Open to Alternatives

Open to Alternatives

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  • Saudi Arabia will consider trading in currencies other than the USD, the country’s finance minister said Tuesday, in one of the clearest signs yet that the oil-rich kingdom is open to diversifying away from the greenback. “There are no issues with discussing how we settle our trade arrangements, whether it is in the USD, whether it is the Euro, whether it is the Saudi riyal,” the Kingdom’s finance minister, Mohammed al-Jadaan stated.
  • Jadaan’s comments are likely to spark speculation about Riyadh’s willingness to conduct oil sales in Chinese Yuan. During a visit to the Gulf in December, Chinese President Xi Jinping told Arab leaders that Beijing would push to buy oil and gas in Yuan, as it looks to position its currency for use in international trade. Saudi Arabia, like other Gulf states, has pegged its currency to the dollar for decades.
  • China accounts for more than a quarter of Saudi Arabia's crude exports. If the Kingdom were to move toward a “petroyuan”, it could dent the dollar’s status as the world’s reserve currency.

Why it matters

Saudi Arabia controls a 10th of global oil production, roughly on par with its main rivals; the United States and Russia. Its oil firm Saudi Aramco holds the crown of the world’s biggest oil exporter with sales of $356 billion last year. In the event of such a drastic Saudi move, the impact would take some time to play out given the industry’s decades-old practices built around the USD – from lending to exchange clearing.

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