Saudi Arabia To Trade Oil In Yuan: How Will It Affect India?

Saudi Arabia has declared that it would begin trading oil with China in the Yuan currency. According to analysts, Saudi Crown Prince Mohammed bin Salman's (MBS) choice will have a significant impact on the dollar-euro's supremacy. Its influence may be observed in the global petroleum market's petro-dollar agreement.

This agreement between Saudi Arabia and China, however, is solely for oil supplies to China. Saudi Arabia, for example, will only export oil in Yuan to China. For the time being, the rest of the world will trade oil in dollars. If this agreement between the world's greatest oil exporter and the world's largest oil buying country extends, Saudi Arabia's move might be detrimental to India as well.

What will be the impact of Saudi's decision on India?

This agreement between the two countries did not happen immediately; in fact, it may have been a pre-planned procedure. According to The Wall Street Journal, the onshore yuan has climbed 0.4 percent to 6.3460 per dollar since December 31, after claims of discussions between China and Saudi Arabia.

Without providing any proof, China's state-owned media, Global Times, said in an article that India is exploring using the yuan as a reference currency to buy oil from Russia with less concessions. The data reinforces anticipation that the yuan will become more widely used in commodity dealings throughout the world.

There is conjecture that if Saudi Arabia and Russia, one of the major oil exporting countries, reach an agreement to limit the dollar's dominance in the oil market, India will receive the same cash in the same currency. It's possible that you'll have to be compelled to purchase oil.

Despite the fact that India is the world's third largest oil importer, Russia now provides oil to India at significant concessions.

De-dollarization from the oil market!

Following the invasion on Ukraine, several restrictions against Russian commerce have been placed by Western and European countries. The oil trade with Russia is no exception.

Meanwhile, numerous publications indicated that such actions by the West and Europe would only serve to de-dollarize the currency and undermine its power.

According to media sources, Saudi Arabia has been in negotiations with China over a yuan-priced oil deal for the past six years, but little progress has been made.

This is because, in the early 1970s, the US struck a petro-dollar pact with Saudi Arabia in order to boost the dollar's dominance in the oil market. America vowed to offer security to the Kingdom in exchange, and now it is raising its hands.

Saudi Arabia's Dissatisfaction!

MBS is also enraged by the Biden administration's efforts to negotiate a nuclear agreement with Iran, as the US has denied its backing for the Saudis in the continuing civil war between Saudi Arabia and Yemen.

The Saudi administration, on the other hand, is dissatisfied with the withdrawal of soldiers from Afghanistan. In such a case, Saudi Arabia's choice might be a major defeat for America.

China buys more than a quarter of Saudi Arabia's oil exports. If Saudi Arabia exports oil in Chinese currency, the Yuan's dominance will grow, which would have a negative impact on the dollar.

Saudi Arabia's relations with China and America

Saudi Arabia's and China's relations have strengthened in recent years. China is assisting Saudi Arabia in developing its own ballistic missiles, discussing the possibility of a nuclear programme, and funding Crown Prince Mohammed bin Salman's pet projects.

Meanwhile, under the Biden administration, ties between Saudi Arabia and the United States have worsened. MBS is also enraged by US accusations that he gave instructions to assassinate writer Jamal Khashoggi. Since 2018, the US has accused Prince for killing a journalist through an intelligence officer