A professor of peace and conflict research at Sweden’s Uppsala University, Ashok Swain, has stated that if Saudi Arabia joins the BRICS economic bloc, it could accelerate the use of the yuan as a trading currency. Professor Swain is the head of Uppsala University’s Department of Peace and Conflict Research and the UNESCO chair on International Water Cooperation.
Impact on Trading
Professor Swain commented that Saudi Arabia becoming a member of China-dominated Shanghai Cooperation Organization (SCO) and BRICS would accelerate the bilateral trading being conducted using yuan as the trading currency. Saudi Arabia became a Dialogue Partner of the SCO in March, and although it is not yet a member of BRICS, the country has expressed interest in joining. Russia’s President Vladimir Putin and Saudi Crown Prince Mohammed bin Salman Al Saud discussed potential collaboration between Saudi Arabia and the BRICS last month.
Oil Sales Negotiations
According to reports, Saudi Arabia is actively negotiating with Beijing to price some of its oil sales to China in yuan. Discussions regarding yuan-priced oil contracts have been taking place on and off for six years between the two nations, but they have intensified in recent times. The Uppsala professor noted that oil trade in yuan would be a “huge step” for China and “a significant setback to the dollar’s standing.”
Shift from US Dollars
The yuan has recently replaced the USD as the most traded currency in Russia, and a growing number of countries are shifting away from using US dollars to settle trades. The BRICS group is also working to create a new currency that would reduce its member countries’ reliance on the US dollar. A former White House economist believes that a BRICS currency will erode the US dollar’s dominance, and another economist predicted that the yuan and euro will disrupt the US dollar’s dominance, and the three will form a tripolar reserve currency world.