Breaking: Petrodollar Cracks: Saudi Arabia Considers Accepting Yuan For Chinese Oil Sales

[MH.Yang]

Manufacturing will be in demand for as long as human civilizations will exist - how all manner of physical goods will be produced for human consumption? Machines are not necessary in this matter.

Manufacturing plants are creating job opportunities for the working class as well as educated individuals in Pakistan and also in Bangladesh. I bear witness to these developments in person.

Petro-Dollar arrangement was considered when USA became a major customer of oil extracted in the Middle East. Shale Revolution made it possible for USA to reduce its oil imports from the Middle East, however.

The U.S. Shale Revolution - The Strauss Center

The “Shale Revolution” refers to the combination of hydraulic fracturing and horizontal drilling that enabled the United States to significantly increase its production of oil and natural gas, particularly from tight oil formations, which now account for 36% of total U.S. crude oil production...

www.strausscenter.org

U.S. Imports from Persian Gulf Countries of Crude Oil (Thousand Barrels per Day)

S. Arabia becomes largest oil supplier to China in 2020

- Saudi's oil exports to China amounts to approximately 1.69 million barrels per day in 2020, up 1.9% year over year - Anadolu Agency

www.aa.com.tr

China has become a major customer of oil extracted from the Middle East lately.

China’s crude oil imports surpassed 10 million barrels per day in 2019 - U.S. Energy Information Administration (EIA)

www.eia.gov

Petro-Yuan arrangement is aimed to cater to Chinese transactions in this respect.

Petro-Dollar arrangement is one of the factors that prevents USD depreciation:

Think BTC is a Dirty Business? Consider the Carbon Cost of a Dollar

Note: This was originally published in Climate Money, a Substack where I share shorter updates alongside longer dispatches like this one…

susanfsu.medium.com

While KSA is embracing Petro-Yuan arrangement, it will not ditch Petro-USD arrangement anytime soon. KSA wants to play its cards safely as well.

USA is increasingly capable of coping with reduction in global Petro-USD flows with Shale Revolution and shift to electric vehicles from traditional vehicles. USA might restructure its energy sector further in coming years.

If USA can become an exporter of food, oil, education resources and other commodities. Then China and USA will reduce many contradictions and conflicts.
At present, the root of all contradictions between China and USA comes from trade imbalance.

 

[Big_bud]

Petrodollar Cracks: Saudi Arabia Considers Accepting Yuan For Chinese Oil Sales​

Petrodollar Cracks: Saudi Arabia Considers Accepting Yuan For Chinese Oil Sales
One of the core staples of the past 40 years, and an anchor…

Published March 15, 2022

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Petrodollar Cracks: Saudi Arabia Considers Accepting Yuan For Chinese Oil Sales

One of the core staples of the past 40 years, and an anchor propping up the dollar’s reserve status, was a global financial system based on the petrodollar – this was a world in which oil producers would sell their product to the US (and the rest of the world) for dollars, which they would then recycle the proceeds in dollar-denominated assets and while investing in dollar-denominated markets, explicitly prop up the USD as the world reserve currency, and in the process backstop the standing of the US as the world’s undisputed financial superpower.

Those days are coming to an end.

One day after we reported that the “UK is asking Saudis for more oil even as MBS invites Xi Jinping to Riyadh to strengthen ties“, the WSJ is out with a blockbuster report, noting that “Saudi Arabia is in active talks with Beijing to price its some of its oil sales to China in yuan,” a move that could cripple not only the petrodollar’s dominance of the global petroleum market – something which Zoltan Pozsar predicted in his last note – and mark another shift by the world’s top crude exporter toward Asia, but also a move aimed squarely at the heart of the US financial system which has taken advantage of the dollar’s reserve status by printing as much dollars as needed to fund government spending for the past decade.

According to the report, the talks with China over yuan-priced oil contracts have been off and on for six years but have accelerated this year as the Saudis have grown increasingly unhappy with decades-old U.S. security commitments to defend the kingdom.


China buys more than 25% of the oil that Saudi Arabia exports, and if priced in yuan, those sales would boost the standing of China’s currency, and set the Chinese currency on a path to becoming a global petroyuan reserve currency.

