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Goodbye Petrodollar: Russia Accepts Yuan, Is Now China's Biggest Oil Partner

Russia is now the top crude exporter to China, the largest (or second largest, depending on whom you ask) oil demand growth country in the world.

At the start of the decade, Saudi Arabia enjoyed a 20% share of Chinese crude imports, while Russia was lagging far behind with 7%. Now the Saudis find themselves neck and neck with Moscow for the lead in Chinese market share, with both performing in the 13-16% range. But Russia's share continues to rise, as The Kingdom struggles to maintain a foothold.

Why? Analysts attribute Russia's huge market share growth to its willingness to accept yuan, while Saudi Arabia is still clinging to blood-soaked dollars. As Business Insider notes:



Interestingly, part of Russia's success in China has been attributed to its willingness to accept Chinese yuan denominated currency for its oil.


This is consistent with earlier forecasts about Russia's market share in China. Bloomberg reported back in July:

Following Russia’s recent acceptance of the renminbi as payments for oil, we expect more record high oil imports ahead to China,” Gordon Kwan, the Hong Kong-based head of regional oil and gas research at Nomura Holdings Inc., said in an e-mail, referring to the Chinese currency. “If Saudi Arabia wants to recapture its number one ranking, it needs to accept the renminbi for oil payments instead of just the dollar.”

As both the head of the Eurasian Economic Union (and founding member of BRICS), as well as a major energy exporter, Russia is leading the charge against the dollar. And now other nations are following suit: Iran and India announced last month that they intend to settle all outstanding crude oil payments in rupees, as part of a joint strategy to dump the dollar and trade instead in national currencies.

The dollar is slowly losing its privileged place in international transactions. What this means for the United States is anyone's guess.

Goodbye Petrodollar: Russia Accepts Yuan, Is Now China's Biggest Oil Partner
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Russia steals Saudi's crown as China’s top oil supplier

Moscow is gaining momentum as the biggest seller of crude oil to China, with Russian crude supplies overtaking those from Saudi Arabia.

According to data from RBC Capital Markets, the Saudi share of Chinese crude imports at the beginning of the decade was about 20 percent, while Russia's was below 7 percent. The situation has changed.

"Russia is the biggest rival to the Saudis in the single-largest oil demand growth country in the world," Michael Tran, RBC Capital Markets' commodity strategist told Business Insider.

"The rising tide of Chinese growth has meant that notional volumes for both countries have increased in the years since, but Russia's gains have been outsized," he added.

Tran said Saudi Arabia now finds itself “neck and neck with Moscow for the lead in Chinese market share, with both jostling in the 13-14percent range, yet the momentum resides with the latter."

Over the past five years, Saudi Arabia increased exports to China by only about 120,000 barrels a day while Russia managed to increase exports by 550,000 barrels a day in the same period.

Russia managed to overtake the Saudis as the biggest crude exporter to China four times in 2015. In the past five years Saudi Arabia has lost the top spot only six times.

Statistics from China's General Administration of Customs (GAC) showed that in December Beijing bought 4.81 million tons of crude oil from Russia. The volume was up 30 percent compared with the previous year.

Imports from Saudi Arabia dropped 1.2 percent year on year to 4.47 million tons. The fall was blamed on a hike in the official Saudi selling price and the closure of several large Chinese refineries for planned overhauls.

"Saudi Arabia is losing its crown as its selling prices in Asia haven't been attractive enough," Gao Jian, an analyst at SCI International, a Shandong-based energy consultant, told Bloomberg back in June.

Analysts say that Russia’s readiness to accept Chinese yuan as payment for its oil is one of the key tipping points.

The Russian-Chinese financial cooperation program includes a three-year ruble-yuan currency swap worth more than $20 billion. The swap agreement was signed in 2014 by the central banks of Moscow and Beijing with the aim of boosting trade using national currencies.

In November, the Central Bank of Russia included the Chinese yuan in its reserve currency basket.
Russia steals Saudi's crown as China’s top oil supplier — RT Business


Impressive development. Ganbare!
 
