The United States and Britain are stepping up pressure on Saudi Arabia to pump more oil and join efforts to isolate Russia, with Riyadh appearing ready to respond, and reviving the threat of leaving dollars for oil sales to China.
UK Prime Minister Boris Johnson went on to become the world’s largest exporter of crude oil on Wednesday, a day after U.S. security adviser Brett McGurk arrived with a U.S. delegation.
Saudi Arabia and its neighbors The United Arab Emirates, among the few producers with surplus capacity, has rejected Western demands for more crude cooling at a high price and maintained an OPEC supply pact with Russia and others.
Prince Mohammed bin Salman, the de facto ruler of the kingdom, has been sharply criticized by the West in 2018 for the assassination of Saudi journalist Jamal Khashoggi, the history of human rights in Riyadh and the war in Yemen. U.S. President Joe Biden has so far refused to deal directly with the prince known as MbS.
As US-Arab relations are at a low point, MbS has responded by strengthening relations with Russia and China, even though the kingdom still has close security relations with Washington.
McGurk and other U.S. officials met with senior Saudi officials on Tuesday to pump more oil and find a political solution to end the war in Yemen, where Saudi-led forces are clashing with the Iran-backed Houthi group, the two sources said.
“You’d be wrong if you thought Washington would drop these two files,” one of the two sources, who is familiar with the dispute, told Reuters.
A senior U.S. government official said McGurk was “discussing a wide range of issues in the Middle East, including Yemen,” but declined to comment.
The British Prime Minister, meanwhile, described Saudi Arabia and the Basque Country as “key international partners” in removing Russia’s hydrocarbons and putting pressure on Russian President Vladimir Putin after Moscow invaded Ukraine.
But renowned Emirati political analyst Abdulkhaleq Abdulla said Johnson should not expect much. “Boris will return empty-handed,” he wrote on Twitter.
The Saudi government did not immediately respond to Reuters’ request for comments on visits to the United States and Britain.
So far, Saudi Arabia has shown no signs of canceling the oil supply agreement between the Organization of the Petroleum Exporting Countries and its allies, including Russia, as the group known as OPEC is gradually rising.
At the last OPEC meeting on March 2 – less than a week after Russia invaded Ukraine and the West intensified sanctions against Moscow – ministers shunned the Ukraine issue in talks and immediately agreed to maintain the current policy.
Meanwhile, Riyadh said it wanted closer relations with Beijing, inviting Chinese President Xi Jinping to visit this year. The Wall Street Journal reported that Saudi Arabia was talking about putting the gross yuan it sells to China at a price.
“If Saudi Arabia does that, it will change the dynamics of the forex market,” said a source familiar with the matter, adding that the move was long overdue and threatened by Riyadh in 2018. – It can encourage other buyers to follow.
The Saudi energy ministry declined to comment, and Saudi Aramco’s oil giant did not respond to the request.
A diplomat said Riyadh was facing “old threats” to push back the West, although diplomats and others said it would be a practical challenge to switch to the yuan, given that crude is priced in dollars, Saudi riyala is tied to the greenback and the yuan has no reserve currency boasting of the same mission of one.
“It would be reckless to consider the global price of oil in dollars and the currency bond, not to mention the amount of Saudi debt priced in dollars, its reserve assets in dollars and U.S. equity holdings,” said Karen Young, a fellow resident. American Enterprise Institute.
“There may be some yuan contracts between Saudi Arabia and China, but there is no reorientation of Saudi monetary policy,” he said.
The Saudi central bank had $ 492.8 billion in assets at the end of January, including $ 119 billion in U.S. Treasuries.
The government had $ 101.1 trillion in debt at the end of 2021 — mostly in dollars — and Saudi sovereign wealth was $ 56 billion in U.S. equities.
Monica Malik, chief economist at Abu Dhabi Trade Bank, said Saudi Arabia could slowly move some sales to the yuan. “A gradual change would have a limited impact,” he said.
And while U.S. officials were meeting in Riyadh, the U.S. State Department said Tuesday that Washington was not asking its allies to choose between the United States and China.