Saudi Arabia officially open to non-dollar oil trade

Photo: Dominique BERBAIN/Gamma-Rapho via Getty Images

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 media outlet Bloomberg in Davos on Tuesday.

If the Saudis were to open to talks about oil trade arranged in non-dollar currencies it would represent a significant threat to the current dominance of the U.S. dollar in the 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 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.

In recent years however, Saudi Arabia has shown a willingness to step up 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 is eager to thrust its own currency, the yuan, to the fore 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. He proposed 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.

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