VZCZCXRO7247
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). 
 
¶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