Sputnik News
China’s drive to use the yuan when buying oil from Gulf nations may result in the creation of a new world energy order, a UK newspaper has reported.
It quoted Credit Suisse analyst Zoltan Pozsar as stressing the importance of Chinese President Xi Jinping meeting with Saudi and Gulf Cooperation Council (GCC) leaders in December.
Pozsar argued that the gathering “marked the birth of the petroyuan,” reflecting China’s push “to rewrite the rules of the global energy market.”
According to him, this push comes as part of “a larger effort to de-dollarize” BRIC countries, including Brazil, Russia, India and China, “and many other parts of the world after the weaponization of dollar foreign exchange reserves” following the beginning of the Russian special military operation in Ukraine on February 24, 2022.
During the GCC summit, the analyst recalled, President Xi announced that over the next three to five years, China would not only dramatically increase imports from GCC nations, but work towards “all-dimensional energy co-operation.”
“This could potentially involve joint exploration and production in places such as the South China Sea, as well as investments in refineries, chemicals and plastics. Beijing’s hope is that all of it will be paid for in renminbi [juan], on the Shanghai Petroleum and Natural Gas Exchange, as early as 2025,” Pozsar noted.
Although it doesn’t turn the renminbi into a substitute for the dollar as a reserve currency, “the petroyuan trade nonetheless comes with important economic and financial implications for policymakers and investors,” according to the UK news outlet.
It pointed to “the prospect of cheap energy”, which is “already luring western industrial businesses to China”, where Germany’s BASF’s main plant in Ludwigshafen was recently moved (as an example).
China is already conducting trade with many partners, including Russia, in the yuan, gradually moving away from the greenback. In the latest sign of Beijing’s push for de-dollarization, Chinese officials earlier in the week extended trading hours for the onshore yuan as part of the government’s attempt to increase the international use of the currency. The yuan appreciated past 6.9 per dollar, reaching its strongest levels in four months after China announced the trading hour extension.
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