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The sun may be setting on the petrodollar. Photo credit: Zbynek Burival
Riyadh

Saudi Arabia wants to sell oil to China for yuan

The US dollar owes its strength and spread to the fact that it is considered an important reserve currency for commodities such as oil, which is usually traded against dollars. Saudi Arabia now seems to want to break out of this system. This would be a very hard blow for the US economy.

Published: March 17, 2022, 9:59 am

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    Saudi Arabia seems to want to become more independent from the US. According to the Wall Street Journal, they are apparently considering no longer trading oil exclusively against US dollars. Efforts have been underway for some time with China, for example, to transact oil business in yuan. Talks in this direction have allegedly been going on since 2016, probably because of growing dissatisfaction in the oil-producing country with the US.

    In addition, a solution to the US dollar and trade with China using its currency, the yuan, would also have advantages for Saudi Arabia. The yuan thus acquired could be used to pay Chinese companies involved in mega-projects in the desert state. And this would be more independent of currency fluctuations on the capital markets.

    On Twitter, journalist Aziz El Yaakoubi also commented on the issue, saying that a senior US official described the possibility of Saudi Arabia trading yuan with China as “very volatile and aggressive” and “not very likely”.

    However, it could be an attempt by Saudi Arabia to open up new opportunities. After all, the example of Russia currently shows how quickly it is possible to be excluded from international currency systems. So it might be attractive to be prepared for any eventuality and to have alternatives at hand.

    Saudi Arabia has invited Chinese leader Xi Jinping to visit the country in May, as alliances shift in the Middle East and Washington’s regional partners seek security and economic assurances.

    The Saudi-based Gulf Cooperation Council (GCC) meanwhile announced plans to invite the Houthi movement and other Yemeni parties for consultations in Riyadh to kickstart UN-led peace efforts, two Gulf officials told Reuters. The talks are scheduled from March 29-April 7.

    The Eurasian Economic Community (Belarus, Kazakhstan, Kyrgyzstan, Russia, Tajikistan + Armenia for certain provisions) and China plan on creating a new global economic and financial system, the foundations of which will be set at the end of March 2022.

    This new monetary and financial system will have a reference currency whose rate would be established from a basket of currencies of the founding Member States (therefore dominated by the Chinese yuan) and will be underpinned by commodities.

    It was designed by Russian economist Sergey Glazyev and is intended to replace the American Bretton Woods system, after Russia’s exclusion as part of the “sanctions” for its operation against the Ukrainian Nazis.

    The emergence of two competing economic and financial systems would mean the end of globalization. In his response to witnessing the end of his global project, George Soros concluded: “We can only hope that Putin and Xi will be removed from power before they can destroy our civilization.” The money propping up Ukrainian president Zelensky comes from an oligarch linked to George Soros.

    China will soon become the financial capital of the world and Russia is currently using the yuan as its foreign reserve currency, since China has not been confiscating assets from Russian civilians.

    The situation for many Westerners will only deteriorate from here, said economist Martin Armstrong. “The World Bank is now acknowledging that food and energy will become scarce.”

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