#SaudiArabia #Russia #oil #dollar #USD #EUR #CHF #petroyuan #bitcoin #ruble
“Saudi and Chinese officials are in talks to price some of the nation’s crude oil sales in yuan rather than USDs or EURs“–Paul Ebeling
Now, on its face, this might not strike you as a big deal.
The Big Q: Who really cares whether China buys its Crude Oil with USDs, RMByuan or the Swissie?
The Big A: You should!
Here are a few reasons that this is a bigger deal than you may think, as follows:
- By negotiating a supply of oil to be paid for in yuan, China insulates itself from “financial cancelation” by the US. Xi Jinping has seen the havoc wrought on Russia’s economy by US economic sanctions, including freezing Russian dollar deposits. He wants to make absolutely certain his nation can survive this kind of economic warfare should China embark on a course the US disapproves of. As no nation wants to find itself handcuffed, watching its economy implode.
- Crude oil is the world’s most-traded commodity. And, 80% of global oil sales are priced in USDs. This matters because it means that nations and corporations who want to buy crude oil priced in dollars must use dollars to buy it. That means there is an automatic global demand for dollars from central banks and corporate CFOs. If Crude Oil were priced in RMByuan, China could order all domestic purchases to be made in yuan rather than dollars. That would reduce global reliance on, and demand for, the Buck
- The Saudis have exclusively used the dollar for Crude Oil trading as part of a security agreement with the US. government. By working out a deal with China, they are taking a swipe at the dollar’s reserve status, and declaring they no longer trust the US to maintain their security. If the US cannot keep Saudi Arabia safe from invasion, China will take over that responsibility.
Thus the US would lose economic leverage over China, its monopoly over oil pricing, and a steadfast 50-yr ally in the volatile Middle East.
The move has put a question mark over the American dollar’s supremacy, while adding more context to the tensions between the US and Saudi Arabia: the Saudi-U.S. relationship has been increasingly frayed in recent years. The rift intensified after President Biden, who has said the [Khashoggi] assassination should make the kingdom a “pariah,” took office.
The US has lost massive prestige on the world stage, as its 40-yr-record inflation that degrades the purchasing power of every dollar worldwide. US leadership’s insistence that only more government spending can reduce the national debt. With that things have gotten so bad that Saudi’s ruler, Crown Prince Mohammed bin Salman, would not take Mr. Biden’s call to beg for increased OPEC Crude Oil production.
And now that Russia is accepting bitcoin, and demand rubles for it Crude Oil and Nat Gas constitutes a further step in a much larger move away from dollars.
Have a prosperous week, Keep the Faith!