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US pressures Saudi Arabia to sell oil in dollars, not Chinese yuan, amid Israel negotiations

As part of negotiations for Saudi Arabia to recognize Israel, the United States is demanding that Riyadh keep pricing its oil in dollars, not China’s renminbi or other currencies.

Biden Saudi Arabia MBS
US President Joe Biden fist bumps Saudi Crown Prince Mohammed bin Salman (MBS) in Riyadh in July 2022

The United States is negotiating behind the scenes with Saudi Arabia, pressuring the country to keep selling its oil in dollars.

Washington is concerned that Riyadh may price its crude in other currencies, particularly China’s renminbi.

Saudi Arabia is one of the world’s top three oil producers. Since the 1970s, Riyadh has agreed to sell its crude in dollars, helping maintain the greenback’s hegemonic status as the global reserve currency.

The Wall Street Journal reported that the US is working on a diplomatic deal in which Saudi Arabia would agree to normalize relations with Israel’s apartheid regime.

In return, Riyadh wants Washington to pledge to always protect it, as well as help in developing a nuclear program.

Although the negotiations are ostensibly about Israel-Palestine, the Wall Street Journal noted that the US is using the deal to pressure “Saudi Arabia to impose limits on its growing relationship with China”.

“The Biden administration is seeking assurances from Saudi Arabia that it will distance itself—economically and militarily—from China”, the newspaper added, citing anonymous US officials.

In terms of Saudi-Chinese relations, Washington has three main demands, according to the Wall Street Journal:

  1. “assurances that Riyadh will use U.S. dollars, not Chinese currency, to price oil sales”,
  2. “assurances from Saudi Arabia that it won’t allow China to build military bases in the kingdom”, and
  3. “limitations on Saudi Arabia using technology developed by China’s Huawei”.

While many analysts have speculated that the US military will gradually leave West Asia, to prioritize the new cold war, the report emphasized that President Joe Biden’s “focus on the deal [with Saudi Arabia] is a reflection of his view that America has to remain a central player in the Middle East to contain Iran, isolate Russia for its war in Ukraine and thwart efforts by China to supplant Washington’s interests in the region”.

How the petrodollar system helps maintain US dollar hegemony

The petrodollar system has been a key pillar holding up the hegemony of the US currency.

The fact that countries that import oil need dollars to pay for it ensures steady demand for Washington’s currency around the world.

This stabilizes the dollar, helping to finance the massive current account deficit the United States has maintained for decades.

us current account balance 1960 march 2023

When most countries have a consistent trade deficit, their national currency depreciates against the currency they use to pay for imports. As the local currency weakens, this makes imports more expensive and exports cheaper, encouraging the country to balance its trade.

However, the United States has long been able to maintain a gargantuan trade deficit with the rest of the world because there is so much demand for its currency.

The petrodollar system is one important reason for this high demand for dollars (among several other factors – such as overwhelming US military power, the impression that the currency is a stable store of value, open capital markets with many investment opportunities, etc.).

current account countries map

Countries by their current account balance, averaged from years 1980 to 2008 (red is a deficit, green is a surplus)

When Saudi Arabia has a glut of dollars, it has historically deposited them in the US banking system, which in turn uses the excess currency to fund more loans.

Saudi Arabia’s central bank also invests excess dollars it receives from crude sales in the purchase of Treasury securities, effectively financing US government spending.

As Geopolitical Economy Report previously noted:

In 1974, [US President Richard] Nixon sent his Treasury secretary, William Simon, to Saudi Arabia. “The goal” of the trip, Bloomberg explained, was to “neutralize crude oil as an economic weapon and find a way to persuade” Saudi Arabia “to finance America’s widening deficit with its newfound petrodollar wealth”.

Washington signed a historic agreement with Riyadh, pledging to protect the Gulf monarchy in return for Saudi Arabia selling its oil exclusively in dollars, depositing those petrodollars in US commercial banks, and investing in Treasury bonds.

Bloomberg explained: “The basic framework was strikingly simple. The U.S. would buy oil from Saudi Arabia and provide the kingdom military aid and equipment. In return, the Saudis would plow billions of their petrodollar revenue back into Treasuries and finance America’s spending”.

