Saudi Arabia’s decision to use the Chinese yuan could lead to real problems in the oil and dollar markets

 Saudi Arabia’s decision to use the Chinese yuan could lead to real problems in the oil and dollar markets

Saudi Arabia’s decision to use the Chinese yuan could lead to real problems in the oil and dollar markets

The Chinese expert said that converting the Saudi oil company Aramco to trade in yuan with China instead of the dollar would be a "real problem" for the oil market, with serious repercussions for the global financial system.

In an article published on the Huánqi Shíbào website, Zhang Yuju, dean of the School of International Finance at Shanghai University, said: "A real explosion" of the oil market with devastating consequences for the current financial system.

This came after news in the media that Saudi Arabia is considering using the yuan to settle oil deals with China, and "the dialogue between Russia and India on the establishment of a trade mechanism for the Indian rupee, and the Russian ruble in general." He started talking about the weakness of the dollar in the global oil market.

Expert Yugoi believes that Saudi Aramco, which has an annual income of more than 350 billion dollars, will have an impact on the global energy market if it moves from China to the yuan in the oil sector.

Hugo noted that according to some studies, the country's currency cycle, which serves as the dominant international currency, is usually about 100 years old. "If this view is correct, since the creation of the Bretton Woods system in 1944 for the dominant dollar dividend cycle, there has been little time left for that system to collapse," he said.

The currency is doomed to collapse because of its mistake

On the other hand, the expert pointed out that the "petrodollar" system dates back to 1973, when the United States managed to integrate the dollar into the "central nervous system" of the world economy, becoming the "dominant power". “However, any dominant monetary system will one day collapse. As the saying goes, “a currency is doomed,” which means that if the currency’s strength is overvalued, it will eventually lead to the inevitable change in the world monetary system – the rebalancing cycle.

He said that the main problem with the dollar in the short term is the increasing cost of maintaining the current American system, which is difficult for the United States to meet due to the relative deterioration of national power.

As for the medium-term outlook, the main problem facing the United States is that oil itself, as a source of fossil energy, is gradually losing its hegemony in the context of “carbon neutrality”, which will lead to the collapse of the petrodollar. the system. He will change his horse to stay put, or accept the fate of partial replacement.

In the long run, according to the expert, it is likely that in the middle of the twenty-first century the United States will cease to be the most powerful economy in the world, which will inevitably lead to the emergence of new monetary centers. Energy.

The expert concludes that by then the world is likely to have a trilateral or even multilateral currency balance model.