Riyadh is now in talks with Beijing about pricing some Saudi oil sales to China in the yuan instead of the US dollar. If priced in the renminbi, those sales would boost the status of China’s legal tender. This sort of arrangement has been negotiated between the parties for six years. Saudis have been reluctant to accept national currencies as payment for oil at first, but recent developments have brought a new urgency to talks. Riyadh is now questioning long-standing US security commitments to the Kingdom. Clearly, the move would be a challenge to the US dollar but would not undermine its dominance as the medium of exchange for oil trade. However, it would remind Washington about its commitments. China buys more than 25% of the oil exported by Saudi Arabia. Given that the kingdom exports about 6.2 million barrels of crude per day and China is its major buyer, pricing its sales in the yuan would definitely strengthen the renminbi’s global standing.
Overall, this would unlikely affect the greenback as over 80% of oil sales are in the US dollar. Saudis have been selling their oil for dollars since 1974.
Meanwhile, with isolation growing in Russia, its oil producers have faced problems with raw materials exports. Many Western traders refuse to buy the country’s flagship Urals oil grade.
