US Dollar At Risk As Saudi Arabia Considers Chinese Yuan For Oil

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Title : US Dollar At Risk As Saudi Arabia Considers Chinese Yuan For Oil
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Saudi Arabia is considering selling oil to China -- which buys more than 25% of Saudi oil exports -- in exchange for yuan (China's currency), according to a recent report by the Wall Street Journal. The move would be unprecedented. Saudi Arabia, ever since its 1974 agreement with US President Richard Nixon, has been selling oil in exchange for US dollars.

The change, if realized, would be significant. The status of the US dollar, including as the world's reserve currency, depends on its dominance of global markets, especially the oil market, where 80% of sales are done in US dollars. If Saudi Arabia were to break the tradition of pricing its oil in dollars, as it is contemplating doing, others could well start to price oil in yuan or other currencies -- negatively affecting the US dollar's status and potentially the entire US economy.

Shortly after the news broke about the Chinese-Saudi talks on selling oil in yuan, according to Bloomberg, China's currency "surged". If Saudi Arabia were to sell its oil to China in yuan, it would be a victory for China, which is anyhow actively seeking to undermine the US dollar's global dominance.

"China must brace for a full-blown escalation of the struggle with the United States and prepare to gradually decouple the Chinese yuan from the US dollar," Zhou Li, a former deputy director of the Communist Party's International Liaison Department wrote in July 2020. READ MORE