On December 9, at the China Overseas summit, China reached a major agreement with the Arab countries in the Gulf region. China will further expand the scale of imports of oil and natural gas from Gulf countries, and use RMB for settlement. This transaction has been included in the Shanghai Oil and Natural Gas Trading Center platform. As soon as this news was announced, the world was boosted. Everyone knows that this is another major phased victory for the RMB going overseas and the internationalization of RMB by . At the same time, for Arab countries such as Saudi , it is also a great joy to further strengthen their risk awareness and improve their asset management level.
Arab countries such as Saudi Arabia are willing to accept the use of RMB to settle oil and natural gas, which is also for many reasons.
first, of course, for the convenience of transactions. As the leader of the Middle East country, Saudi Arabia is also the country with the largest export volume of Chinese oil to . The amount of oil sold to China has accounted for 27% of Saudi Arabia's domestic oil exports. This means that just from the scale of oil transactions between China and Saudi Arabia, if RMB is used for settlement, it will be very convenient for trade between the two sides, and it can further enhance the convenience of oil trade between China and Arab countries. From the perspective of payment convenience, Arab countries such as Saudi Arabia accept this agreement by China to use RMB to settle oil and natural gas.
Second, Saudi Arabia and other Arab countries have confidence in China. The US dollar, pound, euro, yen, and RMB are just a piece of paper after all. The reason why a piece of paper can play the role of currency is that it can buy a large number of goods with one piece of paper, on the one hand, because the paper is supported by a strong supply of goods behind it, and on the other hand, it is also because this piece of paper represents the credibility of national sovereignty. As China continues to rise and become stronger and its economy is booming, China's economy and trade with Arab countries and regions has also developed in depth, which has refreshed the impression of Arab countries about China, and its favorability for China is also rising sharply. Economic exchanges will inevitably promote mutual trust at the political level. This time, the Chinese national leaders went to Riyadh to attend the three summits. First, they visited Saudi Arabia and signed an agreement with Saudi Arabia to establish a comprehensive strategic partnership with . This shows that after China and Saudi Arabia, the leader of the Middle East Arab countries, established high-level strategic mutual trust, it is natural to use RMB to settle oil and natural gas. Another reason why Arab countries are willing to accept using RMB to settle oil and natural gas is to believe in China.
Third, precisely because the Middle East Arab countries believe in China, it brings another problem, why the relevant countries will not believe in the US dollar and the United States as always. This is because China has played a key role in supporting the hegemony of the dollar since Nixon announced in 1971 that the dollar will no longer be pegged to gold and instead directly to oil. For decades, major Middle Eastern investors have become accustomed to using the US dollar for oil and natural gas settlement. In recent years, the Middle East will suddenly accept settlement in RMB, and there are also many reasons.
1. Eggs cannot be placed in a basket. In the 1970s, the reason why the Middle East accepted the US dollar as the anchor currency for oil and natural gas was because the United States was the dominant one at that time. Although the Soviet Union was in every way unconfronting the United States, the Soviet Union's economic influence was not as good as that of the United States. Therefore, Saudi Arabia had no choice but to follow the United States, which was the historical reason why Arab countries had to accept the US dollar.
2. It is different now. With the development of the global economy and the decline of the United States' own hegemony, the United States increasingly prioritizes "America first" in maintaining global hegemony. This means that the United States does not care about the interests of its so-called allies that are beneficial to the national interests of the United States. In this case, by regularly hiking interest rates on the US dollar, the United States has reaped global wealth, and the big players in the Middle East have naturally become an important goal of the United States. Although the dollar assets in the hands of Arab countries have soared during the process of the US dollar's interest rate hike, everyone knows that if these green banknotes are not invested in the industry and become value-added industries, these banknotes are just a piece of paper.In the US dollar interest rate hike and the rate cut of , the wealth of Arab countries such as Saudi Arabia may be turbulent. Therefore, in order to protect the security of their own property, Arab countries also hope to protect their interests with a stronger currency.
In terms of the current situation, the RMB is a very good choice. After all, China is the world's largest single economy, , and it is also a super-industrialized super country. The high stability of Chinese society, rapid economic development, and huge industrial capacity to supply the world have given Saudi Arabia and other Arab countries enough confidence to believe that it is a very wise choice to share the financial risks that may be brought by US dollars with . From the perspective of maintaining their own financial security and ensuring their own wealth appreciation, Arab countries such as Saudi Arabia are also willing to use RMB to settle oil and natural gas.
Fourth, of course, it is also out of the need for investment to increase value. The reason why the state visit between China and Saudi Arabia was held in Riyadh, the capital of Saudi Arabia, and the summit between China and Gulf countries and Arab countries was held because Saudi Arabia proposed the 2030 Vision Plan. According to this vision plan, the Saudi government is preparing to spend US$1,000 billion to build a future city in ten years. Arab countries, including Saudi Arabia, are very clear that underground oil will be mined one day. If Arab countries do not have a renewable growth industry, holding these green banknotes will actually be equivalent to a piece of waste paper. Even if it is not a piece of waste paper, it is a "fat sheep" taken by other powerful countries.
This time, Saudi Arabia has set aside US$1,000 billion to focus on building a 2030 vision with the future city as its main content. It also wants to use China's strong infrastructure capabilities to give it a "leader" position in renewable energy to seek the future for Saudi Arabia. After a large number of Chinese companies enter Arab countries, they will inevitably produce a lot of transactions. If such transactions are settled in RMB, they can be said to be convenient, stable and reliable, and of course, this is also the best choice. At the same time, Arab countries represented by Saudi Arabia have enough wealth and sovereign funds that have coveted the outside world, so they are also investing globally. Now that the global economy of is sluggish, China is still a high ground for investment and a hot land for capital influx. In this case, China and Arab countries use RMB to settle oil and natural gas, which actually provides guarantee for Arab countries to enter China. From the perspective of investment appreciation and capital interests, Arab countries such as Saudi Arabia are also willing to use RMB to settle oil and natural gas.
Based on the above four reasons, the China Overseas Summit decided to use RMB to settle oil and natural gas. In any case, this is a major phased victory for the RMB to go overseas and realize the internationalization strategy. In an era when fossil energy still occupies an important position, anchoring the RMB with oil and gas in the Middle East is a model of win-win cooperation for both sides and even the multilateral relationship.
