China will 'compel' Saudi Arabia to trade oil in yuan — and that's going to affect the US dollar

[fitpOsitive]

China will 'compel' Saudi Arabia to trade oil in yuan — and that's going to affect the US dollar

• "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," Carl Weinberg, chief economist and managing director at High Frequency Economics, told CNBC
• In recent years, several nations opposed to the dollar being the world's reserve currency have progressively sought to try and abandon it
• OPEC kingpin Saudi Arabia is at the crux of the petrodollar

Sam Meredith | @smeredith19
Published 1:57 AM ET Wed, 11 Oct 2017 Updated 21 Hours Ago

China will "compel" Saudi Arabia to trade oil in yuan and, when this happens, the rest of the oil market will follow suit and abandon the U.S. dollar as the world's reserve currency, a leading economist told CNBC on Monday.

Carl Weinberg, chief economist and managing director at High Frequency Economics, said Beijing stands to become the most dominant global player in oil demand since China usurped the U.S. as the "biggest oil importer on the planet."

Saudi Arabia has "to pay attention to this because even as much as one or two years from now, Chinese demand will dwarf U.S. demand," Weinberg said.


"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."

Crux of the petrodollar
In recent years, several nations opposed to the dollar being the world's reserve currency have progressively sought to try and abandon it.

For instance, Russia and China have sought to operate in a non-dollar environment when trading oil. Both countries have also increased their efforts to mine and acquire physical gold if, or perhaps when, the dollar collapses.

OPEC kingpin Saudi Arabia is at the crux of the petrodollar.

Since a 1974 agreement between U.S. President Richard Nixon and Saudi King Faisal, Saudi Arabia has accepted payments for nearly all of its oil exports in dollars. However, as China imports more and more oil from countries across the world, the idea of having to purchase that same oil in dollars has become increasingly irritable to Beijing.

In recent years, China has sought to ratchet up the pressure on Saudi Arabia over the form of currency in which their oil trade is conducted, with Riyadh now enjoying less and less oil purchases from Beijing.

What does it mean for the dollar?
When asked what it could mean for the dollar should the oil market move oil trade out of the U.S. currency and into the yuan, Weinberg said the world's transaction currency would suffer "lesser demand for U.S. securities across the board."

"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… (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."
https://www.cnbc.com/2017/10/11/chi...-and-thats-going-to-affect-the-us-dollar.html

I will siggest the Saudia should trade oil for PKR, SR, Rubel or Yuan.

 

[saurav jha]

I will siggest the Saudia should trade oil for PKR, SR, Rubel or Yuan.

PKR? Seriously?

 

[fitpOsitive]

PKR? Seriously?

Yes sir, I am serious.

 

[beijingwalker]

 

[RoadRunner401]

Incorrect.

The "petrodollar" was created on 14 February 1945 as part of the Quincy Agreement.

I usually ignore off topic gibberish, but in your case I will, In the final days of World War II, leaders from all of the Allied nations met in Bretton Woods, New Hampshire in an effort to create a new global economic order. With much of the global economy decimated by the war, the United States emerged as the world's new economic leader. The relatively young and economically nimble U.S. served as a refreshing replacement to the globe's former hegmon: a debt-ridden and war-torn Great Britain.

In addition to introducing a number of global financial agencies, the historic meeting also created an international gold-backed monetary standard which relied heavily upon the U.S. Dollar. it was called the Bretton Woods and this was backed by gold

This dollar system worked well. However, by the The 1960s the weight of the system upon the United States became unbearable. On August 15, 1971, President Richard M. Nixon shocked the global economy when he officially ended the international convertibility from U.S. dollars into gold, thereby bringing an official end to the Bretton Woods

Two years later, in an effort to maintain global demand for U.S. dollars, another system was created called the petrodollar system. In 1973, a deal was struck between Saudi Arabia and the United States in which every barrel of oil purchased from the Saudis would be denominated in U.S. dollars. Under this new arrangement, any country that sought to purchase oil from Saudi Arabia would be required to first exchange their own national currency for U.S. dollars. In exchange for Saudi Arabia's willingness to denominate their oil sales exclusively in U.S. dollars, the United States offered weapons and protection of their oil fields from neighboring nations, including Israel.

 

[VCheng]

In 1973, a deal was struck between Saudi Arabia and the United States in which every barrel of oil purchased from the Saudis would be denominated in U.S. dollars. Under this new arrangement, any country that sought to purchase oil from Saudi Arabia would be required to first exchange their own national currency for U.S. dollars. In exchange for Saudi Arabia's willingness to denominate their oil sales exclusively in U.S. dollars, the United States offered weapons and protection of their oil fields from neighboring nations, including Israel.

Sir, the USA guaranteed security for SA in 1945. SA in return pledged to sell their oil in dollars only. Bretton Woods is a totally different matter. After all, 1973 was the year of the oil embargo. Remember that?