Business Desk :
Saudi Arabia is in active talks with Beijing to price part of its oil shipments in yuan, people familiar with the situation said – a move that could erode the US dollar’s dominance in the global petroleum market, The Wall Street Journal reports.
Talks with China over yuan-priced oil contracts have been on and off for six years, but have accelerated this year as the Saudis have grown increasingly unhappy with decades-old US security commitments to defend the kingdom, the report said.
China buys more than a quarter of Saudi Arabia’s oil exports. Those sales, if priced in yuan, would raise the value 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.
For Saudi Arabia to price even some of its nearly 6.2 million barrels per day of crude exports in anything other than dollars would be a significant shift, according to the report published yesterday. Around 80% of worldwide oil transactions are made in dollars, and the Saudis have only traded oil in dollars since 1974, when they struck a deal with the Nixon administration that provided security guarantees for the country, it said.
China has intensified its courtship of Saudi Arabia. China has recently aided Saudi Arabia in the development of its own ballistic missiles, provided nuclear programme advice, and begun investing in Crown Prince Mohammed bin Salman’s pet projects, such as Neom, a futuristic new metropolis.
President Xi Jinping of China has been asked to visit Saudi Arabia later this year, the WSJ report added.
In January, Saudi Foreign Minister Faisal bin Farhan met with Chinese Foreign Minister Wang Yi.
STRAINS IN US-SAUDI TIES
Meanwhile, the US-Saudi relationship has deteriorated under President Biden, who declared the country a “pariah” in the 2020 campaign after the killing of Saudi journalist Jamal Khashoggi in 2018, WSJ said.
Prince Mohammed, who US intelligence officials suspect ordered Khashoggi’s murder, refused to join Biden and Saudi King Salman on a phone call last month.
It also comes at a time when the US-Saudi economic relationship is deteriorating.
The United States is now one of the world’s leading oil producers.