Saudi Arabia moves closer to China, and discusses potentially selling its oil in yuan

China is Saudi Arabia’s largest trading partner, and the two nations have developed closer relations in recent years.

For a decade, Beijing has bought more oil from the Persian Gulf than the United States. The region is very important for China’s energy security, providing the East Asian giant with one-third of its energy needs.

This March, China helped broker a historic rapprochement between Saudi Arabia and Iran. Washington was furious about the peace breakthrough, and has pushed Riyadh to re-join its aggressive containment strategy against Tehran.

Geopolitical game changer: China’s Iran-Saudi peace deal is big blow to petrodollar and US economic hegemony

Chinese President Xi Jinping visited Saudi Arabia in December 2022, where he signed agreements with the Gulf Cooperation Council (GCC) and Arab League.

In Riyadh, Xi announced that “China will continue to import large quantities of crude oil from GCC countries, expand imports of liquefied natural gas … and make full use of the Shanghai Petroleum and Natural Gas Exchange as a platform to carry out yuan settlement of oil and gas trade”.

Saudi Arabia’s finance minister confirmed for the first time in public this January that Riyadh is indeed considering selling oil in other currencies.

However, although there has been a lot of speculation about this in the financial press, the Saudi government has not publicly announced any plans to price its crude in yuan or any other currency.

In 2021, Saudi Arabia became an official dialogue partner of the Shanghai Cooperation Organization (SCO). The SCO is an important institution promoting Eurasian integration, and fellow members include China, Russia, India, and Pakistan.

Iran became a full member of the SCO this July.

Saudi Arabia is among of the three biggest oil producers in the world (along with the US and Russia). Iran has long been one of the top 10 producers of crude.

top 10 oil producer countries 2022

23 Comments

23 Comments

  1. David Pearce

    2023-08-10 at 13:29

    Never gonna happen. MBS is hard-hedging between two poles for their benefit. Saudi Arabia & Israel are two of my least favorite governments, but the US expecting them to completely side against China is unrealistic.

    • Curtis Blanco

      2023-08-12 at 01:09

      Saudia Arabia is fearful of Iran. When the United States under Obama and Biden insisted on a nuclear Arms deal with Iran to ensure Iran didn’t get the bomb, but was little more than window dressing, Saudia Arabia started considering other options and why not.

      The entire reason Saudia Arabia agreed to accept only dollars for oil in the first place is because in return, we agreed to provide them with security.

    • Geary Jones

      2023-08-12 at 09:06

      If it wasn’t for Biden’s dumb ass shutting down the canadian oil pipeline we wouldn’t have too worry about asking other people for oil. I mean who sign 70 different bills without reading them first smh

    • Carolyn L Zaremba

      2023-08-13 at 14:01

      Agreed. “The United States demands.” Who are they kidding?

    • Michael Thomas

      2023-08-14 at 18:19

      Fuck the United States I hope it falls to the ground

  2. Pete

    2023-08-11 at 08:10

    Someone should tell Joe it isn’t 1974 anymore.

    • Neale Dobkin

      2023-08-12 at 12:10

      Debt is like a tail on a kite. If that tail becomes long enough, the wind better stay strong, or the kite will be inexorably pulled groundward. The power center of the world is shifting eastward. Our former global minions are not as US-dependent as formerly. Our greatest continuing resource is an educated population, both from the standpoint of earning a good living, and voting on issues which only informed people might understand. We should recognize this deficiency and correct it in our budgetary process.

      • Charles Simmons

        2023-09-10 at 10:26

        I agree that our main resource is a highly educated public but I think the will to achieve it does not exist today. So we at the grassroots have to fight for it as never before.

      • Don Mason

        2023-09-14 at 21:38

        I disagree. I am not formally educated. I am self taught, however I was able to find my way into NOAA where I worked for 35 years. I was surrounded by highly educated people. In relatively short order, I realized that I was surrounded by mostly below average educated people, despite my he frames which hung on their walls. It took me a while to fully comprehend that these PhD’s, scientists, mathematicians, economists, biologists were largely poor thinkers and poor workers. Hundreds of educated men and women knew very little about a very lot. But, they all had degrees and a tacit presumption of intelligence and ability by virtue of their diplomas. It simply was not so. Most were poor thinkers, poor problem solvers, poor leaders, poor track records, and often poor attitudes. To top it off, many were unhappy. It’s not just at NOAA either. It’s prevalent throughout our society.

