Saudi Arabia's cabinet approved on Wednesday a decision to join the Shanghai Cooperation Organization, as Riyadh builds a long-term partnership with China despite U.S. security concerns.

Saudi Arabia has approved a memorandum on granting the kingdom the status of a dialogue partner in the Shanghai Cooperation Organization (SCO), state news agency SPA said.

The SCO is a political and security union of countries spanning much of Eurasia, including China, India and Russia.

Formed in 2001 by Russia, China and former Soviet states in Central Asia, the body has been expanded to include India and Pakistan, with a view to playing a bigger role as counterweight to Western influence in the region.

Iran also signed documents for full membership last year.

Joining the SCO was discussed during a visit by Chinese President Xi Jinping to Saudi Arabia last December, sources have told Reuters.

Dialogue partner status will be a first step within the organisation before granting the kingdom full membership in the mid-term, they said.

The decision followed an announcement by Saudi Aramco (2222.SE) which raised its multi-billion dollar investment in China on Tuesday, by finalising a planned joint venture in northeast China and acquiring a stake in a privately controlled petrochemical group.

Riyadh's growing ties with Beijing have raised security concerns in Washington, its traditional ally. Washington says Chinese attempts to exert influence around the world will not change U.S. policy toward the Middle East.

Saudi Arabia and other Gulf states have voiced concern about what they see as a withdrawal from the region by main security guarantor the United States, and have moved to diversify partners. Washington says it will stay an active partner in the region.

Countries belonging to the organisation plan to hold a joint "counter-terrorism exercise" in Russia's Chelyabinsk region in August this year.