U.S. intelligence agencies are closely watching Saudi Arabia for signs that the oil-rich kingdom will seek to develop nuclear weapons, amid tensions in the region centered on IranÂ’s nuclear program.

One key warning sign was the cooperation agreement signed Sunday in Riyadh by China and Saudi Arabia.

According to the Saudi Jidda News, the agreement will seek joint development of “atomic energy for peaceful purposes, which will help to meet the kingdom’s rising demand for energy and cut its growing dependence on depleting resources.”

The agreement was signed by King Abdullah and Chinese Prime Minister Wen Jiabao and followed earlier public remarks by a senior Saudi prince who said the country should develop nuclear weapons to counter rival IranÂ’s nuclear arms.

Former Saudi intelligence chief Prince Turki al-Faisal said Dec. 5 that “our efforts and those of the world have failed to convince Israel to abandon its weapons of mass destruction, as well as Iran. … Therefore it is our duty toward our nation and people to consider all possible options, including the possession of these weapons.”

The administration’s argument against Iran’s reason for developing nuclear energy — that Tehran has enough oil to produce electrical power for a century — also would apply to Saudi Arabia.

Saudi Arabia holds some of the largest oil reserves in the world and is ChinaÂ’s main supplier of crude oil.

Saudi Arabia last year held talks with the Obama administration on U.S. nuclear cooperation and reached a deal for nuclear development with South Korea in November.

However, the Chinese deal has raised concerns because of ChinaÂ’s past role as an arms proliferator. China supplied Pakistan with nuclear-weapon design information during the 1980s. That technology was discovered in Libya in 2003 after Tripoli decided to give up its covert nuclear program.

China in the 1980s supplied Saudi Arabia with 36 DF-3 medium-range ballistic missiles that, although not equipped with nuclear warheads, are considered nuclear-capable systems.

One U.S. official said of the China-Saudi nuclear deal: “There’s no reason at this time to be concerned that this deal is anything other than what they say it is.”