Spain's King Felipe VI met Sunday with Saudi King Salman, official media said, during a visit coinciding with talks to sell Spanish warships.

Felipe, 48, was guest of honour at a lunch hosted by Salman, 81, who decorated him with the cordon of King Abdul Aziz, the highest Saudi honour for a foreigner, the Saudi Press Agency said.

Later they discussed relations between the two nations and how to further develop them "in various fields", it said.

They also reviewed the situation in the Middle East, before Felipe held separate talks with Saudi Finance Minister Mohammed Aljadaan and Minister of Commerce and Investment Majed al-Qasabi.

The Spanish king arrived late Saturday in Riyadh for a three-day stay.

Madrid's foreign ministry said its minister Alfonso Dastis, and Public Works Minister Inigo de la Serna, would accompany Felipe during the visit.

Spanish media have linked this trip to a much-anticipated deal to sell Avante 2200 frigates for an estimated two billion euros ($2.1 billion).

"We can only confirm that negotiations are very advanced to build five warships which would be sold to the Saudi navy," a spokesman for state-owned Spanish ship builder Navantia told AFP.

Spain is the seventh largest arms exporter in the world, and Saudi Arabia is one of the biggest buyers of military gear.

A Saudi-led coalition began air strikes over Yemen almost two years ago after Huthi rebels and their allies, troops loyal to ex-president Ali Abdullah Saleh, overran much of Yemen.

Riyadh feared the Huthis would seize all of Yemen and move it into the orbit of Shiite Iran, Sunni Saudi Arabia's regional rival.

But the air campaign has faced repeated criticism from rights groups over civilian casualties.

This year's budget allocates 191 billion riyals ($51 billion) for military spending including equipment and weaponry, down from 205 billion riyals spent in 2016.

A separate budget allocation of 97 billion riyals is to pay for new naval bases for the Border Guards, and other security projects.

Rights groups have said any Spanish sale of warships to Saudi Arabia would be illegal under international law.

Felipe's father, Juan Carlos, who reigned from 1975 to 2014, has close ties to the Saudi royal family.

A Spanish consortium, Al-Shoula, is building a high-speed railway across the desert to link the holy cities of Mecca and Medina.

The project is behind schedule and is now set to open in 2018.

Spanish construction group FCC leads one of three consortia building a $22.5-billion rapid transit system in the Saudi capital.

it/pg

FCC - FOMENTO DE CONSTRUCCIONES Y CONTRATAS SA