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As the sanctions imposed by the United States and some of its allies against Russia continue to shake the global market, especially the global energy trade, more and more countries are looking for alternatives to settlement systems dominated by the US dollar to avoid risk and loss, with some exploring the possibilities of using the Chinese yuan.

The Wall Street Journal reported on Tuesday that Saudi Arabia was in “active talks” with China to price some of its oil sales to China in yuan, citing unidentified sources.

The report came as Indian media also reported that the Indian government is considering buying Russian oil at discounted prices with a rupee-ruble swap mechanism that could use the yuan as a benchmark currency.

For some, if the Saudi consideration materializes, it could mean a rollback of the petrodollar system, a facet of US financial hegemony, and contribute to the decline of the dollar’s reserve status, which the US has benefited from. . printing as many dollars as needed to fund its spending for decades.

Chinese international affairs and oil experts said that although Saudi Arabia and China have been engaged in talks over the use of the petroyuan for a few years, nothing concrete is expected to come out any time soon. But they said using the yuan to settle some of the Saudi oil trade with China is definitely a growing trend as it caters to Saudi interests, and the yuan is becoming increasingly international.

Li Weijian, a researcher at the Institute of Foreign Policy Studies at the Shanghai Institutes of International Studies, told the Global Times on Wednesday that countries learn from other countries or from their own bitter experience of the risks of depending entirely on of the dollar. .

In light of the growing abuse of unilateral U.S. sanctions, countries are stepping up efforts to seek a rescue currency for their international trade, and the yuan is one of the options on the table, Mr. Li. With the continuation of the process of global multipolarization, the trend will accelerate and contribute to the internationalization of the yuan.

The yuan’s share in global cross-border payments reached 3.2 percent in January, ranking fourth and behind the US dollar, euro and pound, according to SWIFT data.

China is the world’s largest oil importer and buys more than 25% of the oil exported by Saudi Arabia.

In recent years, China and Saudi Arabia have also engaged in a wide range of cooperation under the Belt and Road Initiative and the Saudi Vision 2030.

China’s approach of emphasizing development is winning more and more hearts in the Gulf region, Li said. United to stir up conflict and profit from it.

Settlement of oil transactions in yuan could avoid negative fallout from fluctuations in international crude prices, said Xi Jiarui, senior crude industry analyst at Beijing-based JLC Network Technology Co, a market intelligence provider. raw materials.

Due to the sheer size of Saudi Arabia’s oil exports to China, such a move could have a huge impact, Xi said.

Huge swings in crude prices have been a headache for China, the factory of the world, and the effort to stabilize commodity prices has often been on the agenda of top Chinese policymakers.

As of November 2020, Brent oil rose from $40 to $78 per barrel in July 2021. Currently, Brent is trading at around $100 per barrel.

An official of a state-owned energy company in eastern China’s Shandong Province told the Global Times on Wednesday that he would welcome the day when Saudi oil is settled in yuan.

“Bilateral relations will be strengthened with such a decision, and closer ties will help us secure crude oil supplies, which are crucial for us in these volatile times,” the official said on condition of anonymity.

Saudi Arabia exported 84.92 million tonnes of crude to China in 2021 and secured its status as China’s top source of oil imports. Russia came second.

Countries currently under US sanctions have already diversified the currencies they use for payments over the past decade. However, analysts point out that the petroyuan and the internationalization of the yuan will be long and arduous processes.

While settlements of oil deals between China and Saudi Arabia in yuan are apparently progressing, they may not happen anytime soon. There is, however, growing momentum by countries around the world to find a replacement for the petrodollar system, analysts noted.