Oil, Saudi Arabia and China

[sharkman]

https://oilprice.com/Energy/Energy-General/Saudi-Arabia-Reiterates-Commitment-To-China-Regardless-Of-US-Concerns.amp.html
 

Back in March last year it was made clear enough at the annual China Development Forum hosted in Beijing, when Aramco chief executive officer, Amin Nasser said: “Ensuring the continuing security of China’s energy needs remains our highest priority - not just for the next five years but for the next 50 and beyond.” And yet, the U.S. is surprised by the apparent finalisation of the transition of Saudi Arabia away from Washington and towards China, which effectively marks the end of the 1945 core agreement between the U.S. and Saudi Arabia that defined their relationship up until extremely recently. This transition has been seen most recently in the refusal of MbS to take a telephone call from President Joe Biden in which he was to ask for his help in bringing down economy-crimping high energy prices and then in the huge cut in collective OPEC oil production that has only added to energy-driven inflationary fears for global economies.

 

This article suggests that the US no longer has a special relationship with Saudi Arabia.  This also suggests that Saudi Arabia will sell oil in currencies other than the US dollar.  Does that mean that the US dollar is no longer a petro dollar?

[Moonbox]

No.  China has a long way to go before it's considered a proper world-reserve currency, and given how export-reliant they are, they probably don't want it anyways.  

I think this probably does signal the ending of the US' unconditional support for Saudi Arabia, and (hopefully) a transition away from any sort of ally/partner status.  

[sharkman]

China may have a long way to go, but they are only part of a group of nations involved in this effort.  India and Russia, along with China, seem to all be allied together in this effort.

Either way, I’m sure there will be many developments springing up from this.

 

[Moonbox]

China is the one that really matters, with the others being minor supporting players.  Russia is in steep demographic (and now economic) decline and will have little power or relevance.  India is nascent at best, still very backwards socially and economy and probably 15-20 years behind China.  China itself is deeply troubled, with a massive debt bubble and its traditional trade partners trying to diversify away from it.  

More questionable, however, is how well these countries can cooperate.  China and India are very distrustful towards one another and have had military clashes in the past.  Russia will find itself an increasingly junior partner that is in danger of falling subservient to China, who covet Russia's mineral wealth.    

Lots of developments are certain to come, but Saudi Arabia will not be the turning point.  

Edited November 2, 2022 by Moonbox

[sharkman]

In relation to the US dollar, further down in the article it relates how Saudi Arabia is indeed considering taking Chinese currency for its oil rather than USD.  Russia already takes only rubles for their oil, and this can’t be helpful to the stability of the Yankee buck.

“Given the transition of Saudi Arabia away from the U.S. and towards China – and the senior Saudis do look at the issue in these terms, whatever they say publicly – there is also every reason to expect Riyadh to continue to back China’s efforts to undermine the power of the U.S. dollar in the global energy markets as well. Not only is Saudi Arabia now a prime mover in advancing the China-GCC Free Trade Agreement (FTA) – a key aim of which is to forge a “deeper strategic cooperation in a region where U.S. dominance is showing signs of retreat” – but also the Kingdom is now a prime advocate for switching away from the hegemony of U.S. dollars in the pricing of global oil and gas.” 
 

I'm sure you will disagree, moonbox, but you have nothing except your opinion to offer.  Either way, only time will tell.

Edited November 3, 2022 by sharkman
Grammar

[sharkman]

On 11/2/2022 at 12:08 PM, sharkman said:

China may have a long way to go, but they are only part of a group of nations involved in this effort.  India and Russia, along with China, seem to all be allied together in this effort.

Either way, I’m sure there will be many developments springing up from this.

 

To expand on this thought, it's notable that many more nations have joined with China and Russia.  They have formed some sort of economic alliance, and they are called the BRICS nations, which stands for some of their founding members:  Brazil, Russia, India, China, South Africa. (These nations alone make up 41% of the world's population.)

But since last fall, Egypt, Saudi Arabia, Mexico, NIgeria, Venezuela, Algeria, Turkey and Argentina have all joined as well. With their main goal of unseating the US dollar as the world's reserve currency.  People who expect this to happen say this will cause the US dollar to collapse.

 

Edit:  I should add that in 2021, Saudi Arabia's 50 year oil deal with the US ended.  They did not renew(do you remember in the news of the report that Biden called Saudi Arabia and they did not pick up) this deal and instead allowed themselves to be courted by China, who has successfully replaced the US as Saudi Arabia's main oil economic partner.  This does not bode well for the US dollar.

Edited January 26, 2023 by sharkman

[Moonbox]

Man.  They should totally go ahead and form a reserve currency with Venezuela and Argentina etc - upstanding and reliable financial stewards they've proven themselves to be.  Nothing spells "global reserve currency" like a nation going through currency collapse and hyper-inflation, or one who defaults on its debt every few years. 

 

 

 

[sharkman]

It’s 13 nations in all that make up almost half the world population, moonbox.  Get back to me when your critical thinking skills don’t get overwhelmed by your biases and emotions.

[Moonbox]

Oh boy!  HALF OF THE WORLD'S POPULATION!?!?

They should add all of Africa too then, so that they can have EVEN MORE PEOPLES in this wondrous new reserve currency.  Add Lebanon, Somalia and whatever other failed states you can think of.  MORE PEOPLE = BETTER 

China, known for their transparency for never, ever manipulating their currency, will make an ideal leader for this.  

?

 

[sharkman]

More warning signs about the fall  of the US Petrodollar.

https://oilprice.com/Energy/Energy-General/The-US-Is-Facing-A-Major-Challenge-As-Petrodollar-Loses-Force.html
 

“…On the other hand, it would be foolish to simply dismiss the potential end of the Saudi preference for the dollar with hand-waving. The end of the petrodollar would indeed weaken the dollar, even if this would not be a mortal blow in itself. Moreover, it is especially foolhardy to ignore the status of the petrodollar because that status also has geopolitical implications. Saudi comments on the dollar signal that the Saudis no longer consider its alliance with the United States to be as important as it has been since the 1970s. What’s not an immediate economic problem for the US regime or the dollar may nonetheless be an immediate geopolitical problem.“

Moonbox’s repeated cries of ‘nothing to see here’, show a denial of reality.  That’s because in many ways we are in uncharted waters.  And a real threat to the status quo, in the BRICS nations, exists.  
And we are at the front end of an economic event that looks very serious, with high inflation and rising interest rates.  And the West is fighting a proxy war that has a real nuclear threat from an increasingly unstable leader, Putin.  

To pretend that it is business as usual is a dangerous assumption.