China Aims to Break US Petro-Dollar by Buying Oil in Yuan Currency

On Friday, Chinese leader Xi Jinping met Saudi Arabian leaders in that country, expressing his interest in using yuan to buy Persian Gulf generated gas and oil.

Crown Prince Mohammed bin Salman on said this was a “historic new phase of relations with China.” Foreign Minister Prince Faisal bin Farhan Al Saud said “We don’t see this as a zero sum game,” over his country’s growing relationship with China, according to Reuters.

“We do not believe in polarisation or in choosing between sides,” Al Saud added.

Chinese leadership has been moving to substitute its currency for the US dollar in the role of global trade, which would increase the communist country’s control of international markets and destabilize the American economic infrastructure both internationally and domestically. 

The Saudi Arabian currency of riyal is interlinked to the US dollar, with most of Saudi Arabia’s assets and reserves stored in US dollars, including more than $100 billion of US Treasuries bonds that Riyadh, the capital of the Middle Eastern country, holds.

China has been moving to increase its influence in the Middle East, and Xi and Salman met during two Arab summits designed to bolster relations between the two nations.

Saudi Arabia is a major supplier of oil to China, and Xi continued his commitment to using oil from Riyadh. Xi said he would “make full use of the Shanghai Petroleum and National Gas Exchange as a platform to carry out yuan settlement of oil and gas trade.”

According to Fox News, Xi said, “China will continue to import a large amount of crude oil from the GCC [Gulf Cooperation Council] countries, expand imports of liquefied natural gas, strengthen the engineering services in oil and gas upstream development and the cooperation in storage, transportation and refining.” 

The US threatened members of Organization of the Petroleum Exporting Countries (OPEC), of which Saudi Arabia is a member, with potential antitrust litigation earlier in the year as one of many moves that has seen increasing tension between the US and OPEC. The White House accused OPEC of aligning with Russia in October after the group slashed its oil production, right at the time the US was looking to import more oil in the lead up to the US midterm elections.

Biden had said in June that he didn’t intend to ask Prince Mohammed for more oil despite saying in the same speech, “I hope we see them [The Saudis] in their own interest concluding that makes sense to do,” and “I’ve indicated to them that I thought they should be increasing oil production.”

In July, Fox News reported that the Saudi prince told Biden his country was “almost tapped out on increasing oil production” and that “they will not have the capacity to produce beyond 13 million barrels per day.”