| March 15, 2022 09:25 PM
Saudi Arabia i s considering the Chinese yuan to price some of its oil transactions rather than the predominantly used U.S. dollar, according to a report.
Around 80% of global oil sales are conducted in U.S. dollars, but that level of dominance may not last with talks about a currency shake-up between Gulf nations and their counterparts in China, which buys more than 25% of Saudi Arabia's oil, as reported by the Wall Street Journal. That would mark a significant change for the Saudis, who have been trading oil exclusively in U.S. dollars for decades.
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Talks about yuan-priced oil contracts between the two countries have been on and off over the past six years but have become more frequent as Saudi Arabia's relationship with the United States becomes increasingly strained, sources told the publication.
The Biden administration released a report in February 2021 accusing Saudi Arabia's Crown Prince Mohammed bin Salman of having "approved" the 2018 operation that resulted in the death of Jamal Khashoggi, a columnist for the Washington Post. Prior to this, President Joe Biden pulled U.S. support "for offensive operations" taking place in Yemen, signaling a break with Saudi Arabia and a clear shift from the Trump administration's Middle East policy.
Additionally, the United Arab Emirates and Saudi Arabia have said they are concerned about the U.S. taking part in talks geared toward reviving the Iran nuclear deal.
"The dynamics have dramatically changed," a Saudi official told the Wall Street Journal. "The U.S. relationship has changed. China is the world's biggest crude importer, and they are offering many lucrative incentives to the kingdom."
The report also cited a senior U.S. official who described the notion of Saudis selling oil to China in yuan as “highly volatile and aggressive” and “not very likely.”
Saudi Arabia threatened to use other currencies aside from the U.S. dollar to sell oil over a bill in 2019 that would have allowed OPEC members to be hit by antitrust lawsuits, according to Reuters. The proposed legislation has been proposed several different times but has never passed.
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Biden announced March 8 that the U.S. would be banning oil and natural gas imports from Russia as a means to impose added economic pressure on Russian President Vladimir Putin to stop his war in Ukraine.
As Biden sought options to boost production, leaders from Saudi Arabia and the UAE declined White House requests to speak with the president, the Wall Street Journal previously reported. The White House denied there were any "rebuffed" calls.