Breakingviews – Aramco health adds spice to Saudi’s yuan dilemma – Reuters

Breakingviews – Aramco health adds spice to Saudi’s yuan dilemma – Reuters

LONDON, March 21 (Reuters Breakingviews) - Saudi Aramco (2222.SE) is giving Mohammed bin Salman extra firepower in his beef with Joe Biden. Saudi Arabia’s $2.3 trillion oil behemoth wants to increase its maximum output as crude prices soar. That adds spice to tensions between the Saudi Arabian crown prince and the U.S. president that are spilling over into how the kingdom prices its oil.

Right now, Saudi Arabia’s crude contracts are denominated in dollars. That makes sense, given that the Saudi riyal is pegged to the dollar and nearly 25% of Saudi’s $493 billion of central bank assets are U.S. Treasuries. Abruptly repricing Saudi’s main export could destabilise the economy, and undermine Saudi’s decades-long U.S. friendship.

Those ties are in question, though. The Wall Street Journal recently reported that MbS declined U.S. pleas to increase oil supply amid the Russia crisis. On human rights Beijing will arguably ask fewer uncomfortable questions than Washington. Dollar sanctions on Russia are making some countries rethink the desirability of U.S. hegemony.