Saudi Arabia Considers Accepting Yuan Instead of Dollars for Oil Trade

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Riyadh is in active negotiations with Beijing to trade some of its oil sales to China in yuan, Wall Street Journal quoted sources familiar with the matter as saying. This move would undermine the US dollar’s domination of the global petroleum market and mark another shift by the world’s top crude exporter toward Asia.
According to the WSJ report, the talks between the countries over yuan-priced oil contracts have accelerated this year as the Saudis have grown increasingly unhappy with decades-old US security commitments to defend the kingdom.
China purchases more than 25% of Saudi Arabia’s oil exports. Those sales, if priced in yuan, would raise the value of China’s currency. It would be a significant move for Saudi Arabia to price even a portion of its 6.2 million barrels per day of petroleum exports in a currency other than dollars.
The Wall Street Journal reported on Monday that Saudi Arabia has invited Chinese President Xi Jinping to visit the country, which may happen as soon as May. The visit might help the kingdom strengthen ties with Beijing at a time when relations with Washington are tense.
The strategic cooperation between Saudi Arabia, the world’s top oil exporter, and the US has been put to the test by Riyadh’s human rights record, particularly in light of the Yemen conflict.
The talks with China over yuan-priced oil contracts have been off and on for six years but have accelerated this year. Saudi officials in favor of the shift have argued the kingdom could use part of yuan revenues to pay Chinese contractors involved in mega projects domestically, which would help mitigate some of the risks associated with the capital controls over the currency.

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