Saudi and Chinese officials are in talks to price some of the Gulf nation’s oil sales in yuan rather than dollars or euros, The Wall Street Journal reported Tuesday, citing people familiar with the matter.
The two nations have intermittently discussed the matter for six years, but talks have reportedly stepped up in 2022, with Riyadh disgruntled over the United States’ nuclear negotiations with Iran and its lack of backing for Saudi Arabia’s military operation in neighboring Yemen.
Nearly 80 percent of global oil sales are priced in dollars, and since the mid-1970s the Saudis have exclusively used the dollar for oil trading as part of a security agreement with the U.S. government, according to the Journal.
The talks are the latest in an ongoing effort by Beijing both to make its currency tradeable in international oil markets and strengthen its relationship with the Saudis specifically. China previously aided Riyadh in construction of ballistic missiles and consultation on nuclear power.
Conversely, the Saudi-U.S. relationship has been increasingly frayed in recent years. Crown Prince Mohammed bin Salman initially put forth a public image as a reformer, liberalizing the country’s policies on women’s rights and criminal justice.
However, the 2018 assassination of dissident journalist Jamal Khashoggi has been catastrophic for both the crown prince’s public relations offensive and relations with Washington. The rift intensified after President Biden, who has said the assassination should make the kingdom a “pariah,” took office.
During the same period, China’s economic relationship to Saudi Arabia has grown closer, with the kingdom providing 1.76 million barrels of oil a day to the country in 2021, according to the Journal, citing China’s General Administration of Customs. While the country plans to maintain the dollar for the majority of its oil trading, a shift by the Saudis could create a domino effect for China’s other major oil suppliers, such as Russia, Angola and Iraq.
Saudi Arabia previously threatened to sell in other currencies in 2019 if Congress passed a bill that would allow antitrust liability for OPEC members. The bill, which has been introduced numerous times over the years, failed again that year.
The report Tuesday also comes as the U.S. has appealed to the Saudis to pump more oil to offset soaring gas prices compounded by Russia’s invasion of Ukraine and the U.S. cutting off Russian oil imports in response.