Saudi Arabia, the world's largest crude oil exporter, is open to discussing oil trade settlements in currencies other than the U.S. dollar, Saudi Minister of Finance, Mohammed Al-Jadaan, told Bloomberg TV in an interview in Davos on Tuesday.
The Saudi signal that it could be open to talks about oil trade arranged in non-dollar currencies could be another threat to the current dominance of the U.S. dollar in global oil trade.
"There are no issues with discussing how we settle our trade arrangements, whether it is in the US dollar, whether it is the euro, whether it is the Saudi riyal," Al-Jadaan told Bloomberg TV.
"I don't think we are waving away or ruling out any discussion that will help improve the trade around the world," the Saudi minister added.
The Saudi riyal has been pegged to the U.S. dollar for decades, while the Saudi oil exports continue to support the petrodollar system from the 1970s in which the world's top oil exporter prices its crude in U.S. dollars.
However, Saudi Arabia is willing to deepen its strategic cooperation in oil trade with China, the world's largest crude oil importer.
Last month, China and Saudi Arabia agreed to expand crude oil trade as they upgraded their relations to a strategic partnership during the visit of Chinese President Xi Jinping in the Saudi capital Riyadh.
China, for its part, plans to make its own currency, the yuan, more prominent in international oil trade.
During a visit to Saudi Arabia last month, Xi Jinping pledged to ramp up efforts to promote the use of the yuan in energy deals, suggesting at a summit in the Saudi capital that the Gulf Cooperation Council (GCC) countries should make full use of the Shanghai Petroleum and Natural Gas Exchange to carry out its trade settlements in yuan.
By Charles Kennedy for Oilprice.com
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One of these changes is the growing strategic, economic and energy relations between Saudi Arabia and China. In fact, China has become the largest trade partner for Saudi Arabia and its market the largest destination for Saudi crude oil exports and investments and this includes accepting the petro-yuan as payment for its crude oil exports to China sooner or later.
This became inevitable when Chinese President Xi Jinping speaking at the China-Arab Gulf States Summit during his visit to Riyadh in December demanded that that they accept the petro-yuan for payment for Chinese imported crude from the Gulf States.
From the US point of view, accepting the petro-yuan amounts to pulling the rug from under the petrodoillar. However, a compromise might be reached whereby Saudi Arabia accepts the petro-yuan for its exports to China, the euro for exports to the EU and the dollar for exports to the United States.
Moreover, there is a recent precedent when President Putin demanded and got the EU paying in ruble for Russian oil and gas exports.
Dr Mamdouh G Salameh
International Oil Economist
Global Energy Expert