Report: Saudi Arabia mulls ditching dollar in favor of China's yuan
Saudi Arabia is considering ditching the US dollar in favor of yuan in its oil sales to China, something which stands to profoundly affect the energy market, The Wall Street Journal reports.
The two sides’ officials are conducting negotiations to partially ditch the dollar in energy transactions, it added.
They have been discussing the prospect since 2016, but the talks have made some progress recently amid souring relations between the kingdom and the United States.
Saudi Arabia is uneasy with what the kingdom views as the US’s waning support for Riyadh’s war on Yemen, and over US President Joe Biden administration’s “attempt to strike a deal with Iran”, the daily wrote.
Saudi officials have also said they are shocked by the precipitous US withdrawal from Afghanistan last year, it added.
“China buys more than 25% of the oil that Saudi Arabia exports. If priced in yuan, those sales would boost the standing of China’s currency. The Saudis are also considering including yuan-denominated futures contracts, known as the petroyuan, in the pricing model of Saudi Arabian Oil Co., known as Aramco,” noted the report.
The Biden administration, which has stopped its oil imports from Russia over Moscow’s military operation in Ukraine, has been trying to push Saudi Arabia and the United Arab Emirates into increasing their oil production.
Earlier this month, Biden officials tried to contact the Persian Gulf states towards the purpose, but they both declined to receive their calls.
“There was some expectation of a phone call, but it didn’t happen,“ a US official said of a plan for Saudi Crown Prince Mohammed bin Salman and Biden to speak. “It was part of turning on the spigot."
Economic ties between Beijing and Riyadh have been growing.
China is the kingdom's largest trade partner, mainly because of its purchases of 25 percent of all of Riyadh's oil exports.
A move to conduct oil transactions with China in yuan would mark a substantial shift for the oil market, where 80 percent of sales are conducted in dollars. All of Saudi Arabia's sales are exclusively done in dollars.
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