China to ‘Compel’ Saudi Arabia to Accept Yuan for Its Oil
China, the largest global oil importer, is putting pressure on the Saudis to accept yuan for its oil exports to Beijing
This week, a leading economist predicted a major paradigm shift, as Carl Weinberg, chief economist and managing director at High Frequency Economics told CNBC that China will “compel” Saudi Arabia to abandon the petrodollar, and instead, begin trading oil in yuan—a move he says is likely to precipitate the rest of the oil market following suit and abandoning the U.S. dollar as the global reserve currency.
Weinberg noted that China is poised to clearly dominate the global landscape in terms of oil demand since surpassing the U.S. as the “biggest oil importer on the planet,” adding that Saudi Arabia will “pay attention to this because even as much as one or two years from now, Chinese demand will dwarf U.S. demand.”
“I believe that yuan pricing of oil is coming and as soon as the Saudis move to accept it—as the Chinese will compel them to do—then the rest of the oil market will move along with them,” Weinberg said.
Commensurate with the rise of the U.S. use of the petrodollar as a weaponized financial instrument, numerous states that oppose the dollar holding the status of world reserve currency, have worked to minimize their dependence on dollars in bilateral transactions.
In fact, the World Gold Council has reported that the Central Bank of Russia has more than doubled the pace of its gold purchases, bringing its reserves to the highest level since Putin took power 17 years ago, according to Jim Rickards, author of the book “Currency Wars.”
Russia’s desire to break away from the hegemony of the U.S. dollar and the dollar payment system is well-known. Over 60 percent of global reserves and 80 percent of global payments are in dollars.
After the failed “reset” in U.S./Russian relations by the Obama administration, and the continued deterioration of the countries’ relationship, Washington began targeting entire sectors of the Russian economy, as well as specific individuals, meant to impose an economic burden so severe that it would force Moscow into compliance.
Instead of decimating Russia, what it precipitated was a Russian response of gradually weaning themselves off of the hegemony of the U.S. petrodollar, and working with China to create an alternative to the SWIFT payment system that is not solely controlled by Western interests (see Asian Infrastructure Investment Bank, New Development Bank).
While still suffering from the economic warfare being waged by the U.S., Russia, as well as China have long since realized that as long they are subservient to the petrodollar, there remains a clear and present danger of their respective economies being devastated by the whims of Washington.
The current petrodollar alliance between the U.S. and Saudi Arabia began with a 1974 agreement between U.S. President Richard Nixon and Saudi King Faisal. Since that time Saudi Arabia has denominated all oil exports in US dollars. Since China is now the global leader in oil demand, having to purchase Saudi oil in U.S. dollars is becoming increasingly irritating to Beijing.
In fact, in recent years, China has sought to increase pressure on Saudi Arabia over being forced to transact in dollars, by purchasing less oil from the Saudis.
“Moving oil trade out of dollars into yuan will take right now between $600 billion and $800 billion worth of transactions out of the dollar,” Weinberg said. “[That] means a stronger demand for things in China, whether it’s securities or whether it’s goods and services. It is a growth plus for China and that’s why they want this to happen.”
It is clear that China is now moving to assume their rightful place as a global superpower, and that along with Russia, they clearly are working to hedge against allowing their nations to remain vulnerable to the petrodollar being wielded as a weapon by Washington.
When the Saudis begin to switch from exports being denominated in dollars, to pricing exports in yuan, you can be virtually certain that the clock is counting down to a U.S. economic implosion the likes of which you have never seen.
Source: The Free Thought Project
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