Not long after Riyadh rebuffed the White House’s entreaties to pump more oil to offset the economic effects of sanctions on Russia, reports emerged that Saudi Arabia has entered into negotiations with China to begin selling oil in yuan. Such a shift to Chinese currency would undermine the dollar’s dominant status in global petroleum markets. Ed Morrissey observes:
This isn’t an energy problem, so it can’t be fixed by rapidly increasing American production—at least not directly. This is a diplomatic and strategic issue, one that Joe Biden’s pursuit of a renewed [nuclear] deal with Iran has exacerbated, if not almost entirely created. The Obama administration also bent toward Tehran at the expense of the regional Sunni states, but the Saudis et al. benefited from Donald Trump’s rejection of the [2015 nuclear agreement] and a focus on U.S. alliances [with Saudi Arabia, the United Arab Emirates, and Israel].
That’s the strategic outlook from the Saudi [perspective]. The strategic outlook from China is just as obvious, although an attack on the dollar would be risky for Beijing. They hold a lot of U.S. currency in reserve, after all, and that is one way they manipulate the yuan.
China could decide that the strategic value of dismantling [the global monetary policy established in 1944 at] Bretton Woods outweighs the damage they could do to themselves in the short run. As for the Saudis, they might end up noting that China has been facilitating the Iran deal, as noted by Putin’s interlocutor in the talks, Mikhail Ulyanov. [The Saudi discussions about the yuan] could just be a shot across Biden’s bow to deflect the White House from a very bad deal with the mullahs of Tehran.
As if to underscore Saudi grievances, yesterday Iran-backed Houthi guerrillas in Yemen launched missile and drone attacks at several fossil-fuel and water-desalination plants in the kingdom.