CWA # 856

The World This Week

Xi's visit to Saudi Arabia and Peru's political instability

11 December 2022

TWTW#193, 11 December 2022, Vol. 4, No. 42

China: President Xi's visit to Saudi Arabia hints at Beijing's pivot to the Middle East
Avishka Ashok

What happened?
On 8 December, China’s President Xi Jinping landed in Saudi Arabia for a three-day-long state visit. Chinese media claimed the visit was the country’s “biggest diplomatic initiative in the Arab world.” Xi Jinping signed a comprehensive strategic partnership agreement with Saudi Arabia and a series of investments and energy resources deals. Both countries signed 34 agreements on the following areas: information technology, genetics, mining, hydrogen energy and manufacturing. The Chinese delegation also agreed to set up an electric vehicle plant in Saudi Arabia. It also includes Huawei being allowed to provide cloud computing services and building high-tech complexes in Saudi Arabian cities.

On Iran, Xi agreed with the Arab concerns while Saudi officials agreed with Beijing’s one-China principle.

Xi engaged in two other summits during his visit to Riyadh: the China-Saudi-GCC Summit for Cooperation and Development and the Saudi-Arab-China Summit for Cooperation and Development. On 9 December, Xi Jinping met the Arab leaders from the Gulf, Africa and the Levant at a summit hosted by Saudi Crown Prince Mohammed bin Salman. He also held bilateral meetings with the Kuwait Crown Prince, Egyptian President, Iraqi Prime Minister, Sudanese leader, and Palestinian President. He stressed on the importance of stability in the oil markets. Xi said: “China will continue to firmly support the GCC countries in maintaining their own security and build a collective security framework for the Gulf. China will continue to import large quantities of crude oil from GCC countries on an ongoing basis.” More importantly, Xi announced that China would buy oil and gas in yuan instead of the US dollar.

What is the background?
First, China and Saudi Arabia relations. China, the second largest economy, has an incessant demand for petroleum products such as crude oil and LNG. To keep up with its growth rate, China depends heavily on the Middle East and Africa for its energy imports. Saudi Arabia exports almost half of China’s oil imports. The country also views China as a lavish spender and investor. Saudi Arabia looks up to China in the field of technological advancements. Riyadh will spend over USD 24.7 billion on secure, efficient and accountable digital platforms by 2025. China has been lauded as a “natural partner” for Saudi Arabia’s emerging science and technology industry.

Second, Saudi Arabia’s interests in China. Saudi’s deepening relationship with China results from the country’s leadership, who aim to move away from any form of polarisation of the international order. Saudi Arabia wants to create strong bilateral relationships with all big powers and maintain a balanced relations to protect its interests. While China replaced the US as Saudi’s export destination in 2017, Riyadh became the top invested country in the Arab world with 20.3 per cent of Chinese investments in the 2005-2020 period. The Saudi leadership is also looking forward to moving away from the US after the frigid interaction between Joe Biden and the Crown Prince in July 2022. Despite being a US ally in the Middle East, the Kingdom’s growing proximity with China is a change in the US-Saudi relationship.

Third, China’s engagement with the Middle East. Compared to China’s involvement in other continents such as Africa and Southeast Asia, Beijing’s involvement in the Middle East has been slow to catch up. Relations with the Arab countries started picking up with the Belt and Road Initiative and comparatively low-key deals signed between countries. However, China’s engagements with the Gulf states have attracted attention in the past few decades. In 2014, Xi promised to double China’s engagement with Arab countries by 2023. In January 2022, China hosted the Arab Gulf Foreign Ministers in Beijing to discuss issues of common interest and deepen relations. In November 2022, China’s state-owned Sinopec signed a USD 60 billion deal with QatarEnergy for a period of 27 years. It has also signed a series of agreements with Iran worth USD 400 billion and Israel worth USD 18 billion on ports, transportation, railways, telecommunication, renewable energy and pharmaceuticals.

