At the Gulf conference in Riyadh, China’s Xi asked for the trading of oil in yuan.
China will seek to purchase oil and gas in yuan, President Xi Jinping said to the leaders of the Gulf Arab nations on Friday. This will help Beijing achieve its objective of internationalizing the yuan and reducing the influence of the U.S. dollar on global commerce.
Speaking from Saudi Arabia, Crown Prince Mohammed bin Salman sponsored two “milestone” Arab meetings with Xi that highlighted the prince’s regional clout as he pursues alliances outside of the country’s traditional ties to the West.
At a time when Riyadh’s relationship with Washington has been put under strain over human rights, energy policy, and Russia, top oil exporter Saudi Arabia and economic powerhouse China both issued strong statements during Xi’s visit on “non-interference.”
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As Riyadh had previously threatened in response to potential U.S. legislation opening OPEC members to antitrust litigation, any decision by Saudi Arabia to abandon the dollar in its oil trading would be a seismic political move.
The United States is alarmed by China’s expanding influence in the Gulf. Deepening economic relations were highlighted during Xi’s visit, where he was welcomed with fanfare, met with Gulf states on Friday, and participated in a larger summit with leaders of Arab League nations from the Gulf, the Levant, and Africa.
The difficult U.S.-Saudi meetings five months earlier, when President Joe Biden visited a smaller Arab summit in Riyadh, were sharply contrasted by Prince Mohammed’s announcement at the beginning of Friday’s talks of a “historic new phase of relations with China.”
Foreign Minister Prince Faisal bin Farhan Al Saud responded when asked about Saudi Arabia’s relations with Washington in light of the kindness shown to Xi. He stated that Saudi Arabia would continue to cooperate with all of its allies. “We do not consider this to be a zero-sum game,” he added.
The prince stated during a news conference following the meetings, “We do not believe in polarisation or in selecting between sides.”
Despite the fact that Saudi Arabia and China have signed a number of agreements for strategic and economic cooperation, analysts predicted that the relationship would still be primarily driven by energy concerns, despite Chinese companies’ recent forays into the infrastructure and technology sectors.
Robert Mogielnicki, a senior resident scholar at the Arab Gulf States Institute in Washington, told Reuters that “energy concerns will remain front and centre of relations.”
“In order to advance trade and investment agreements, the governments of China and Saudi Arabia will also seek to encourage their national champions and other players in the private sector.” Additionally, there will be more collaboration in the technological realm, raising well-known worries in Washington.
This week, Saudi Arabia and Huawei reached an agreement regarding cloud computing and the construction of high-tech buildings in Saudi cities. Despite U.S. worries about a potential security risk associated with deploying its technology, the Chinese tech giant has contributed to the construction of 5G networks in Gulf states.
In an effort to navigate a polarised world order while keeping an eye on their own national economic and security interests, Saudi Arabia and its Gulf allies have defied American pressure to limit their business dealings with China and to sever ties with fellow OPEC+ oil producer Russia over its invasion of Ukraine.
China’s top oil supplier, Riyadh, and China’s goal to increase non-oil trade and cooperation in peaceful nuclear power were reaffirmed in a joint statement by the two nations. Riyadh is China’s primary oil supplier.
Beijing, according to Xi, will keep importing huge amounts of oil from Gulf Arab nations and increase its imports of liquefied natural gas. He also noted that these nations were natural partners and would continue to work together in the development of upstream oil and gas.
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He went on to say that China would “fully utilise the Shanghai Petroleum and National Gas Exchange as a platform for Yuan settlement of oil and gas trade.”
Beijing has pushed for the use of its own yuan currency in commerce rather than the dollar.
Before Xi’s visit, a Saudi source told Reuters that although it may make sense to sell small amounts of oil to China in yuan in order to pay for Chinese imports directly, “it is not yet the proper time.”
The majority of Saudi Arabia’s holdings and reserves are in dollars, including more than $120 billion in U.S. Treasury securities, and the Saudi riyal is tied to the dollar like other currencies in the Gulf.
The Chinese president earlier expressed hope that the Arab summits would go down in history as “milestone events in the history of China-Arab relations” and that his visit would usher in a new era in relations.