From the Petrodollar to the PetroYuan? Saudi Arabia and China discuss the payment of oil in Yuan
One of the cornerstones of the past 40 years, and an anchor that underpins the dollar's reserve status, has been a petrodollar-based global financial system. This was a world where oil producers would sell their products in the United States (and the rest of the world) in dollars, from which they would then launder the proceeds into dollar-denominated assets and then invest in dollars in markets that they accepted it as a reference currency. These days, however, are about to end, if the discussions between China and Saudi Arabia go through.
The day after the UK demanded more oil production, the WSJ released a success report, noting that “Saudi Arabia is in active talks with Beijing to price part of its oil sales to China in yuan ", a move that could not only paralyze the petrodollar's dominance in the global oil market – something Zoltan Pozsar predicted in his latest note – and mark another shift by the world's leading crude oil exporter to Asia, but also a move targeted directly at the heart of the US financial system that has taken advantage of the dollar's reserve status by printing all the dollars needed to finance government spending over the past decade.
According to the report, talks with China over Yuan-valued oil contracts have gone back and forth for six years, but this year accelerated as the Saudis became increasingly unhappy with U.S. security commitments to defend. the Kingdom is decades old now.
The Saudis are angry about the lack of US support for their intervention in the civil war in Yemen and the biden administration's attempt to strike a deal with Iran over its nuclear program. Not to mention the fool of the withdrawal from Afghanistan last year.
China buys more than 25% of the oil exported by Saudi Arabia and, if valued in yuan, such sales would increase the position of the Chinese currency and set the Chinese currency on the path to becoming a global reserve currency of the petroyuan. After all, oil imports into the US are much less, so it is the customer who usually decides how he wants to pay, especially when it is the size of the People's Republic. Without forgetting that Chinese industrial and military productions are of such size as to be able to satisfy any demand for goods which, of course, would be paid for with the Yuan obtained from the sale of oil. Then there is the not secondary factor of the bad personal relations between Prince MBS and Biden, who during the electoral campaign came to define Arabia as the "Pariah State".
This choice could have immediate and European repercussions. The US cannot afford such a moral defeat right now without a reaction, and this could come precisely in the form of greater involvement against the other energy commodity producer, Russia. We'll see what the Dems will say tomorrow after Zelensky's speech in front of the House of Representatives.
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The article From Petrodollar to PetroYuan? Saudi Arabia and China discuss the payment of oil in Yuan comes from ScenariEconomici.it .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/dal-petrodollaro-al-petroyuan-arabia-saudita-e-cina-discutono-sul-pagamento-del-petrolio-in-yuan/ on Tue, 15 Mar 2022 19:46:25 +0000.