Last week, Saudi Aramco, the kingdom’s state-owned oil corporation, announced it would help build a massive new oil and petrochemical refinery in northeastern China.
The facility will be able to produce 300,000 barrels of oil per day and will have a 1.5 million metric ton-per-year ethylene cracker and a 1.3 million metric ton-per-year paraxylene unit.
China already buys one-quarter of Saudi Arabia’s massive oil export, which are the world’s largest, and, since 2018, Beijing has offered renminbi-priced oil contracts.
The news comes after the rulers of Saudi Arabia and the United Arab Emirates both refused to answer phone calls from the White House.
The USA has long enjoyed a close strategic relationship with the two oil-exporting Arab nations, and US President Joe Biden was looking for them to increase oil production to offset the loss of Russian oil due to the US boycott.
A similar deal in the early 1980’s helped create a glut in the oil market that collapsed its value, driving the Soviet Union into its first recession and spelling the ultimate end of the socialist republic in 1991.
While the USA has long been hands-off about Saudi politics, Biden has been far more critical than his predecessors, and it’s reportedly left a dent in US-Saudi relations.
Last year, the Biden administration claimed it was ending offensive support for Saudi Arabia’s war against the Yemeni Houthi liberation movement, which ousted non elected Yemeni President Abdrabbuh Mansour Hadi in 2015.
However, despite the claims, US-made bombs are reportedly still falling on Yemeni cities.
Roughly 400,000 Yemenis have died since the war began in 2015, more than half of them due to the total collapse of infrastructure and the Saudi blockade of the country, according to the United Nations.
Saudi Arabia is now considering selling some of its oil to China in yuan rather than dollars, people familiar with the matter told the Wall Street Journal on Tuesday, citing “active talks” between Riyadh and Beijing.
Such a move could further marginalize the petrodollar paradigm that has controlled the global financial system for over half a century, placing the dollar’s status as the international reserve currency at risk.
China buys over a quarter of the oil exported by Saudi Arabia, meaning that denominating those deals in yuan would significantly boost the international profile of the Chinese currency, while ditching the dollar.
Currently, 80% of global oil sales are transacted in dollars, with the Saudis trading exclusively in the US currency since 1974 – when Washington offered Riyadh security guarantees in exchange for its loyalty to the petrodollar system.
While China and Saudi Arabia have been discussing pricing oil deals in yuan for six years, those talks have recently increased in urgency due to Saudi dissatisfaction with the policies of the US government.
Indeed, the US’ history of grandstanding animosity toward many of the top oil-producing states – from Venezuela to Iran to Russia – has left it with little space to maneuver as commodity prices and inflation continue climbing with no end in sight.
The western economy’s moves to shut Russia out of the global financial system have countries like China, already on several sanctions blacklists, hunting around to ensure what happened to Russia cannot happen to them.
Should the Saudis begin successfully selling their oil to China in yuan, the move could be emulated by China’s other major fuel suppliers – Angola and Iraq, as well as Russia.
Attempting to sell oil in non-dollar currencies used to be a bad omen for a nation – Iraq, Libya, Syria, and Iran have all made moves away from the dollar, only to be strictly punished for their independence by the US military.
But with Washington’s military failure in Afghanistan, as well as its current domestic troubles, other nations may have concluded that it is no longer the kind of power it once seemed to be.
RT. com / ABC Flash Point Oil & Gas News 2022.