Saudi Arabia might adopt yuan now rather than USD for oil sales.
Saudi Arabia might adopt yuan now rather than USD for oil sales.
For many years, America's edge over other currencies were its supremacy over oil; nevertheless, it now appears that America may lose its place to its greatest threat.
The Wall Street Journal reported Tuesday that Saudi and Chinese officials are discussing pricing part of the Gulf nation's oil sales in yuan rather than dollars or euros.
Talks are anticipated to begin in 2022, with Riyadh displeased with the US nuclear negotiations with Iran and its lack of backing for Saudi Arabia's military action in neighboring Yemen.
According to the Journal, about 80% of worldwide oil sales are priced in dollars, and the Saudis have solely used the dollar for oil transactions since the mid-1970s as part of a security deal with the US government.
The negotiations are the latest in Beijing's continuous efforts to make its yuan tradeable in international oil markets and to bolster its ties with the Saudis in particular.
China has already assisted Riyadh in the development of ballistic missiles and nuclear power plants.
In contrast, the Saudi-American relationship has been increasingly strained in recent years.
Crown Prince Mohammed bin Salman portrayed himself as a reformer at first, liberalizing the country's regulations on women's rights and criminal justice.
However, the murder of dissident writer Jamal Khashoggi in 2018 has been disastrous for both the crown prince's public relations campaign and ties with Washington.
The schism widened after President Biden entered office, saying the assassination should make the kingdom a "pariah."
China's economic ties with Saudi Arabia have grown deeper, with the kingdom supplying the country with 1.76 million barrels of oil per day by 2021, according to the Journal, citing China's General Administration of Customs.
While the government intends to keep the dollar as the primary currency for most of its oil dealings, a transition by the Saudis may have a domino effect on China's other key oil suppliers, including Russia, Angola, and Iraq.
Saudi Arabia has threatened to sell in other currencies in 2019 if Congress enacted legislation allowing OPEC members to face antitrust punishment.
The bill, which had been offered several times before, failed once more that year.
The news comes as the US has asked Saudi Arabia to produce extra oil to counter skyrocketing gas costs, which have been exacerbated by Russia's invasion of Ukraine and the US's subsequent cutoff of Russian oil imports.