https://sputniknews.com-Ekaterina Blinova-Saudi Arabia is reportedly considering pricing some of its oil sales to China in yuan instead of US dollars, the Wall Street Journal wrote on 15 March, citing people familiar with the matter. Talks with the Chinese have intensified as Riyadh has become disenchanted with Washington, according to the media outlet.
“If Saudi Arabia and China reach an agreement on oil payments in yuan, it will have significant ramifications for the future of the dominance of the dollar on the global market,” says Sami Hamdi, an Arab political analyst and head of the International Interest, a risk analysis group. “I think that while the dollar would remain dominant, such a move would cause a dent in the reputation of the dollar and would also encourage nations that are uncomfortable with the manner in which the US has been able to apply such sweeping sanctions on Russia by virtue of dominating the dollar.”
If Saudi Arabia and China proceed with this move, it would herald “a new era” in which states would accelerate their attempts to reduce their dependence on the dollar, according to Hamdi.
“We’ve already seen this taking place in Turkey,” he remarks. “We’re seeing this taking place with other countries – this idea that the dollar has far too much influence.”
Indeed, in January 2022 the central banks of the United Arab Emirates and Turkey inked a bilateral currency swap agreement to deepen bilateral trade in local currencies, according to the Anadolu Agency. The news outlet notes that with the latest agreement, the Turkish Central Bank’s total swap figure with foreign central banks has reached $28 billion.
At the same time, no representative of the Saudi government itself has made any sort of announcement with regard to the aforementioned switch to the yuan in the oil trade, says Dr Ahmed Al Ibrahim, a Riyadh-based political analyst. He notes that there are many scenarios that Saudi Arabian experts and officials are studying in order to bolster the country’s position and the economy. “But that doesn’t mean that we will disengage ourselves from the dollar,” Al Ibrahim remarks, warning against jumping to conclusions.
“Taking the dollar away from the trade is not something you make a decision about,” the political analyst says. “These are countries’ economies. This is the economy of Saudi Arabia, the way we traditionally were doing trade. This is the American economy. This is a global economy. Saudi Arabia or America cannot take these decisions. We are part of a system, a global financial system, and we all know that the American financial system is so big, that if it sneezes, the whole world will cough.”
The Wall Street Journal’s report has not yet been confirmed by Riyadh, echoes Dr. Abdulkhaleq Abdulla, professor of Political Science at Emirates University and author of several books, including The Gulf Moment.
“I think what happens is that some of the oil products, not oil as such, will be sold in yuan,” the professor suggests. “And that literally means that Saudi Arabia owns some oil downstream refineries that are in China and maybe these refinery products that are based in China, maybe they will be sold on the Chinese market in yuan currency. But overall, the 90% or whatever of oil produced by Saudi Arabia and by the world will still be sold in dollars.”
Still, the observers agree that relations between the US and Saudi Arabia have recently grown tense following the Biden administration’s efforts to restore the Iran nuclear deal, the withdrawal of the US assistance in the Yemen War, and Washington’s verbal attacks against Crown Prince Mohammed bin Salman.
“Mohammed bin Salman is very upset with the way Biden has been giving him the cold shoulder and the way Biden has been treating him,” says Hamdi.
Notably, every time there is a deterioration in US-Saudi relations, Riyadh hints at the possibility of drifting away from the US dollar in the oil trade, notes Hamdi.
Back in 2019, Saudi Arabia threatened to sell in other currencies if the US Congress passed a bill allowing antitrust liability for OPEC members, according to The Hill. The Saudis have exclusively used the greenback for crude trading as part of a security agreement with the US government since the mid-1970s.
The Hill notes that the purported Saudi-Chinese talks could be part of the ongoing effort by Beijing “both to make its currency tradeable in international oil markets and strengthen its relationship with the Saudis specifically.” The media outlet adds that the WSJ report also comes on the heels of Washington’s request to Riyadh to pump more oil in order to offset soaring gasoline prices which further leaped after the latest round of US sanctions targeting Russia’s crude.
Reported Saudi-Chinese talks “never necessarily really manifest into open defiance of the US,” suggests Hamdi.
“And this is why there remain more question marks over these talks as to whether they are actually serious or whether they’re just a lashing out on the part of the US allies,” he concludes.