What are the implications of pricing Gulf oil in Chinese yuan instead of US dollars?

“We will make full use of oil and gas from the Shanghai Stock Exchange as an area for settling oil and gas trade in Chinese currency,” said Chinese President Xi Jinping, during his speech at the Gulf Summit in Saudi Arabia.

Chinese President Xi Jinping made a prominent statement during his speech at the Gulf Summit in Saudi Arabia, saying: “We will make full use of oil and gas from the Shanghai Stock Exchange as an area for settling oil and gas trade in Chinese currency.”

The settlement of the oil and gas trade of the Gulf states with China on the Shanghai Stock Exchange and in the Chinese yuan means progress towards an actual additional step towards ending the dominance of the dollar in international trade.

break the dominance of the dollar

The United States of America would not have disengaged the dollar from gold in 1971 had it not been for Saudi Arabia’s agreement to price its oil in dollars, which helped Washington print more dollars without having a gold equivalent.

And if Saudi Arabia - the world's largest oil exporter with an average of 7.5 million barrels per day - abandons pricing oil in dollars and turns to the yuan, and Qatar does the same with its liquefied gas, this will be a blow to the dollar that threatens to break its dominance in the international currency market.

The seriousness of this matter lies in the fact that China is the largest importer of oil and gas in the world and the second largest consumer of them, while Saudi Arabia is its largest exporter, and Qatar is the second largest exporter of liquefied gas.

Beijing imports large quantities of Gulf oil, and has agreed with Doha to import larger quantities of liquefied gas, which makes the economies of China and the Gulf countries integrated.

The use of the yuan in intra-trade with the Gulf states is theoretically possible, but this step would cause concern to the United States, which is closely following Chinese expansion in its traditional areas of influence in the region.

On December 7, Washington considered Xi Jinping's visit to Saudi Arabia "an example of China's attempts to extend its influence around the world, and that this will not change US policy towards the Middle East."

And the American newspaper "The New York Times" previously published an article last March, entitled "Saudi Arabia is considering accepting the yuan instead of the dollar when selling its oil to China."

Meanwhile, Saudi Arabia is trying to pressure Washington in order to obtain concessions from it, especially with regard to its commitment to the security of the Gulf, providing it with the weapons it requests in the Yemen war, and stopping its pressures and brandishing it with the human rights card.

Chinese technology is challenging America

China is no longer just a country that imitates Western products, but has become a competitor to the United States in modern technology, especially the fifth generation communications service provided by the Chinese company Huawei, and raises security concerns in the United States.

Riyadh's signing of a memorandum of understanding with the Chinese technology company Huawei in cloud computing and building high-tech complexes in Saudi cities is another challenge to Washington, which has warned countries of the world about the security risks of allowing Huawei to establish fifth-generation networks.

Despite these warnings, Huawei participated in the establishment of fifth-generation networks in most Gulf countries, which constitutes the loss of important markets for the United States and Western countries in the region.

And the signing by Saudi King Salman bin Abdulaziz of a “comprehensive strategic partnership agreement” with the Chinese president on December 8, which represents a new stage in the development of relations, and the alignment of the Chinese Belt and Road initiative with the Saudi Vision 2030, especially with regard to the “NEOM” project that is expected That Chinese companies contribute to its implementation.

Although the two sides did not sign military agreements during the Chinese president's visit to Saudi Arabia between December 7 and 9 to participate in three summits with Saudi Arabia, the Gulf states and the Arab countries, the latter announced his country's support for "building a joint, comprehensive, cooperative and sustainable security system in the Middle East." ".

This indicates China's willingness to contribute to supporting the security of the Gulf, whether in terms of selling modern weapons or even settling military industries in the region, and even helping Saudi Arabia build a "peaceful" nuclear program.

And China's strengthening of its military presence in the Gulf would weaken the security alliance with the United States, which had previously refused to sell drones to Saudi Arabia, and did not move a finger when it bombed Saudi oil facilities with drones and ballistic missiles believed to have been launched by the Iranian-backed Houthis.

Nevertheless, Saudi Arabia does not show a desire to replace its alliance with Washington, but rather to expand its partnerships with more than one superpower, according to what Foreign Minister Saud Al-Faisal stated in 2004, that the relationship between Saudi Arabia and the United States is not a "Catholic marriage", but an "Islamic marriage".

Saudi Arabia does not rule out divorce with the United States, as it wants to have more than one strategic partner, and China is one of them. Despite this, Riyadh still needs Washington, which is hostile to Iran, while Beijing is allied with the latter.

Palestine for one China

Despite the development of its relations with Israel in recent decades, the Chinese president did not hesitate during the Arab summit to affirm his support for the establishment of a Palestinian state on the 1967 borders, with East Jerusalem as its capital.

In response to the request of the Algerian Prime Minister, Ayman bin Abdel Rahman, from China to support "efforts to grant Palestine the status of full membership in the United Nations," the Chinese president said that it is necessary to "grant Palestine full membership in the United Nations."

It is clear support from a country that enjoys permanent membership in the UN Security Council, as one of the outcomes of the Arab Summit held in early November in Algeria.

Rather, Jinping went a long way in his support for the Palestinian cause, by asserting that "the historical injustice suffered by the Palestinians cannot be continued, nor can the legitimate rights be compromised."

On the other hand, the Arab leaders renewed their support for the "one China" principle, in reference to their recognition that Taiwan is part of Chinese territory.

And the Riyadh Declaration stated, affirming that "Taiwan is an integral part of Chinese territory, and rejecting its independence in all its forms.