Prof. ST Hsieh
Director, US-China Energy Industry Forum
March 15, 2022
Ukraine war so far has drastically challenged the existing global order. Cease fire may come soon but peace keeping in Europe will be very challenging. While Putin flexed Russia military power, Biden led EU and allies flexed unprecedent economic power crippling Russia economy. Even after cease fire is reached, Russia will still subject to economic sanctions. The US economic power is based on the unique strength of US dollars.
Ukraine war also shakes up the long-standing Russia energy trades with Europe. As EU nations focuses on decoupling Russia coal, oil, and gases within next five years, US energy exporters, specifically LNG industry, will gain maximum benefit from EU market.
It is also clear that after US led economic sanctions could effectively remove Russia from the global financial markets, it is also mean the end of OPEC+ as Russia would not be able to do businesses in US dollars. So, it is easy to understand why any nation who is not a friend in the US camp must be concerned about the trading with US dollars.
The following reports about China and Saudi enhancing their financial coupling is a clear example of attempting to do business without US influence. In fact, one can expect that after the Ukraine war is over, Russia will be forced to trade without US dollars.
While it is natural for China, the world largest energy importer, and Saudi, the world top oil exporter, to enhance trade relationship, it is a very recent development that Saudi is breaking away from the 70 years old, “rock-solid” relationship with the US.
A major reason is US Democratic strong position on human rights which became the US government foreign policy position after Biden took office in 2021.
“In 2020, Biden also promised to make Saudi Arabia a “pariah” over the murder of a journalist. And since becoming president, he has made it clear that he doesn’t consider Saudi Arabia as an ally, but rather as a partner.”
Biden’s official position downgraded the traditional bilateral relation significantly between the US and Saudi. The former US President Trump and family maintained close personal relationship with Saudi Crown Prince, Mohammed bin Salam (MBS), the de facto leader of Saudi and will lead the nation for a generation, Biden has made statements that “he considers MBS as a murderer.” It is no wonder that “Saudi Crown Prince Mohammed bin Salam reportedly rejected a request for a call with Biden.” How should a murderer open a phone conversation with moral leader of the world?
MBS has invited President Xi to a state visit as early as this May.
“Saudi Arabia is planning to replicate the warm reception it gave to former U.S. President Donald Trump in 2017 when he visited the kingdom on his first trip abroad as president, the Journal report said.”
“The crown prince and Xi are close friends and both understand that there is huge potential for stronger ties.”
US dollar’s dominance in oil markets may face challenge as Saudis reportedly eye yuan-based sales deal with China
Phil Rosen Business Inside
Tue, March 15, 2022, 10:41 AM
- Saudi Arabia is in talks to sell oil to China and be paid in yuan, according to the Wall Street Journal.
- For nearly 50 years, the world’s top oil exporter has traded crude exclusively in US dollars.
- Relations between Saudi Arabia and the US have deteriorated under the Biden administration.
The world’s top oil exporter and the world’s biggest oil importer could shake up the US dollar’s dominance in the global petroleum market.
Saudi Arabia is in talks to sell oil to China and be paid in yuan instead of dollars, according to a Wall Street Journal report.
About 80% of global oil sales are done in dollars, and Saudi Arabia has conducted its deals exclusively in the greenback since 1974. So if a Saudi-yuan deal were to be made, it would bolster China’s currency at the expense of the dollar as Beijing looks to challenge US leadership in financial markets.
The likelihood of a potential deal between Saudi Arabia and China has picked up recently, according to the Journal. The longtime Mideast ally has grown unhappy with the US due to the Biden administration’s reluctance to do more in the Yemen civil war and its push to revive the Iran nuclear deal.
In 2020, Biden also promised to make Saudi Arabia a “pariah” over the murder of a journalist. And since becoming president, he has made it clear that he doesn’t consider Saudi Arabia as an ally, but rather as a partner.
What’s more, Saudi Crown Prince Mohammed bin Salam reportedly rejected a request for a call with Biden to discuss Ukraine and boost oil production amid the West’s sanctions against Russia.
Meanwhile, China leaned on Saudi Arabia as its primary crude supplier last year. And economic relations between Saudi Arabia and the US have dwindled, since the US has become less dependent on Saudi oil in recent years as domestic shale production boomed.
Saudi Arabia invites China’s Xi to visit – WSJ
Mon, March 14, 2022, 12:47 PM
(Reuters) – Saudi Arabia has invited Chinese President Xi Jinping to visit the kingdom in a trip that could happen as soon as May, the Wall Street Journal reported on Monday.
The visit could help the kingdom deepen its ties with Beijing at a time of strained relations with Washington.
Since U.S. President Joe Biden took office in January 2021, the strategic partnership between Saudi Arabia, the world’s top oil exporter, and the United States has been tested by Riyadh’s human rights record, particularly in light of the war in Yemen and the 2018 murder of Saudi journalist Jamal Khashoggi.
In an interview with The Atlantic published earlier this month, Saudi Crown Prince Mohammed Bin Salman said he did not care whether Biden misunderstood things about him.
Saudi Arabia is planning to replicate the warm reception it gave to former U.S. President Donald Trump in 2017 when he visited the kingdom on his first trip abroad as president, the Journal report said.
“The crown prince and Xi are close friends and both understand that there is huge potential for stronger ties,” the report https://www.wsj.com/articles/saudi-arabia-invites-chinas-xi-to-visit-kingdom-amid-strained-u-s-relations-11647284211?mod=latest_headlines quoted a Saudi official as saying. “It is not just ‘They buy oil from us and we buy weapons from them’.”
Saudi government and China’s foreign ministry did not immediately respond to requests for comment from Reuters.
Aramco says China joint venture to develop refinery and petrochemical complex
CAIRO, March 10 (Reuters) – Saudi Aramco (2222.SE) said on Thursday its joint venture in China will develop a major integrated refinery and petrochemical complex in the northeast of the country.
The project, expected to be operational in 2024, combines a 300,000 barrel-per-day capacity refinery and ethylene-based steam cracker, with Aramco set to supply up to 210,000 barrels a day of crude oil feedstock.
Huajin Aramco Petrochemical Company (HAPCO) is a joint venture between Saudi oil giant Aramco and North Huajin Chemical Industries Group Corporation (000059.SZ) and Panjin Xincheng Industrial Group.