Fourth, China’s desire to replace the dollar with the yuan. In the furtherance of its end goal of replacing the US as the world’s superpower, China has been pushing for trading in the Chinese currency instead of the US dollar. To be accepted as the global currency, central banks must possess over USD 700 billion worth of yuan in forex reserves. In 2015, 18 local financial institutions in China and 17 Russian institutions agreed to establish an efficient payment mechanism to assist the trade between the countries. In the same year, the yuan was awarded the status of a reserve currency by the IMF. China has since been pushing for contracts which use the yuan as the trading currency. China once again pushed for an alternative payment system during the Shanghai Cooperation Organization’s summit in Uzbekistan in September 2022. As of September 2022, Russian businesses also opted to use the yuan to settle their payments, resulting in a boost in the yuan’s borrowing.

What does it mean?
The increasing Chinese involvement in the Middle East is a cause of concern for the US and Russia. Media sources comparing the US President Joe Biden’s visit to Saudi Arabia in July 2022 observe a massive change in the Kingdom’s approach. Analysts hint at a growing discomfort between the US and Saudi Arabia’s relations, caused by the Jamal Khashoggi’s murder, the human rights issues and its energy policies.

The deepening relations between China and the GCC are also a cause of concern for Russia as it competes with the Gulf to sell oil to its largest customer. It has already been offering big discounts after the Ukraine war; competing with the Gulf may become deeply disadvantageous for Russia.

Peru: Political instability following Pedro Castillo's impeachment
Madhura Mahesh

What happened?
On 07 December, President Pedro Castillo, ahead of the trial announced that he would be dissolving the congress “by decree.” The opposition, members of his party, the armed forces and the federal police condemned this decision. Ministers from his party resigned from their offices and the Supreme Court of Peru termed this move unconstitutional.

Congress convened two hours later to begin the impeachment trial and with 101 votes in favour, 6 against and 10 abstentions, Castillo was impeached from power. In his place, Vice President Dina Boluarte was sworn in as the first female President of Peru. She called for "a political truce to install a government of national unity." Castillo was then arrested from the presidential palace on a “rebellion” charge for trying to violate the constitution.

What is the background?
First, the structure of the Peruvian Government. The Government of Peru is a semi-presidential form of government with a multiparty system. It is divided into three branches: executive, legislature, and judiciary. Peru’s legislature or the Peruvian Congress is a unicameral body with 130 legislators elected through a proportional representation for five years. The legislature is led by the President of Congress who is elected by the members and is usually from the ruling party. The executive is led by the President of Peru who is the head of state and government. The executive consists of the President, two Vice Presidents, a Prime Minister and the Council of Ministers which are appointed by the President. President Pedro Castillo was elected in June 2021 and in his term, he shuffled his cabinet five times. The congress is held by the opposition and has always clashed with Castillo and his ministers.

Second, differences between the legislature and the executive. The current governmental structure was introduced in Peru in 1993. Since 1999, with the impeachment of former President Alberto Fujimori, the Congress and the Executive have always clashed. Since 2016, Peru has seen six Presidents assume office who have either been impeached or have dissolved the Congress and called for fresh elections. After Castillo came to power with more than 50 per cent of the total votes in 2021, he has clashed with the legislature controlled by the opposition on many accounts. The Congress has accused Castillo on multiple occasions of corruption and economically benefiting from his Presidency. As of 7 December, Castillo has five open criminal investigations and a constitutional complaint accusing him of leading a criminal organisation in the government.

Third, prior impeachment attempts. The impeachment motion passed on 2 December was the third impeachment motion tabled in Congress against Castillo. The first impeachment attempt was in December 2021 on the on the account of illicit financing of the ruling party and the second attempt was in March 2022 on the accusation of “permanent moral incapacity.” Both these attempts failed as the opposition did not garner enough support for the motion to pass, that is, 87 votes in favour of the procedure.

What does it mean?
First, the continued dominance of Congress. Congress being an independent body in the government has the power to not only make laws but also to remove the President. Since 1999, the Congress has played a major role in the appointment and removal of Presidents. Here Bolurate was appointed by the Congress but currently does not have concrete support of her party or the opposition. Her reign as the President will likely be dictated by the Congress unless she calls for fresh elections.

