'Nuclear option': Saudis in talks with China to pivot from U.S. dollar

(Image by Dr StClaire from Pixabay)
(Image by Dr StClaire from Pixabay)

The United States dollar’s position as the chief currency of trade for the global oil industry has been a foundation of the American economy for decades, keeping inflation at bay amid the Fed’s unprecedented printing of money.

But now Saudi Arabia and China are in talks to price some of the monarchy’s oil sales in the Chinese yuan, rather than dollars, the Wall Street Journal reported Tuesday.

Citing people familiar with the matter, the paper said that after six years of off-and-on discussions, talks stepped up this year amid Riyadh’s strong opposition to Washington’s nuclear negotiations with Iran and other issues.

The Saudis, whose oil industry was developed by the U.S., have exclusively used the dollar for trading oil since the mid-1970s as part of a bilateral security agreement. Nearly 80% of global oil sales are priced in dollars. And Saudi Arabia possesses about 17% of the world’s proven petroleum reserves.

But tensions have grown between the U.S. and Crown Prince Mohammed bin Salman since the 2018 assassination of dissident journalist Jamal Khashoggi. The relationship has only worsened since President Biden said the assassination should make Saudi Arabia a global “pariah” and his administration renewed talks with Tehran.

Meanwhile, Biden and Western leaders are appealing to Riyadh to pump more oil in response to the Ukraine crisis and the decision to no longer import Russian oil.

The Wall Street Journal pointed out that a Saudi pivot to Beijing could prompt other oil suppliers to China – Russia, Angola and Iraq – to do the same.

In 2019, Saudi Arabia threatened to sell its oil in other currencies if Washington passed a bill exposing OPEC members to U.S. antitrust lawsuits, Reuters reported at the time.

The bill, known as NOPEC, could have provoked what was described by a Reuters source as the “nuclear option.” The ditching of the dollar, the wire service reported, would undermine the currency’s “status as the world’s main reserve currency, reduce Washington’s clout in global trade and weaken its ability to enforce sanctions on nation states.”

Another Reuters source said the Saudis were warning that if NOPEC – the No Oil Producing and Exporting Cartels Act – passed, “it would be the U.S. economy that would fall apart.”

NOPEC, first introduced in 2000, aims to remove sovereign immunity from U.S. antitrust law, allowing OPEC states to be sued for reducing output to raise oil prices.

Reuters noted in 2019: “A move by Saudi Arabia to ditch the dollar would resonate well with big non-OPEC oil producers such as Russia as well as major consumers China and the European Union, which have been calling for moves to diversify global trade away from the dollar to dilute U.S. influence over the world economy.”

Why it matters to ‘regular Americans’
On Tuesday, former Trump economic adviser Steve Cortes reacted to the breaking news regarding the Riyadh-Beijing talks in an interview with Steve Bannon on “War Room.”

“What Joe Biden is right now jeopardizing is a century, literally a century, of the hegemony, the supremacy, the primacy of the United States dollar,” Cortes said.

All important global transactions have taken place with the dollar, he explained, because the dollar is “backed by the full faith and credit of the people of the United States and protected also by the supremacy of the United States military.”

But all of that has been put in jeopardy, Cortes said, by the “weaponization of money” against “regular working class people in Russia who have seen the value of their rubles and their purchasing power collapse in recent weeks.”

One of the chief consequences, he said, could be that “we are literally compelling the rest of the world to find currency alternatives, because they cannot operate at the whim of the United States.”

They essentially, he said, could be “de-banked, they could be de-dollarized at the stroke of a pen by somebody like Joe Biden.”

Cortes noted the Wall Street Journal’s report that Chinese President Xi Jinping’s first trip abroad since the beginning of the pandemic will be to Riyadh.

“There’s an emerging alliance on the Eurasian landmass – India, China, Saudi Arabia, Moscow,” he said.

It’s a “complex alliance” with many internal conflicts, Cortes added, but “all of them, now, have a vested interest in not operating in dollars.”

“And that matters to regular Americans, even if you don’t care about foreign affairs, because king dollar – until Biden – has kept inflation contained for the last 40 years.”

Content created by the WND News Center is available for re-publication without charge to any eligible news publisher that can provide a large audience. For licensing opportunities of our original content, please contact [email protected].


This article was originally published by the WND News Center.

Related Posts