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| The term 'petrodollar' came into vogue in the 1970s |
A few days ago, a report was published in the American newspaper Wall Street Journal that Saudi Arabia was considering paying for the sale of oil from China in yuan.
With this news came the rumors that this is not the beginning of the end of the petrodollar era.
The term "petro-dollar" came into use in the 1970s, and with it the position of the dollar as the preferred currency for international transactions in world trade.
Rafiq Lata, a senior editor at Energy Intelligence, a publishing company in the energy sector, said the news about the payment in Chinese currency yuan came from Saudi sources.
Saudi Arabia has not yet commented on the matter, but as soon as the report surfaced, it was determined that the debate would continue for several days.
Energy expert Dr Anas al-Haji says global oil trade is projected to reach 6 2.6 billion this year. That would be a huge amount of money.
This means that the currency in which oil is bought and sold must have significant liquidity.
He says the dollar is the currency that can do the job best. There are other reasons for this.
The dollar has the highest liquidity. Its exchange rate is more stable than other currencies and it is the most popular currency for transactions worldwide.
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| Global oil trade is projected to reach 6 2.6 billion this year |
The beginning of the petrodollar
Shortly after the global oil crisis, in 1974, the Saudi government struck a deal with then-US President Richard Nixon, stating that Saudi Arabia's oil exports would be in dollars.
Under the agreement, Saudi Arabia invested in US Treasury bonds.
The agreement between Saudi Arabia and the United States had far-reaching implications. Many countries followed in the footsteps of Saudi Arabia, and oil prices around the world began to fall in dollars.
That is why countries around the world began to put their foreign exchange reserves in dollars to buy oil so that they could buy oil and treasury bonds, invest in the West and import other foreign goods and equipment. Can
"Dollar trading plays a key role in bringing the global economy we see today to this point," he said.
"More than 60 percent of the world's reserves are in dollars."
"The petrodollar economy has a big role to play in increasing American power, and any change in this situation will not be limited to the economic aspect," he said. It will have a direct impact on global politics and international relations and equality.
The structure of the global oil market
According to 2020 figures, China currently imports 10 million barrels of crude oil per day.
Of this, more than 1.7 million barrels of oil is imported from Saudi Arabia. This is about 17% of China's oil imports. This is 26% of Saudi Arabia's total oil exports.
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| Asian countries such as India, Japan and South Korea have also emerged as major consumers of crude oil |
China also imports 1.5 million barrels of oil a day from Russia. At present, China has become a major consumer of energy worldwide.
This fact has changed the very structure of the world oil market. Now not only China has emerged as a major customer in the oil market but also Asian countries like India, Japan and South Korea have emerged as major customers of crude oil.
According to 2020 data from the US Energy Information Administration, 77% of Saudi Arabia's oil exports go to Asian markets and only 10% to Europe. Only 1.5 million barrels of oil go to the United States every day.
The United States relies on locally produced oil. In view of this fact, Saudi Arabia, Russia and other oil exporting countries are now keen to establish strategic relations with China and other Asian countries.
By doing so, they want to ensure that their oil continues to reach these key markets.
Oil-exporting countries want to build refineries in China, India, South Korea and Japan. This gives oil buying countries long-term procurement contracts.
Saudi company Aramco has recently signed a partnership agreement with China to build a petrochemical complex and a refinery.
This could lead to a strategic relationship between the two countries in the energy sector.
Why deal in yuan?
Dr Alhaji says the debate over using a currency other than the dollar is more than 50 years old. Over the past few years, the debate over buying in the Chinese currency yuan has intensified.
Rafiq Latta says that "in fact this has come to the fore now and it shows the tension in the relations between Saudi Arabia and the United States."
The global oil market has been witnessing a change for some time, with Russia's invasion of Ukraine changing the geopolitical environment and, last but not least, its important relationship with China. Is.
Many experts believe that if oil purchased from Saudi Arabia is paid in yuan, the system will be like an insurance policy for both Saudi Arabia and China.
In addition, the yuan could be the best alternative if in the future oil deals in dollars are banned due to any sanctions.
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