Saudi Arabia studies oil sales in Chinese yuan


Saudi Arabia studies oil sales in Chinese yuan

The crushing sanctions imposed by the United States on Russia have demonstrated the dollar's strength - and this may prompt efforts to avoid using the dollar. The Wall Street Journal reports that Saudi Arabia is in talks with China about accepting the Chinese currency in exchange for oil.

Such a deal could indicate that the prominent position of the dollar - which is already in flux as a result of the rise of China - faces additional challenges during this moment of geopolitical change.

 Experts on the dollar - the world's dominant currency in terms of pricing, payments, and reserves - say the potential oil link between Saudi Arabia and China is more symbolic than a severe threat to the largest reserve currency for the dollar."

"It can marginally affect the dollar's role as a reserve currency, but not by much," Eswar Prasad, professor of economics at Cornell University and author of The Dollar Trap, tells Axios.

"Ultimately, as a reserve currency, I still need a highly liquid currency with deep financial markets and strong institutions," he adds.

The 1974 agreement re-established relations and deepened the military and economic ties between the two countries.

But since a US intelligence report found that Saudi leaders approved the killing of journalist and US resident Jamal Khashoggi in 2018, things have become less cordial. The dollar's strength from its association with democracy. American democratic laws, courts, and institutions exert such a powerful pull that authoritarian economies have difficulty competing. At least for now.

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