WSJ is out with a blockbuster report, noting that “Saudi Arabia is in active talks with Beijing to price its some of its oil sales to China in yuan”
This move could cripple not only the petrodollar’s dominance of the global petroleum market but also a move aimed squarely at the heart of the US financial system which has taken advantage of the dollar’s reserve status by printing as many dollars as needed to fund government spending for the past decade, Zero Hedge analyzed.
According to the report, the talks with China over yuan-priced oil contracts have been off and on for six years but have accelerated this year as the Saudis have grown increasingly unhappy with decades-old U.S. security commitments to defend the kingdom.
The Saudis are angry over the U.S.’s lack of support for their intervention in the Yemen civil war, and over the Biden administration’s attempt to strike a deal with Iran over its nuclear program. Saudi officials have said they were shocked by the precipitous U.S. withdrawal from Afghanistan last year, WSJ reports.
WSJ admits, a shift to a (petro)yuan system, “would be a profound shift for Saudi Arabia to price even some of its roughly 6.2 million barrels of day of crude exports in anything other than dollars”
The majority of global oil sales—around 80%—are done in dollars, and the Saudis have traded oil exclusively in dollars since 1974, in a deal with the Nixon administration that included security guarantees for the kingdom. It appears that the Saudis no longer care much about US “security guarantees” and instead are switching their allegiance to China, Zero Hedge pointed out.