Second, the unstable nature of Peruvian politics. Since the constitution was formally introduced in 1993, the Peruvian political landscape has been dynamic and unstable. Presidents and Ministers in Peru have been involved in scandals, corruption, and human rights violations. The impeachment of Castillo brings out this tumultuous nature of Peruvian politics to light.

Also in the news...
Regional round-ups

East and Southeast Asia This Week
China: CPC withdraws the zero-COVID policy and introduces new norms for pandemic control
On 4 December, in continuation of the protests in China, students at Wuhan University gathered outside the administrative block and called for an open process and information transparency. The students protested against the zero-COVID policy of the Chinese government and expressed their discontent with the confusing regulations on returning to their hometowns. The numerous protests in cities across the country resulted in an emergency meeting where the authorities agreed to ease the COVID-19 restrictions. The World Health Organization (WHO) Emergencies Director Dr Michael Ryan appreciated China’s decision to loosen its policy. On 7 December, China’s National Health Commission released a 10-point announcement withdrawing the zero-COVID policy and presented a new set of lenient norms to control the pandemic.

China: UN Representative calls for greater support towards disaster prevention
On 6 December, China’s Deputy Permanent Representative at the United Nations Geng Shuang addressed the General Assembly and called on the developed countries to take up more responsibilities in providing humanitarian aid and enhancing disaster prevention. Shuang urged the countries to provide support in terms of funds, technology, and disaster relief management expertise along with fulfilling their obligations on climate change. Further, he stressed on protecting vulnerable groups such as women, children, refugees and displaces persons.

Japan: House of Councilors adopts resolution on human rights violation in China
On 5 December, Japan’s House of Councilors adopted a resolution on human rights in China and expressed concerns over the violation of rights in Xinjiang, Tibet, Inner Mongolia and Hong Kong. China’s Foreign Ministry Spokesperson Mao Ning referred to the resolution and reprimanded it for ignoring the basic facts, being based on disinformation and interfering in China’s internal affairs. Further, Mao pointed fingers at Japan’s aggression during the world wars and said: “Pointing fingers at other countries will not cover up Japan's past. Politicizing and instrumentalizing human rights issues to hurt China's image and stall China's development will not succeed.”

Cambodia: US questions China’s access to Ream Naval Base
On 5 December, the US administration questioned the Cambodian government on its stand over China and asked for more transparency about the latter’s access to the Ream naval base in the gulf of Thailand. US had earlier accused Thailand and China of taking extraordinary measures to cover the strategic involvement in Cambodia. Chinese construction on the Cambodian base has sparked Washington on how important the location is for China. The Ream Naval Base will be China’s first overseas base in the Indo pacific region which allows the navy to expand its reach towards the Indian Ocean. The expansion is part of China’s diversification of military capacity-building efforts.

Philippines: Cooperation renewed with South Korea over nuclear power plant
On 7 December, the Philippines renewed its cooperation with South Korea regarding the resumption of the stalled nuclear power project. The Chief of the Southeast Asia nations’ special commission on nuclear energy made the request during the meeting with the Ministry of Trade and Energy officials of South Korea. The decision was based on the project to build a nuclear power plant in the Philippines in the 1970s but was shelved owing to safety concerns. The plant was supposed to be in the vicinity of 100 kilometres west of Manila. Officials from the Philippines said the push to strengthen nuclear power generation was to deal with climate change and the energy crisis. He stressed that South Korea’s cooperation is needed to conduct further tests and the country will be the optimal partner based on the operational technologies.

South Asia This Week
Nepal: ruling coalition falls short of securing majority in parliament
On 7 December, the Election Commission of Nepal said that the country’s ruling coalition which includes Prime Minister Sher Bahadur Deuba’s Nepal Congress fell short of securing a majority with 136 seats in the 275-member parliament. A spokesperson for the Nepali Congress (NC) said that even though the NC emerged as the party to secure the largest votes in the parliament, the result was “not in line” with their expectation and that they “had expected more.” This result entails the NC seeking support from the other 34 independent and minor party candidates in the assembly, including Rabi Lamichhane’s National Independent Party, which has long campaigned against the NC-led government’s corruption in the country.