        I think 10% of the American workforce intellectually supports the other 90%. Now, after watching my own kids go through college, I am convinced that K-12, college and university pretty much are all substandard.

        Education is not a substitute for intelligence. First and foremost and beginning a very young age, kids need to learn how to think, how to figure things out, how to be independent thinkers, how to think logically, how to be confident in their thinking. These basic skills need to be universally taught from K-12 and refined more the next 4-8 years.

        This approach would revolutionize our country in incalculable ways.

        With a truly educated populace, the country can only succeed on every level and the quality of life, measured in happiness, would grow exponentially.

        The education system in America blows – even in the Ivy League schools. Yes, there are pockets of exceptions.

      • Deschutes

        2023-11-10 at 11:57

        Hello Neale,
        You say “Our greatest continuing resource is an educated population..”. I beg to differ. As a generalization, Americans are not all that smart. In previous surveys during the first year of the Ukraine war in 2022, the vast majority of Americans surveyed, could not correctly state where Ukraine was on a map. The same happened during the Iraq war in 2003-2016: the vast majority of Americans did not know where Iraq was on a world map. Not so smart as you allege. You then go on to say said ‘educated Americans’, ‘voting on issues which only informed people might understand’ is another ‘continuing resource’ for USA. What utter bollocks. Informed, educated Americans!? Presumably voting in USA’s best interests!? Don’t make me laugh. Voting in Trump!? Voting in Biden!? Voting in Reagan!? These are clear signs of a very stupid electorate. Neale, maybe it’s time for you to have several conversations with Trump MAGA voters. Find out their political views. Find out their opinions on the Ukraine war, abortion rights, the current Gaza genocide, U.S. massive military spending vs. miniscule social spending, etc. I think you’re a bit daft tbh.

  3. tedc

    2023-08-11 at 10:46

    Joe’s memory lingers around 1974-a manifestation of dementia.

  4. Peter Lim

    2023-08-12 at 04:56

    That’s not going to help the US. Using the Reminbi to pay for Arab oil is only one dimension of the US multifaceted problems thr largest of which is her massive debt problems. Saudi Arabia is only one member of OPEC+ albeit a large producer ig oil. What if other members of OPEC+ especially Russia refused to accept the, $ as payments? I don’t see Saudi Arabia agreeing with the US.

  5. Bahram kishi

    2023-08-12 at 06:51

    It is clear the USA has no choice but to fight multiolar world to the end….the key word is having ” no choice “.

  6. Hien Nguyen

    2023-08-12 at 12:05

    Well, US under Nixon and Kissinger sold its ally South Vietnam. Now the world will sell US. US will taste it own medicine ?.

  7. Eric Arthur Blair

    2023-08-13 at 19:53

    Some additional comments about the US petrodollar which Ben undoubtedly knows about but may have omitted for the sake of brevity (in deference to his short attention span critics).
    First I must echo the brilliant yet succinct comment by Prof Radhika Desai recently that the US model for obtaining wealth is essentially a PROTECTION RACKET: defined as extortion of wealth from vassal states to protect them from THREATS THAT THE US ITSELF HAS CREATED. The US extorts protection money from its victims, to prevent aggression from the US itself (usually via a proxy). It is the Mafia Don imposing on others an “offer they cannot refuse”. Oft times the USA manufactures these threats by recruiting criminals, fanatics and extremists. Alternatively they may creates threats out of whole cloth, from nothing whatsoever. Yesterday it was the Taliban or AlQaeda or ISIS (all of which the USA created), today it is the threat of Russian “aggression” (provoked by violent US Ukronazi proxies over 8 years), tomorrow it is the threat of Chinese “aggression” (provoked by US and US proxy naval sabre rattling in the South and East CHINA seas).
    Translation: The USA is the world’s greatest blood sucking parasite, a violent schoolyard bully who steals your lunch money.

