International partner: The country benefits from healthy trade ties with leading players

In January 2014 China’s government officials declared that in 2013 its annual trade in goods passed the $4trn mark, knocking the US off the top spot in international trade, and this shift in the axis of commerce is reflected in Saudi Arabia’s own trade relations. However, although the dramatic growth of China and other Asian economies has altered the balance, the Kingdom’s trade ties with Western Europe and the US remain strong. From Riyadh, the flying time to Beijing or Washington is roughly the same at just over 12 hours, and while Delhi is just four hours away, London, Frankfurt and Brussels only take a couple of hours more to reach. Saudi Arabia has trading partners on almost every continent.

Global Player

With total overseas sales of $388bn in 2012, according to World Trade Organisation (WTO) statistics, Saudi Arabia was the globe’s 15th-largest exporter. Exports of merchandise rose by 6% compared to 2011. The Kingdom was also the 30th-biggest importer of goods, or 21st if intra-EU trades are discounted, with imports of $156bn in 2012, up 18% yearon-year (y-o-y), representing the highest percentage increase of any of the world’s top 50 importers. Saudi Arabia also imported $50bn in services in 2012, down 6.9% y-o-y. According to preliminary data released by the Saudi Arabian Monetary Agency in the 2014 budget statement, total exports of goods was SR1.37trn ($366.8bn) in 2013, a 5.5% fall from 2012. Non-oil exports were estimated at SR197.6bn ($52.6bn), representing a y-o-y increase of 3.9%. Total imports of goods were pegged at SR574.1bn ($153.05bn), up 8% compared to 2012. Although there was a trade surplus of SR802.1bn ($213.84bn), this represented a decline of 13.3% compared to 2012. Jadwa Investment noted that while elevated oil revenues largely accounted for the surplus, global demand for petrochemical products had declined during the year.

Fuel Sales

According to the WTO report, China became the second-largest importer – after the EU – of fuels and mining materials globally in 2012. EU imports of fuel and mining materials were $1.03trn and China’s were $533bn, up 3.4%. In terms of fuel alone, India’s imports grew by the biggest margin, up 18%, while China’s imports rose 14%. The same year saw the US’s imports of fuels drop by 7.1% as tight oil and shale gas production flooded the American market with domestic fuel. However, Saudi Arabia managed to keep its place as the US’s second-biggest source of oil imports, and sales of $56bn accounted for 12.9% of total imports. Only Canada sold more oil to the US in 2012. Although continued economic woes dampened trade in the EU, Saudi Arabia was its seventh-largest source of imports, accounting for 3.7% of the total and sales of $38.5bn. But in the East, the economies of postFukushima Japan and China both used Saudi Arabia as their number one source of fuel imports. Japan bought $54.1bn worth, or 17.9% of its total, and China purchased $44.9bn, equivalent to 14.4% of its total fuel imports. The US has published figures on its trade with Saudi Arabia in 2013 showing that imports from the Kingdom dipped by 6.9% to $51.8bn, while US exports to Saudi Arabia grew by 5.7% from $17.9bn to $19bn.

Non-Oil Goods

The WTO records show that in 2012, fuel sales constituted 83.5% of Saudi Arabia’s total exports, down from 89.3% in 2005. This points to a degree of diversification in the Saudi economy, as well as in the goods it has been producing for sale. For instance, in 2012 its sales of chemicals totalled $35bn, equal to 1.8% of the global market. In 1980 Saudi Arabia’s share of global chemical sales was just 0.1%, and it accounted for just 0.7% in 2000. Also, the total export value of Saudi manufactured goods reached $57bn in 2012, up 35% from $42bn the year before and an 850% increase on the $6bn it exported in 2000.

Imports

Saudi Arabia is also a significant importer. It imported $5.47bn in goods from the EU in 2012 and $590m from Japan. The Kingdom is the world’s 13thlargest buyer of pharmaceuticals, with $5bn worth in 2012, while nearly $20bn of cars and car parts were imported. It also imported $12.27bn worth of office equipment, constituting 7.9% of total merchandise imports. As construction boomed, Saudi Arabia bought $148m worth of iron and steel from the US as well.

The impact of the country’s decision to wind down domestic wheat production can also be seen in the numbers for agricultural products, which represented 18.8% of imports in 2012, compared to 15.4% in 2005. Domestic food processing and manufacturing seems to have increased, however, as food stuffs as a percentage of all imports fell from 14.7% in 2005 to 12% in 2012.

The UK regards Saudi Arabia as a high growth market with combined UK exports of goods and services amounting to $12.73bn in 2012. According to a report published by the British government in December 2013, in September 2013 Saudi Arabia ranked it third behind China and the US as a non-EU importer of British goods. The Kingdom paid $895.12m for British exports in that month, just behind the high of $951.81m in April 2013.

Cement Alliances

In February 2014 Britain’s Prince Charles joined members of the Saudi royal family in performing a traditional sword dance at the Janadriyah Festival in Riyadh. His host, the second deputy prime minister, Prince Muqrin bin Abdulaziz, had attended the Royal Air Force College Cranwell, the UK’s air force academy. Military aviation was on the agenda as the visit was used to announce the formal completion of the $7.47bn BAE Systems’ contract to supply 72 Eurofighter Typhoon jets to the Royal Saudi Air Force.

In February 2014 Crown Prince Salman bin Abdulaziz Al Saud, who serves as the deputy prime minister and minister of defence, visited three of the country’s leading trading partners and allies in Asia. In Japan, Crown Prince Salman met with Emperor Akihito and had bilateral talks with Prime Minister Shinzo Abe to discuss a civil nuclear cooperation accord. In Pakistan he met with President Mamnoon Hussain and Defence Minister Khawaja Asif to discuss cooperation on defence equipment and training. Crown Prince Salman’s visit to India was the highest level state visit since King Abdullah bin Abdulaziz was received there in 2006, a year in which he also visited China. There are 2.88m Indian workers in Saudi Arabia, the largest of any migrant group, and Saudi Arabia is India’s fourth-biggest trading partner. The Indian media reported that in 2012-13 trade between the two countries was worth $43.78bn. Saudi Arabia exports crude oil, plastics, fertilisers and aluminium to India, and imports mineral fuels, cereals, iron and steel.

In March 2014 US President Barack Obama visited Saudi Arabia, which was the US’s 10th-largest goods trading partner, according to 2013 figures issued by the Office of the US Trade Representative, with two-way trade valued at a total of $71bn. Based on trade figures for that year, exports to the US totalled some $51.8bn, balanced by imports of $19bn. The top imports from the US to Saudi Arabia in 2013 were $5.8bn of vehicles, $3.6bn worth of machinery, aircraft at $2.1bn, electrical machinery to the tune of $1.4bn, and optical and medical instruments valued at $923m.