Saudis Mull Ditching US Dollar for China's Yuan in Oil Sales

Chinese president Xi Jinping accompanies Saudi Arabia's king Salman bin Abdulaziz Al Saud listen to their national anthems during a welcoming ceremony inside the Great Hall of the People on March 16, 2017 in Beijing, China. / Getty Images
March 15, 2022

Saudi Arabia is considering selling oil to China in yuan rather than the U.S. dollar, according to a Wall Street Journal report.

The move would deal a major blow to the dollar's supremacy in the oil market. The Saudis have grown motivated to turn against the United States, according to the Journal, because they are unsatisfied with America's foreign policy decisions and support for the kingdom.

The Saudis fault the United States for not actively supporting its campaign in the Yemeni civil war and for pursuing a nuclear deal with Iran. China has also worked to gain influence in the kingdom in recent years, and Beijing hopes to promote the use of its currency globally and secure protection from U.S. sanctions by convincing Saudi Arabia to price oil in yuan.

If the Saudis sell their oil exports to China in yuan, it would transform the state of the foreign exchange market. China accounts for over a quarter of Saudi Arabia's oil exports, equivalent to tens of billions of dollars every year.

The economic ramifications of trading oil for yuan would be so dramatic that Crown Prince Mohammed bin Salman's aides have warned him of potential damage to the Saudi economy if he pursues the move, according to the Journal. Saudi Arabia's currency, the riyal, is pegged to the dollar.

Still, the Journal reported, others in the crown prince's circle are enthusiastic about pricing oil in yuan because of the upsides of gaining influence with China. Beijing, the Saudis hope, could offer major investments in the country in return, and might reconsider its support for Saudi Arabia's rival, Iran.