    Some dates: By the late 1960s, US expenditure, especially on the Vietnam war, had far exceeded its ability to redeem the USD with gold (as had been set at Bretton Woods). France and Germany in particular were demanding the exchange of their USD assets for physical gold, which the US did not have, hence in 1971 Nixon abruptly took the USD off the gold standard, which caused devaluation of the USD, inflation in price of imports and created existential doubt over the continuation of the USD as global reserve currency.
    Around the same time the USA went through Peak Oil and became a net oil importer* – largely from, guess where? The Middle East of course.
    In 1973 the Arabs got their asses whupped (yet again) by the Israelis (who were armed to the teeth by the latest US weapons) in the Yom Kippur war. In angry response the Arabs, via OPEC, embargoed oil exports to the USA. Even though the USA still produced 95% of its own oil (on a declining curve), the sudden 5% shortfall they experienced was enough to stuff up their economy and raise their price of gasoline at the pump FOURFOLD!!
    All this was a real headache for the US, but Kissinger and Nixon came up with plan so brilliant you could put a tail on it and call it a weasel. They subsequently approached the Saudis and said that if the Saudis agreed to sell their oil in USD only, refusing all other currencies, the US would militarily protect the Saudi Royal family from all future threats (including those pesky Israelis), ensuring Saudi Monarchical grip on power indefinitely (no matter how antidemocratic and authoritarian they were). Any surplus USD the Saudis earned (after domestic expenditure) must then be used to purchase US weaponry and other surplus USDs must be invested in US debt securities and US treasury bonds – Petrodollar recycling. Of course, the USA continued to arm Israel with its latest whiz bang weapons, but hey, that could be “balanced” by the Saudis continuing to buy the latest whiz bang weapons from the USA in perpetuity! A wet dream for US bankers and warmongers to sell weapons to both sides of a conflict (which they also did in the Iran Iraq war). Cynical much?
    What did that mean for the world? I meant that the USD was now no longer a purely fiat currency, the USD now represented Petroleum, an obligatory essential requirement for all industrial nations to produce food and manufactured goods. Hence it restored credibility to the USD as the global reserve currency. The only ways to get USD were to convert their domestic currency to USD in the foreign exchange market (very expensive) or to export their commodities to the USA, who would send them electronically printed USD to buy oil, which cost the USA NOTHING. By 1975 the USA had convinced the rest of the Middle Eastern countries to sign up to this US petrodollar system.

    TRANSLATION: The USA was able to now get unlimited imported goods for FREE!!! This protection racket did not benefit ordinary hard working Americans, it was the US Banks and Corporations that obtained imports for free, then on-sold them to retailers, then to ordinary Americans with suitable markup. (BTW, it is also what prompted ultimate de-industrialisation of the US). Ordinary Americans still had to work hard for a living, unlike the 0.1% parasitic US elite class. Furthermore recycling of the US petrodollar into US debt securities enabled all US debts to be underwritten by those foreign oil exporters, it is what has enabled the USA to spend far far more than it has ever produced over the past 50 years, to build up a national debt exceeding $30 trillion USD with impunity (which will NEVER be paid back) and has enabled the US to establish more than 800 military bases around the world.
    This is the “exorbitant privilege” described by Giscard D’estaing. It was a first class ticket on a gravy train far exceeding the wildest rapacious wet dreams of the most rabid capitalist blood sucking leeches.

    IMPORTANT POINT: wikipedia explains clearly NONE of the factual historical basis of the US petrodollar, it merely randomly scatters disparate factoids here and there without joining any dots. Why? Just ask yourself who controls wikipedia.

    *In due course, given time, will explain why Peak oil is real and the fact that Barack Obama’s claim that the USA is the world’s greatest producer of oil is a lie and a scam, largely perpetrated by the USD exorbitant privilege and is FRAUD, FRAUD, FRAUD.

    • Maynard Minsky

      2023-08-24 at 06:28

      Much truth, but you are also oversimplifying a bit.

      Namely, you are ignoring the dimension of *inter-imperial* competition at work in the establishment of these monetary and military arrangements.