Maldives: President says the regional alliance is vital for peace and stability
On 8 December, Maldives President Ibrahim Mohamed Solih sent felicitations in the message to the Secretary-General of the South Asian Association for Regional Cooperation (SAARC) Esala Ruwan Weerakoon, the Secretariat of SAARC, institutions partnered with SAARC and the citizens of the South Asian countries on the occasion of the 38th SAARC Charter Day. Solih’s message said that the Maldives recognises the significance of adhering to regional partnerships to ensure peace and stability. He added that the Maldives’ allegiance to the value and principles of the SAARC Charter. He also expressed his hope to continue to work together to achieve progress and prosperity for the countries of the SAARC region.

Sri Lanka: World Bank approves access to concessional financing from International Development Association
On 6 December, Sri Lanka’s President Media Division (PMD) reported that the World Bank had approved Sri Lanka to access concessional financing from the International Development Association (IDA). The financing offered at minimum interest rates will help the country implement government-led programs to stabilize the economy and protect millions of people’s livelihoods. World Bank also added that the approval makes Sri Lanka an IDA country. The World Bank Vice President for Development Finance, Akihiko Nishio, said that the World Bank is committed to helping Sri Lankan people when there are needs. He also added that the World Bank is ready to support Sri Lanka in implementing reforms and helping create the foundation of sustainable growth.

Pakistan: Islamabad requests Riyadh for another cash loan; IMF ninth review at the “advanced stage”
On 7 December, Finance Minister Ishaq Dar in a meeting with Saudi Arabia’s ambassador Nawaf bin Said Al-Malki requested the country to urgently provide USD three billion in cash after the foreign exchange reserves fell to a critically low level. He also thanked the ambassador for extending the term of a USD three billion deposit in the State Bank of Pakistan (SBP) by the Saudi Fund for Development (SFD). FM Dar’s request for the cash bailout is the same amount of money rollover of the previous deposit by Saudi Arabia in the SBP. Separately, the Finance Division stated that talks with the IMF on the ninth review of Pakistan’s USD seven billion Extended Fund Facility (EFF) were at the “advanced stage.” This comes as the SBP’s exchange reserves dipped to USD 784 million to a fatal four-year low of USD 6.2 billion in the week that ended on 2 December 2022.

Central Asia, Middle East and Africa This Week
Uzbekistan and Kazakhstan: Countries refuse to join Russia’s trilateral gas union
On 7 December, Uzbekistan rejected President Vladimir Putin's creation of a trilateral “natural gas union,” including Russia, Kazakhstan and Uzbekistan. Uzbek Energy Minister said: “We will never compromise our national interests. Even if we [agree to receive natural gas from Russia], we will proceed via commercial sales contracts. We will not allow any political conditions to be imposed in return.” Similarly, Kazakhstan also refused to join the union as the Deputy Minister of Foreign Affairs said: “It is too early to discuss its content because so far this is some kind of idea. But the principled position of Kazakhstan is that Kazakhstan does not allow its territory to be used to circumvent sanctions. These positions have not changed and will be used in assessing any potential new initiatives.”

Lebanon: MPs fail to elect a President, once again
On 8 December, the Lebanese Parliament failed to elect a president for the ninth time. 39 MPs voted in favour of Michel Moawad, the Hezbollah opponent, but fell short of the required majority. Hezbollah and its allies casted blank ballots and most of the MPs spoilt their ballot, resulting in the Parliament Speaker calling for another session on 15 December. Lebanon is in the midst of a political crisis, with a vacant presidential post and a cabinet that is not fully functional.