While nothing new to regular ZH readers (see this from 2017, “The World’s New Reserve Currency? Everything You Need To Know About PetroYuan“), the idea of a new global reserve currency was reintroduced last week by none other than former NY Fed staffed Zoltan Pozsar who wrote in his latest note that “when this crisis (and war) is over, the U.S. dollar should be much weaker and, on the flipside, the renminbi much stronger, backed by a basket of commodities. From the Bretton Woods era backed by gold bullion, to Bretton Woods II backed by inside money (Treasuries with un-hedgeable confiscation risks), to Bretton Woods III backed by outside money (gold bullion and other commodities).”

And so the pieces of the endgame are falling into place: Russia starving the western world of much needed resources, sending commodity prices ever higher, while it’s silent partner China quietly picks up the pieces and takes advantage of Russia’s isolation to approach all those other “non-western” former petrodollar clients to offer them a new product, the yuan, which Beijing is now actively and aggressively pushing to dethrone the dollar as a global reserve currency.

Petrodollar Cracks: Saudi Arabia Considers Accepting Yuan For Chinese Oil Sales

Petrodollar Cracks: Saudi Arabia Considers Accepting Yuan For Chinese Oil Sales One of the core staples of the past 40 years, and an anchor...

www.nxtmine.com

Ukraine crisis and US arrogance, blessing in disguise for overwhelming majority of the world's population! Finally there seems to be an upcoming alternate to the world's real dictator who has had complete monopoly over world's financial system. If it is successful, we'd be thankful to China and hard work of the Chinese people who have built their national strength by working with so much discipline for decades!

 

[Goritoes]

It will take much longer than we think to topple USD, plus we are forgetting that US is a true diplomat country, if they even get the sense that Arabs are moving away from them they will make sure to bring them back in loop, either by hook or crook. But so far I don't see any major shift in ME politics and alliances, US can also reignite the Uyghur issue within the Arab societies to fade off any support China might try to get in. But as another member here said, world needs a world where more than one country is calling the shots, and for Dollar sake disband that useless UNSC.

 

[Song Hong]

Say hello to Russian gold and Chinese petroyuan | The Vineyard of the Saker

A bird's eye view of the vineyard

thesaker.is

 

[Han Patriot]

so you are suggesting that every single Saudi Arabian who wants to by an Iphone, a Tesla, a kitchen wire or even a pleasure vibrating gadget have to travel all the way to China to buy?``````

mate, let me tell you one fact, no matter whether its made in Guangzhou, Hangzhou, Suzhou or Dalian, they all traded in international currencies``````period

Let me explain in simple terms, you pay in Dinars, the dinars go into the Saudi banks who converts this to their Yuan reserve to buy Chinese stuff which gets shipped from China using COSCO the third larger shipper with ships made in China and crewed by Chinese protected by the Chinese Navy in Djibouti. For your banks to earn the Yuan they sell oil to China and we deposit the Yuan in that Saudi Bank.

 

[Song Hong]

Saudi can use the Yuan Forex to pay for industrialization.

A genuine effort to help Arabs to modernized. But then, I am not sure if Saudi would allow their women to work 24x7 in a factory.

WSJ News Exclusive | Apple Supplier Foxconn in Talks to Build $9 Billion Factory in Saudi Arabia

The biggest assembler of the iPhone is discussing a potential facility that could make microchips, electric-vehicle components and other electronics, according to people familiar with the matter.

www.wsj.com

 

[MH.Yang]

so you are suggesting that every single Saudi Arabian who wants to by an Iphone, a Tesla, a kitchen wire or even a pleasure vibrating gadget have to travel all the way to China to buy?``````

mate, let me tell you one fact, no matter whether its made in Guangzhou, Hangzhou, Suzhou or Dalian, they all traded in international currencies``````period

Saudi Arabia imports $30 billion in goods from China every year. In addition, Russia, Iran, Pakistan, and most central Asian&ASEAN&East African countries support CNY settlement.

 

[SD 10]

Dollar won't collapse overnight, but its global dominance is being chipped away little by little.

music to my ears ... hopefully in my lifetime...... i am still young so fingers crossed!

 

[Viet]

USA has basically ruin USD system by sanctioning Russia, now many countries and (even businesses ) feel unsafe with their USD reserves, particularly the ones that think they ( or their countries) will be sanctioned by USA due to some issue in the future.

Nonsense
Sanctioning a central bank is the most powerful tool ever. Russia is cut off from dollar system.
By the way it’s not only from dollar Russia is cut off from yen, sterling, euros.

