Rashid Husain Syed, a senior member of Islamabad-based Back2School Forum, who is a Toronto-based journalist, consultant, and energy analyst and lived in Saudi Arabia for a quarter of a century says a beginning has been made toward Chinese request to Riyadh (and other Gulf Monarchs) to use yuan, for at least part of its oil trade –any shift toward yuan, according to him, will only be gradual, specially given that most Middle Eastern currencies are dollar-pegged, the global market is too large and the yuan is still not liquid enough.
In his latest piece in The Globe & Mail, Syed says that “with the rise of China as an emerging power and the world’s largest crude importer, the decades-old arrangement of maintaining the U.S. dollar as the currency of global oil trade is under attack – and may one day be over”.
“Ever since the deal in the ‘70s between Saudi Arabia and the United States, making the U.S. dollar the currency of global oil trade, the dollar has remained the dominant currency of the world. The arrangement meant any country buying oil, from Somalia and Ethiopia to Europe, India, Sri Lanka, Pakistan and China, all needed U.S. dollars”.
This ensured the dominance of U.S. dollars and its increasing weaponization in the global financial system –behind the removals from power of Saddam Hussein and Moammar Gadhafi was the challenge they posed to using the U.S. dollar as the currency for their oil trade, some media have speculated, and some independent experts, commentators, observers strongly feel.
“Both China and Saudi Arabia are deeply exposed to the U.S.-led global economy fueled by petrodollars. China holds under $1-trillion in U.S. Treasury bonds. Saudi Arabia also has substantial dollar-denominated assets, including $121-billion in U.S. Treasuries and $608-billion in the U.S. stock markets.”
“In March, 2022, the Wall Street Journal reported that Saudi Arabia was in active talks with Beijing to price some of its oil sales to China in yuan. The talks had been off and on for six years, but accelerated as the Saudis grew increasingly uncomfortable with Washington backing off from its security commitments to defend the kingdom, sources told WSJ. In the given scenario, Riyadh and its other Gulf Arab allies looked at Beijing as an emerging military power and a potential ally.”
“To be sure, Riyadh and Beijing are also aware of the consequences of any such move toward the yuan…but the two countries are moving. For Riyadh to ignore the Chinese request to use yuan, for at least part of its oil trade, may not be possible for long. A beginning has been made…”
Commenting on Syed’s writeup, Amb. G R Baloch, another senior member of the Back2School Forum says, “Monopoly of one Global Super Power replaced by another super power is not a move towards a more peaceful world. I think that the world is moving towards Multi Polarity in all spheres, and that is good for the world.”