China and Saudi Arabia are in talks about Saudi Arabia pricing its oil to China in yuan, according to an exclusive report by The Wall Street Journal. 

Since entering an agreement with the Nixon administration in 1974 on pricing oil in dollars in exchange for security arrangements, Saudi Arabia has always priced its oil in dollars. If this were to change, it could seriously affect the U.S. dollar, the status of which depends on its dominance on the global market, especially the oil market, where 80% of sales are made in dollars. China buys around 25% of its oil from Saudi Arabia, which is one of the world’s largest oil producers.

The news about Saudi Arabia’s considerations regarding the yuan came just a week after it was revealed that leaders in Saudi Arabia and the United Arab Emirates had refused to take calls from U.S. President Joe Biden. Oil prices have surged and the Biden administration wanted to talk to Saudi Arabia and the United Arab Emirates about increasing oil production. 

“There was some expectation of a phone call, but it didn’t happen,” said a U.S. official of the planned discussion between the Saudi Prince Mohammed and Mr. Biden. “It was part of turning on the spigot [of Saudi oil].”

Both Saudi Arabia and the UAE have grown increasingly dissatisfied with U.S. policies under the Biden administration including removing the Iran-backed Houthis from the terrorist list and starting talks to renew the Iran nuclear deal, now in its final stages and appearing to heavily accommodate Iranian interests. 

Immediately upon taking office, the Biden administration released an intelligence report implicating Saudi agents in the murder of Washington Post columnist Jamal Khashoggi and claiming that Crown Prince Mohammed bin Salman, the de facto ruler of Saudi Arabia, had approved the murder. The report called Saudi Arabia a “pariah state.” 

“So Biden came in and de-listed the Houthi militia in Yemen as a terrorist organization, which is something that President Trump had done right before he left office,” Stephen Kalin, the Middle East correspondent for the Wall Street Journal’s recently said. “He pulled out Patriot missiles, which are anti-aircraft missile systems to protect Saudi installations from drone and missile attacks, and he pulled out some troops and he just sort of left the Saudis with the impression that he wasn’t that focused on the Middle East, that he wanted to focus more on China, and if the Saudis were under attack, well, that was their issue to deal with. So the relationship is very strained. It’s hard to really say exactly how bad it is. It might be the worst it’s been in 20 years.”

These strained relations could push Saudi Arabia deep into the arms of China, its largest trading partner and a central pillar of China’s Belt and Road Initiative. Saudi Arabia reportedly ranks in the top three countries globally for Chinese construction projects. China has not only been selling weapons to Saudi Arabia, but is also helping the Saudis build their own ballistic missiles. In 2022, Saudi Arabia is expected to host the first China-Arab summit. 

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