 

[Bengal71]

You have no idea what you are talking about.. Taking yemen rebels as example which is a marginalized militias that the Yemeni army has raped and the Saudi air force send them back in time have you seen the ruin they live in.. Almost 13 century and also how is a missile evidence here? Besides they don't even have forces there but it is the Yemeni armed forces operating on the ground solely. It is like saying Gaza has proven otherwise about Israel.. Anti-insurgency thrival..

But you are missing the big point... DO you know what it means if turmoil happens in the holy area? Do you know what that means? This will cross every nations red lines by default. What do you think the Indonesians, Pakistanis, Turks, Egyptians, and plus 40+ country will watch the holy area go into flame without getting drawn into it..

This basically means WW3 period in a simple language translation if the governments of these countries refuse to react their armed forces will take over the country.. It will literally turn into judgement or our last day on earth either get taken out completely or remain intact there won't be anything in between lose everything or nothing..

Any attempt coup or any slight disruptions could have grave consequences far beyond for every single corner in the world and this is no exaggeration but an understatement

Muslims will standby and watch. Some terrorist groups will be created and Muslims of various ethnicities will join and try to fight. If the US wants to occupy KSA including the holy cities, they will.

Don't ask "do you know what that means" to other people. Real question is "Do you know the extent of weakness of Muslims"? Also another question is "Why would independent Muslim states go out of their way to fight for KSA, how are the people of KSA and how did they behave with Muslims of non-arab backgrounds, why would they go there to fight for them except for some religious zealots"?

 

[Viet]

Saudi Arabia imports $30 billion in goods from China every year. In addition, Russia, Iran, Pakistan, and most central Asian&ASEAN&East African countries support CNY settlement.

I am pretty sure the Saudi sheikh will demand China to accept their currency. Can’t be one sided move.

 

[LeGenD]

If USA can become an exporter of food, oil, education resources and other commodities. Then China and USA will reduce many contradictions and conflicts.
At present, the root of all contradictions between China and USA comes from trade imbalance.

Good Sir, you are one of the most sensible posters of the forum. Your knowledge impresses me at times. I really appreciate it.

 

[MH.Yang]

I am pretty sure the Saudi sheikh will demand China to accept their currency. Can’t be one sided move.

That's no problem, but in the trade relationship between China and Saudi Arabia, China is a deficit country. How does China accumulate SR?
Or the two countries sign a currency swap agreement and let SR bind CNY? Does the Saudi royal family really dare to sign such an agreement?



@rcrmj
When I was traveling in Nha Trang, Vietnam, local Vietnamese businessmen preferred Chinese tourists to pay with CNY.
The Vietnamese PDF member can confirm that CNY is popular in most ASEAN countries.

 

[Viet]

That's no problem, but in the trade relationship between China and Saudi Arabia, China is a deficit country. How does China accumulate SR?
Or the two countries sign a currency swap agreement and let SR bind CNY? Does the Saudi royal family really dare to sign such an agreement?



@rcrmj
When I was traveling in Nha Trang, Vietnam, local Vietnamese businessmen preferred Chinese tourists to pay with CNY.
The Vietnamese PDF member can confirm that CNY is popular in most ASEAN countries.

It’s all about how to determine the fair value. It works so I think you know it. It’s not about surplus or deficit but exchange of currencies. As of today the yuan is still not fully convertible nor the Saudi dollar businesses measure their respective currencies to the dollar or other like yen or euros. Even to ruble. Let’s say you accept Putin currency. However because the ruble lost 40 percent in value against the dollar China businesses will demand 40 pct more ruble.

I assume you are not dumb to accept the same amount of ruble prior invasion.

 

[Song Hong]

It’s all about how to determine the fair value. It works so I think you know it. Because the yuan in not fully convertible nor the Saudi dollar businesses measure their respective currencies to the dollar or other like yen or euros. Even to ruble. Let’s say you accept Putin currency. However because the ruble lost 40 percent in value against the dollar China businesses will demand 40 pct more ruble.

Yuan not fully convertible is a misnomer or deliberate scandalization. Every day billions of Yuan are traded everyday. There are offshore centers in HK and UK.

Problem of Yuan is you cannot press a button and ship overseas from China, millions of CNY to another account without physical goods changing hands.

The anti money laundering, wealth flight polcies are deems "non fully convertible" by all western fake news outlet.