Will some oil transactions be done in yuan soon?

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Two former enemies, Saudi Arabia and Iran, recently signed a peace treaty. China played the role of mediator. This was hardly discussed in the Western media – but it was hotly debated on the short video platform Tiktok.

Rationale: Negotiations should be held between China and Saudi Arabia. Accordingly, Saudi Arabia may soon settle its oil exports to China with the Chinese currency, the petro-yuan. This is why US tiktokers see the dollar’s role as a global reserve currency at stake.

Saudi Arabia is one of the top oil producing countries with an average of 3.54 million barrels per day. A quarter of oil exports go to China. Saudi Arabia currently bills all oil transactions in dollars – the so-called petro-dollars. Blick talks about what a potential deal between Saudi Arabia and China could mean for the world currency.

Globally, 80% of oil trade is done in dollars. There are some countries that do not make oil deals in dollars. These are generally countries that are sanctioned by the United States and therefore cannot conduct their transactions in dollars. Like Iran and Russia. In Russia, the yuan has traded even more than the dollar since February.

“More and more countries are being sanctioned by the United States. “So it’s predictable that more and more countries are looking to avoid this problem,” economist Cornelia Meyer tells Blick. In addition to China, other countries – may dare to take this step to avoid future sanctions from the USA.

This is very difficult to predict. But the dollar will definitely not strengthen. “The dollar falls in the short term, but then quickly recalibrates,” Meyer says. However, changes can happen gradually, especially in the long term.

The dollar will still be the universal means of payment. “But that can be somewhat mitigated,” Meyer says.

The US cannot do more than put pressure on Saudi Arabia. “Saudi Arabia needs the USA. But the US also needs the Gulf states, and Saudi Arabia can guarantee the stability of the Gulf states,” explains Meyer.

But the US still has a small advantage because they guarantee security in Saudi Arabia. The Saudi currency, the rial, has been pegged to the dollar since the 1980s. “So the Saudis will be careful not to anger the United States too much,” Meyer said.

It probably won’t directly affect the Swiss or the franc. In addition to the dollar, the Swiss franc and the Japanese yen are safe havens. “If one of these currencies weakens, the others benefit,” Meyer says. Therefore, the Swiss franc may strengthen in the long run.

“The geopolitical balance is changing. The Saudis will always act in the interests of their country,” Meyer says. Because both the Saudis and the US are not very happy with each other.

Saudi Arabia had hoped for more support in the Yemeni civil war. The US is also trying to sign a nuclear program deal with Iran. This isn’t going well either. In addition, China played a mediating role in the conflict with Iran and scored points with the Saudis.

Source :Blick