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Wasn't Mid East oil supposed to get to China via Gawadar? Oh wait...... :D

The Chinese are Wise, my friend. They , as a gargantuan sized nation of over 1.4 Billion, need to secure various vital sources of energy. They have this now through Russia, Iran, OPEC, and also their own vital strategic reserves. I suppose they , like the Americans, realize the importance of sovereignty and energy security paradigm.
 
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The Chinese are Wise, my friend. They , as a gargantuan sized nation of over 1.4 Billion, need to secure various vital sources of energy. They have this now through Russia, Iran, OPEC, and also their own vital strategic reserves. I suppose they , like the Americans, realize the importance of sovereignty and energy security paradigm.

Of course. That is why I just don't see them getting oil over a 16,000 foot pass that easily given the many alternatives they have open to them.
 
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Of course. That is why I just don't see them getting oil over a 16,000 foot pass that easily given the many alternatives they have open to them.

Perhaps we should consider the implications for Gwadar, ultimately, in regards to the development of Pakistan & South Asian context. Gwadar is a major hub and one of three major deep sea ports for Pakistan, its ultimate finalization will mean Pakistan's easier access to the Persian Gulf and the Straits of Hormuz , increase trade as well as helping to facilitate China's reach and grasp into the markets of the contiguous region. Correlate with me , if you may, and observe the importance of Gwadar in China's strategic agenda --- it allows an alternative route to the Straits of Malaccas, which in Beijing's conjecturation , can be pinched by 7th and 3rd Fleet mobilizations in event of a contingency in the South China Seas. This is one of the reasons why China, through an omnidirectional intercollaborative framework with her regional security and economic partners (namely Pakistan a la Gwadar, Thailand a la Kra Canal, and Myanmar-Thailand a la Dawei Seaport Project with Japan) in developing alternative routes of transportation of her merchant fleet.

Gwadar , as it pertains to Pakistan , is of significant importance as it means Pakistan has greater access to contain and project its power in region, secondly it increases trade potential with region. However, in the greater strategic aspect, THE SINO-PAK ALLIANCE can actually build upon this by synergizing in developing and sustaining Gwadar. To Pakistan, Gwadar means regional reach, to China, Gwadar means one of various points of access in projecting China's reach to the world.
 
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Correlate with me , if you may, and observe the importance of Gwadar in China's strategic agenda --- it allows an alternative route to the Straits of Malaccas, which in Beijing's conjecturation , can be pinched by 7th and 3rd Fleet mobilizations in event of a contingency in the South China Seas.

So how does one reconcile the all-season warm seas with a mountainous route, snowbound in winter, over 16,000 feet in elevation, and through an active earthquake zone?
 
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the emerging economy like Indonesia, India, Bangladesh, Philippine all of them are net oil importer no need to worry about the market.
 
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In term of Economy, NOTHING has change. Even if China only buy whatever they buy with RMB, since RMB only have 10.9% of reserve status predicted after they were listed in the basket (Actual % may be less) the problem is that it would not be wise for Russia, which lacking forex themselves as they were eating it up since the sanction started in 2014. To stockpile RMB.

There are 2 reasons

1.) RMB is a volatile currency, as of now, the Chinese Government, not Chinese Federal Bank were in control of the currency, and again, as I said multiple time over and over, the 2 scaling back to back within 6 months alarm the world as that was the currency that is intended to go into the IMF basket in just 8 months. What if the government of China once again down-adjust the value after joining IMF basket? This would basically damage any RMB forex holder, if Russian are holding a large amount of RMB, it would literally get shorted by the Chinese Government at will.

2.) RMB is not international Tradable. Meaning it still require a conversion into USD when both country deal outside of each other. What about Russia-Iran? DO they deal with RMB too? Or China to EU? Would they deal with solely RMB too? The more RMB out there means there are more RMB to converted to USD or Euro. Which actually fuelled the US Currency which literally push the Russian in further debt, unless, of course, they can get whatever they want from China, and China, on the other hand, make a big concession on Russia.
 
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This never accounted the Iranian Connection, my dear.

They were already buying from Iran even with the sanctions.

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Yes they were, but now , the volume shall increase. Absent of sanctions. Not only China, but also Japan.

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It's very possible for Japan to shift a higher percent to Iran since they are lopsided towards Saudi.
Of course they could also buy more from Russia.


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