Jordan: Trilateral meeting between Jordan, Iraq and Egypt on cooperation in economy, security and politics
On 7 December, foreign ministers of Jordan, Iraq and Egypt met in Amman, as a part of the trilateral cooperation mechanism between the three countries. They discussed the potential areas of cooperation in the fields of economics, security, politics and industry. They also discussed regional issues such as the Palestinian concerns, stability in Iraq, and Turkey’s operation in Iraq and Syria against the Kurdish regions. Egypt’s foreign minister Sameh Shoukry said “the trilateral mechanism aims to strengthen the existing ties based on integration between our countries, as well as enhance economic opportunities.”

Turkey: Oil tankers stuck at strait of Bosphorus after G-7 sanctions against Russian oil
On 8 December, at least 20 oil tankers were queuing off Turkey as the G-7 sanctions were slapped on Russia. Under the sanctions the European firms and individuals will not provide financing, brokerage, shipping and insurance services to ship Russian oil elsewhere if the crude was bought above a price cap of USD 60 a barrel. India who exports Russian oil on insurance and guarantee from European firms will likely witness the waiting for oil imports in upcoming weeks, claimed Business Standard.

Eritrea: Kenyan President visits Eritrean capital Asmara in supporting peace
On 9 December, Kenyan President William Ruto began his two-day official visit to Eritrea. The visit comes following Eritrea's foreign minister's visit to Kenya the previous week; Eritrea's ministry of information said following the visit that Ruto had "expressed the need for countries in the region to work jointly for realising peace and stability as well as political and economic developments." Ruto's unexpected visit to Eritrea seeks to strengthen relations between the two countries which were stranded in the past. Meanwhile, Eritrea faces international criticism for its human rights atrocities and involvement in Ethiopia's Tigray conflict.

Sudan: Military signs agreement for a civilian transition
On 5 December, Sudan’s pro-democracy coalition Forces of Freedom and Change and the military signed an agreement to restore civilian rule in two years that would lead to an election. However, protesters in capital city Khartoum challenged the agreement and called the military to be accountable for the coup as well as the death of anti-coup protesters. The deal doesn’t cover security reforms leaving public concern that it would leave the military powerful and disrupt the democratic transition. A Forces of Freedom and Change spokesperson said: “The goals of the agreement are establishing a fully civilian authority, creating a free climate for politics, and reaching a final agreement with the widest political participation.” The African Union, Arab and western countries have been pressuring both sides for negotiations. Meanwhile, the UN and the US welcomed the agreement.

Africa: Over 95 per cent malaria infections and deaths recorded in Africa in 2021
On 8 December, the World Health Organization (WHO) released the World Malaria Report 2022 outlining that the number of deaths from malaria in 2022 had risen by 63,000 against the pre pandemic figure; in 2020 and 2021, 625,000 and 619,000 deaths were recorded respectively against the 568,000 deaths in 2019. Similarly, the number of infections also increased, at a slow pace, from 232 million cases in 2019 to 245 million in 2020 and 247 million in 2021. Africa accounted for over 95 per cent of the infections and deaths in 2021 and Nigeria, the Democratic Republic of the Congo, Niger and Tanzania recorded over half of global malaria casualties.

Democratic Republic of the Congo: EU sanctions eight more individuals for violence and rights abuses
On 8 December, the European Union placed eight new individuals under sanctions: five belonging to the armed groups ADF, CODECO, FDLR, Mai-Mai Yakatumba and M23; a national army official, a Congolese politician and a Belgian businessman. The EU held them responsible for the human rights violations, inciting violence through illegal exploitation and trade of natural resources, and perpetuating the conflict in the DRC's eastern region. The EU also extended sanctions previously imposed on nine individuals; all 17 persons face a travel ban and an asset freeze.

Europe and The Americas This Week
Ukraine: Foreign Minister reveals that Ukraine can use American weapons in Crimea
On 8 December, Ukrainian Foreign Minister claimed that the US does not restrict Ukraine from using American-origin weapons for their strikes in Crimea. Ukraine is obligated to a promise made to the US to refrain from striking with the equipment supplied by the US, on Russian soil. During his conversation with the Wall Street Journal, Dmitry Kuleba accused Russia of not showing interest for the peace talks while arguing that Moscow has been preparing for new battles. The US and it’s NATO allies have been providing Ukraine with large quantities of weapons and military assistance since the start of the war. In this context, experts have claimed that these supplies have blocked the scope for a peace negotiation between the two warring countries.