      In this case, it was the imperial competition between the US empire (which encompassed a decimated postwar Europe) and the Soviet empire, which was itself the successor of the Russian empire. The Nixonian-Kissingerian bid to establish the petrodollar was as much a bid to check Soviet advances in the Middle East as it was to stanch the bleeding from the end of Bretton Woods. (which didn’t work, notably, considering that the Soviets would then go on to invade Afghanistan) Same with the US’s overall war spending—you noted that it grew exponentially all throughout the postwar and Cold War period. But it did so in the USSR as well. Indeed, the Soviets’ lavish war spending was, along with the deficiencies of the Soviet system, one of the major factors contributing to the Brezhnev-Andropov stagnation from 1964-1985, which fomented the collapse of the USSR. One could argue, in fact, that this was the major factor that ultimately toppled the Soviet empire. At any rate, the petrodollar world we have now is the result of the aftermath—or perhaps more accurately a reconfiguration—of that struggle.

      Imperialism never exists in a vacuum. Historically, it has always been defined by rivalries amongst multiple imperial powers. (usually a hegemonic one vs subhegemonic competitors) Losing sight of this broader picture in any analysis of history or of modern sociopolitical relations is never a good idea—it almost always makes one blind to some subhegemon’s imperial aggressions.

      One must always keep in mind that one imperialism does not exclude (or excuse) another. As the American empire dies, it would behoove everyone to keep an eye on the imperial arrangements that will succeed it and their associated aggressions—some of which are arguably already being formed.

      • Eric Arthur Blair

        2023-09-27 at 18:45

        Once again Ponzi (AKA Minsky AKA Maynard Minsky AKA Kalecki etc) displays sheit’s* deviousness, duplicity, distortions and derangement.

        *As a gender indeterminate entity, the best pronoun to describe Ponzi is “sheit” which encompasses she, he and it. Pronounced “shite”.

