According to the DJ's report, Saudi Arabia is in talks with China to price some of its oil sales in yuan. It is estimated that some political developments accelerate this process. The Biden administration's attempt to reach an agreement with Iran on the nuclear program is one of them, a feature that has also been on the agenda in the conflict with Russia. It is also known that the US puts more production and less price pressure for Saudi oil.
Saudi Arabia provides 15.9% of the oil that China buys, which corresponds to 28.1 billion dollars. Russia ranks second in China's oil imports with 27.3 billion dollars and its share is 15.5%. We can say that petrodollars will not be valid in Russia's Chinese sales, because there is no conversion to dollars since Swift is not active. Already in the use of dollars, Russia has to return to the local currency as it will experience problems due to the banking system. The fact that Saudi Arabia will also participate in the use of yuan adds to the interestingness and this is not a market that the US wants, of course.
There will be a discount in oil conversions over the exchange rate, according to the pricing in dollars. Russia's problems have caused some problems in the insurance of the oil traded today, and factors such as insurance, freight, waiting at ports, and complicated transportation costs have emerged in the pricing of non-Russian oil resources. Saudi Arabia has a trade volume of 65.6 billion dollars with China, of which 39.1 billion dollars is exports from Saudi Arabia to China. In other words, the party giving surplus is Saudi Arabia. Trade in local currencies seems to work in practice, since the difference between exports and imports is not very large in total trade. One thing to note here is that the rial is a fixed currency to the dollar and does not fluctuate in the free market. So it's not convertible, and if the Saudi Arabian Central Bank has to use reserves, its allocation will come from oil and of course high prices. Of course, since the subject of trade in these local currencies has been the subject of many show business launches such as breaking the dominance of the dollar and removing the petrodollars from circulation in the last 20 years, it is necessary not to enter the mood of the new world order early. As for Russia, time will tell if it creates a break through polarization again. It is understood that the energy issue is on a level that will create difficulties in terms of war and changing balances.
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