<article><p class="lead">Saudi Arabia is asking oil product suppliers if cargoes originate from free zones in the Mideast Gulf region, potentially deterring sales from key regional trading hub Fujairah and further damaging relations between Riyadh and the UAE.</p><p>State-controlled Aramco's trading arm ATC issued a tender seeking low-sulphur fuel oil for August delivery to Jeddah, and later e-mailed participants an additional note asking sellers "to declare beforehand if the intended cargo origins is from a GCC Free Zone." There are numerous free zones in the six Gulf Co-operation Council (GCC) countries of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE. </p><p>This request does not exclude cargoes, but market sources said that even asking for a declaration will deter sellers from offering shipments sourced from free zones like Fujairah, a major bunkering and oil products trading hub that sits on the UAE's Indian Ocean coast outside the strait of Hormuz.</p><p>It is unclear how the new tariff regulation will affect ATC's stored or blended oil products in Fujairah. Riyadh may apply a waiver to be able to move cargoes out of Fujairah.</p><p>More than 400,000t of oil product cargoes originating in Fujairah discharged in Saudi Arabia in the first half of the year, according to Vortexa. These included 255,000t of gasoline and 144,000t of fuel oil.</p><p>ATC's request follows an amendment introduced by Saudi Arabia at the weekend to <a href="https://direct.argusmedia.com/newsandanalysis/article/2231269">its regulations on imports</a> from other GCC countries, which mean that Riyadh will no longer apply preferential tariffs to goods made by GCC companies that have a workforce comprising less than 25pc of local workers and produce goods that have a local content added value below 40pc. The UAE's industrial free zones, such as the Jebel Ali Freezone, allow foreign companies to fully-own companies and to work under light regulation.</p><p>The Saudi regulations are a blow to a long-held GCC goal of creating a unified customs zone. Free zones have become common features of their economies, contributing to economic diversification, strengthening the private sector, and creating job opportunities by allowing 100pc foreign ownership and trade at preferential rates. The UAE is expanding its already sprawling free zone system, and Saudi Arabia plans to launch its own at Neom, in the country's northwest.</p><p>The move could further undermine relations between the erstwhile allies, which are being tested by an <a href="https://direct.argusmedia.com/newsandanalysis/article/2231308">argument over Opec+ policy</a>. Riyadh began challenging the UAE's dominance as the region's financial and trade hub earlier this year. In February, it stipulated that foreign businesses would not be given contracts unless they base their regional hubs in the country, a move seen as a blow to the UAE's second largest emirate, Dubai, which has long promoted itself as the region's most attractive business centre to foreign investors and companies working across the Mideast Gulf.</p><p class="bylines">By Elshan Aliyev and Adal Mirza</p></article>