        Firstly, Ben’s article is about the declining US Petrodollar, hence about petroleum/energy and about finance/economics and therefore attached comments ought to be relevant. Ponzi pontificates from sheit’s throne** , saying that I have been “simplistic” and “missed out” on important matters, then sheit goes off on a tangent, describing a distorted “issue” of inter-Imperial conflict, an off-topic subject described in a duplicitous manner. This is typical of sheit’s comments, deviously bringing up a topic outside the scope of the main article, to show how sheit has infinite “wisdom” to point out other people’s inadequate perspectives.
        Secondly sheit’s opinions and implications about the so-called extant “inter-Imperial conflict”, where one “empire” may be just as bad as another, is not only simplistic and stupid, it is downright wrong, wrong, wrong. Readers need to be acutely aware that this is nothing more than Huntington’s “Clash of civilizations” garbage narrative – which is psyops propaganda vomited down upon us by agents and stooges of the US gangster establishment and Ponzi is clearly such an agent/troll. The idea that there was “inevitable” (almost devinely ordained) conflict between the West and the Muslim world, and now between the West and China, is pure garbage. There is an avalanche of evidence that such conflict was 100% manufactured by the US Deep State (the Taliban, Al Qaeda, ISIS etc were all creations of the US) and China has NEVER shown any aggression towards the West but the West has ALWAYS been the aggressor against China, all directed towards maintaining US unipolar global hegemony.
        What is an empire? Simply being a big country does not make it an empire and simply being a small country does not mean they are not an empire. The key criterion of an empire is that it exploits and plunders overseas territories. The USA is definitely an empire. Smallish France remains an empire, albeit now considerably weakened since its West African neocolonies are now rebelling against their historical exploitation. China ceased being an empire hundreds of years ago and those who argue that it exploits and plunders, say, Tibet and Xinjiang (which are defacto parts of China) simply ignore the fact that such territories would be far, far, far worse off economically and socially if they were NOT part of China (they would be ruled by backward fanatical theocracies – eg Tibet, before being part of China, was a feudal theocracy which behaved brutally towards ordinary Tibetans. The USA is keen to install ETIM terrorists in Urumqi, just as they installed Neo-Nazi terrorists in Kiev). Minorities in China are offered cultural protection and special privileges and employment advantages denied to the Han majority eg during the one child policy, minorities such as Uyghurs, Tibetans and Mongolians were exempt and allowed to have 2 or more children. It is a weird form of empire that discriminates IN FAVOUR of minorities. China is NOT an empire.
        Russia ceased being an empire after the dismantling of the USSR (which they underwent VOLUNTARILY and PEACEFULLY – which was unheard of for any empire in history). But even as the Soviet Union, they displayed many non-imperial and pro-foreign sovereignty behaviours. That jackass Ponzi previously tried to portray the Soviet “invasion” of Afghanistan in the 1980s as being equivalent to the US invasion of Afghanistan or Iraq in the early 2000s. Wrong, wrong, wrong – that is pure psyops garbage. Factual history describes how the legitimate socialist government of Afghanistan of the 1970s undertook countless progressive measures towards improving the lives of ordinary Afghans, most notably nationalisation of resources and support for women’s rights (education, employment, no need to wear the hijab etc). This was unacceptable to the USA which, according to its usual CIA playbook, created and funded the Mujahideen (later called the Taliban) together with fanatical Pakistani Islamist terrorists, then inflicted those gangsters upon Afghanistan to try to bring about regime change. The beleaguered socialist Afghan government then INVITED Soviet forces in, to help restore order and combat the fanatical brutal Islamist extremists. That prolonged war did indeed drain the USSR economically because they did not have a global reserve currency / petroRuble privilege similar to the USD exorbitant privilege. When ultimately forced to pull out, the Soviets did so in an organised systematic manner and the socialist government in Kabul, because of legitimate popular support, lasted another 2 years. Unfortunately they were ultimately swamped by the US sponsored Taliban terrorists. So if you want to blame someone for destruction of women’s rights in Afghanistan, BLAME THE USA.
        How long did the US proxy regime last in Kabul last when the USA ran away in 2021? The US puppet Ashraf Ghani actually fled in a helicopter stuffed with $169 million USD cash, before the last evacuating US plane had taken off.
        It is easy for the simpleton Ponzi to spout simplistic false establishment psyops propaganda, but it takes time and effort to debunk sheit’s lies. Nevertheless we must continue to fight the good fight against such toxic trolls.
        The original name of this website was Multipolarista, because it examines the monumental geopolitical changes the world is now going undergoing in our difficult journey towards a multipolar world.
        This is NOT a conflict between “democracies and autocracies”,
        This is a struggle between GANGSTER HEGEMONY and “win-win” Multipolarity.

        This is NOT a conflict between an Imperial US-Euro bloc and an Imperial China-Russia bloc.
        This is a struggle between the Colonial/exColonial global minority Imperial exploiters (13%) and the Global Majority (87%) of nations that were historically exploited and undermined by the West. And yes, Russia was historically and repeatedly invaded, attacked, exploited and undermined by the West.

        Put that in your pipe and smoke it, Ponzi – you simplistic Dunning-Krugerite simpleton.

        **Hopefully sheit remembers to flush after each pontification, otherwise the throne will overflow from shite.

  8. Eric Arthur Blair

    2023-08-13 at 20:00

    correction: “a plan so cunning you could put a tail on it and call it a weasel”
    apologies to Blackadder

  9. NakbaEthnicCleansing

    2023-08-13 at 23:03

    1. Statehood of Palestinians and return of the 1948 Naka refugees and/or their descendants.
    2. Israel to withdraw to the original UN mandated plan.

  10. Giles Chance

    2023-08-14 at 02:32

    The number 1 geopolitical question for the next decade is: what will the United States do when it gets desperate ? War with China could unite the country, and it’s a high price to pay. But as we’ve seen over the centuries, fading hegemons will do anything to hold on.

  11. JonnyJames

    2023-08-14 at 10:37

    On the other hand: since the Sunni minority House of Saud was installed by the British, and they have no legitimate right to rule what is now KSA, they could be overthrown with a little help from MI6/CIA. A declining, desperate empire might do some more reckless shenanigans.

    It will be very interesting how this plays out.

  12. Michael Thomas

    2023-08-14 at 18:23

    The United States shall reap what you sow

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