China And Saudi Arabia In Talks To Price Oil Sales In Yuan: Report

Saudi and Chinese officials have been holding ongoing discussions about pricing of some of the Gulf nation’s oil sales in yuan rather than dollars or euros.

What Happened: The two nations have been holding sporadic talks about yuan-priced oil contracts over a six-year period, according to The Wall Street Journal, which cited people familiar with the matter in a Tuesday report. 

The Saudis have become upset with U.S. policy in the Middle East, specifically the lack of support for the kingdom’s involvement in the Yemen civil war, and the Biden administration’s efforts to finalize a deal with Iran over its nuclear program, sources tell WSJ.

The report added that Saudi officials were stunned by the manner in which the U.S. withdrew military forces from Afghanistan.

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Why It Matters: Nearly 80% of global oil sales are priced in dollars, and since the mid-1970s, the dollar has been the sole currency used by the Saudis for oil trading as part of a security agreement with the U.S. government.

In recent years, China has developed a closer economic relationship with Saudi Arabia, with the kingdom providing 1.76 million barrels of oil a day to the country in 2021, according to the China’s General Administration of Customs.

Even if Saudi Arabia maintains the dollar for the majority of its oil trading, opening the door to pricing its oil in yuan could impact the policy of China’s other major oil suppliers, such as Russia, Angola and Iraq.

Photo: Courtesy of U.S. Secretary of Defense on Flickr.