(ANTIMEDIA) — Saudi Arabia’s king, Salman bin Abdulaziz Al Saud, recently met with Russian President Vladimir Putin in what amounts to more than just a symbolic blow to the United States. While the two discussed a number of issues, including Syria and Iran, according to CNN it was oil that dominated most of the discourse.
Something geopolitically relevant — though it fails to garner widespread attention in the mainstream media — is the fact that Saudi Arabia and Russia “are engaged in an intense battle over who will be the top supplier to China, a major energy importer with an insatiable appetite for crude,” as CNN explained.
But what would make China side with Saudi Arabia’s oil over that of their longtime strategic ally Russia? Or, to phrase that question differently, what would make China consider Saudi oil at all, given it can always turn to Russia and Iran for its oil needs?
According to Carl Weinberg, chief economist and managing director at High-Frequency Economics, China will “compel” Saudi Arabia to trade oil in Chinese yuan instead of U.S. dollars. Now that China has surpassed the U.S. as the “biggest oil importer on the planet,” these direct attacks on the U.S. dollar will have huge implications for the dollar’s current world reserve status.
“I believe that yuan pricing of oil is coming and as soon as the Saudis move to accept it — as the Chinese will compel them to do — then the rest of the oil market will move along with them,” Weinberg stated, as quoted by CNBC.
Iran is already trading oil with China in return for Chinese yuan, and Qatar has conducted billions of dollars’ worth of transactions in yuan, as well. Just recently, the Times of Israel reported that a Chinese state-owned investment firm has provided a $10 billion credit line to Iranian banks, which will specifically use yuan and euros to bypass U.S.-led sanctions.
The implication is that if a country like Saudi Arabia were also to begin conducting these transactions in yuan, the rest of the world would be days away from following suit.
For example, Venezuela, a country that sits on the world’s largest oil reserves, also recently announced it had abandoned the U.S. dollar in response to American-imposed sanctions. It has now begun publishing its oil prices in yuan, instead.
Weinberg explained further.
“Moving oil trade out of dollars into yuan will take right now between $600 billion and $800 billion worth of transactions out of the dollar… (That) means a stronger demand for things in China, whether it’s securities or whether it’s goods and services. It is a growth plus for China and that’s why they want this to happen.”
Russia is more than likely already on board with these proposals, as China and Russia have been chipping away at the dollar for some time now. Earlier this year, the two nuclear giants signed a 68 billion yuan ($10 billion) investment fund to ease ruble-yuan settlements.
Further, China is set to launch a crude oil futures contract priced in Chinese yuan that will be completely convertible into gold. As reported by the Nikkei Asian Review, analysts have called this move a “game-changer” for the oil industry. Whether or not Saudi Arabia will be on board remains to be seen, but it will definitely be in the cards for the near future as the global tectonic plates begin to shift out of Washington’s favor.
As Anti-Media has previously explained, Saudi Arabia is integral to what is known as the petrodollar system. Saudi Arabia may be a crucial American ally and has relied upon American military support for decades, but if they want to continue exporting as much oil as possible to maintain their status as a regional power, then they may not have any choice but to succumb to China’s wishes. The alternative, of course, is that it will lose out on a very lucrative oil market and watch as Iran and Russia reap all the rewards. The Saudis also just recently learned that should the U.S. snub the Islamic Kingdom, they may be able to rely on Russian military support, instead.