Saudi Arabia may Consider Accepting Yuan for Chinese Oil Sales

Saudi Arabia is actively negotiating with Beijing to price some of its oil sales to China in Yuan. Negotiations with China over yuan-price oil trading have been going on for six years but has accelerated this year as Saudi Arabia is increasingly dissatisfied with  U.S. security commitments decades ago to protect the kingdom. 

If the sales started being priced in Yuan, the standing value of China’s currency will increase. The Saudis are also considering having Yuan-denominated futures contracts, called petroyuan, in the pricing model of Saudi Arabian Oil Co also known as Aramco.

For Saudi Arabia, making some of its approximately 6.2 million barrels of crude oil exports per day at non-dollar prices would be a major change. Most of the world's oil sales (about 80%) happen in Dollars, and Saudi Arabia has traded oil only in dollars since 1974 in transactions with the Nixon administration, including the security guarantees for the Kingdom.

China introduced Yuan-priced oil contracts in 2018 as part of its efforts to make the currency globally tradable, but it did not diminish the dollar's dominance in the oil market. For China, the use of the dollar has become dangerous and is highlighted by US sanctions on Iran over its nuclear program and on Russia in response to the Ukraine invasion.