Saudi Arabia’s potential entry into the BRICS economic bloc could accelerate the use of the Chinese yuan as a trading currency, according to Professor Ashok Swain, the head of Uppsala University’s Department of Peace and Conflict Research.
Professor predicts yuan boost
In a recent interview with Al-Monitor, Swain noted that there is no doubt that Saudi Arabia becoming a member of the China-dominated Shanghai Cooperation Organization (SCO) and BRICS, which comprises Brazil, Russia, and some other countries, would boost the bilateral trading being conducted using the yuan as the trading currency.
Saudi Arabia became a dialogue partner of the SCO in March, and the country has expressed interest in joining BRICS. In April, Russian President Vladimir Putin and Saudi Crown Prince Mohammed bin Salman Al Saud discussed a potentail partnership between the country and the BRICS. Should the country join this group, it could open Saudi Arabia greater access to markets in Asia and strengthen its ties with countries in the group.
The kingdom is also presently in talks with Beijing to send some of its oil sales to China in yuan. Although discussions regarding yuan-priced oil contracts have been on and off for six years between the two nations, they have intensified this year. Swain noted that oil trade in yuan will be very good for China and could help them against the dollar.
Saudi Arabia would benefit from moving away from the US dollar
A growing number of countries are moving away from using U.S. dollars to settle trades. China’s yuan recently replaced the USD as the most traded currency in Russia as well as the most used currency to settle cross-border payments in China.
In addition, the BRICS group is working to create a new currency that would reduce its member countries’ reliance on the U.S. dollar. According to former White House economist Benn Steil, a BRICS currency would erode the U.S. dollar’s dominance.
In the same vein, economist Stephen Roach predicted that the yuan and euro would disrupt the U.S. dollar’s dominance, and the three would form a tripolar reserve currency world.
Saudi Arabia’s potential entry into BRICS could offer opportunities for greater bilateral trading using yuan, and its collaboration with BRICS and SCO.
It could also impact the pricing of oil in yuan, could disrupt the U.S. dollar’s dominance in international trade. As more countries move away from the USD, it remains to be seen what impact this shift will have on the global economic landscape.
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