Russia- US: Diplomats of both countries meet at Istanbul to discuss ‘irritants’ in bilateral relations
On 9 December, on the wake of a high-profile prisoner swap between Russia and the US, it was revealed that the diplomats of Moscow and Washington held talks in Istanbul at the Valdai discussion forum. Russian Foreign Minister told that the meeting was aimed at discussing the ‘irritants,’ in the bilateral relations between the two countries and stated that it was merely a routine issue and “not an indication of resuming dialogue with the US. The word ‘irritants’ is said to refer to the functioning of the Russian diplomatic missions in the US and vice versa. The US has not made any public comments on the meeting.

Argentina: Vice President sentenced to six years in prison
On 6 December, Argentinian Vice President Cristina Fernandez de Kirchner was sentenced to six years in prison under the charge of embezzling USD one billion through public works projects in her presidency. She has also been barred from holding a public office. The judgement does not come into effect until all the appeals filed by Fernandez de Kirchner are addressed. Fernandez de Kirchner on her part has denied the accusations and has claimed that she is a victim of the “judicial mafia.” Fernandez de Kirchner was the President of Argentina from 2007-2015 where she allegedly sanctioned many public works projects and diverted funds from these projects to the business of her associates.

Uruguay: Uruguay announces plans to sign free trade agreements, causes tension in Mercosur trade bloc
On 06 December, Uruguay at a Mercosur trade summit announced its intentions to pursue free trade agreements with China and join the Trans-Pacific Partnership (TPP). This rattled the Mercosur trade bloc consisting of Uruguay, Brazil, Paraguay and Argentina. Uruguayan President Luis Lacalle Pou said: "Uruguay needs to and has the ambition to open up to the world. Of course, if we go in a group, it is much better." The Presidents of Brazil, Argentina and Paraguay have opposed this move saying that it hampered the integration of the Mercosur trade bloc. The Paraguayan President Mario Abdo Benítez said that Uruguay can proceed with the deals but it should share and consult with the bloc before it ratifies it. Uruguay has previously criticised the trade blocs restrictions and tariffs and added that it was affecting its economy.

Mexico: Mexican Congress rejects proposed electoral reform but approves an alternate lesser electoral reform law
On 6 December, Mexico’s lower house of Congress failed to pass the proposed electoral reform calling for a constitutional amendment to restructure the National Electoral Institute (INE). The ruling parties and their allies did not get a two-thirds majority to pass the bill with 269 votes in favour, 225 against and one abstention. On 07 December, Congress did pass an alternate proposal for electoral reform which called for reducing the budget of the INE and reducing its power. Both proposals were criticised by the opposition and the public saying that the government wishes to gain more control of the electoral commission before the 2024 elections.

The US: Annual NDAA passed by US house of representatives, USD 858 billion allotted for defense spending
On 9 December, more than two third of the representatives voted in favor of the National Defense Authorization Act (NDAA) which paved the way for defense budget to hit the record of USD 858 billion. Around 10 billion has been allotted for the Taiwan Enhance Resilience Act (TERA), while mentioning China as the main threat to national security objectives in the bill. The 2023 NDAA includes USD 816.7 billion for the Department of Defense. The legislation also dropped the Covid vaccine mandate for active service duty personnel. The bill did not include provision for vendors to mention the software bill of materials (SBOM) on the technology they provided to government agencies.

About the Authors
Harini Madhusudan, Rashmi Ramesh, Akriti Sharma, and Ankit Singh are PhD scholars in the School of Conflict and Security Studies at the National Institute of Advanced Studies. Avishka Ashok, Abigail Miriam Fernandes, Apoorva Sudhakar, and Joel Jacob are Research Associates at NIAS. Sethuraman Nadarajan, Bhoomika Sesharaj, and Madhura Mahesh Research Interns at NIAS.

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The World This Week

Xi's visit to Saudi Arabia and Peru's political instability

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