Saudi Arabia and China - The End of the Old World Order for Crude Oil

For those who are paying attention, it's pretty clear that the United States dollar is under significant threat on many fronts as the major economies of the world seek methods that will protect them from Washington's nonstop use of financial sanctions to force world leaders to act according to America's wishes.  Recent news from Saudi Arabia and China are prime examples of how the world is moving away from the petrodollar system into a new global oil reality.

Let's start with this December 2022 article from the Global Times, a mouthpiece for China's Communist Party:

Here's a quote:

"A discussion of shift to use Chinese yuan in China-Saudi oil settlement is increasingly rising recently amid an ongoing visit of Chinese President Xi Jinping to the country - the trip marks epoch-making milestone in China-Arab relations and also raises hopes for more deepened energy ties for years to come.

 

The shift is deemed as necessary by observers from both countries in light of the "increasing weaponization of the dollar dominated financial system," they said, hoping the move to inject certainty to bilateral trade and dent the US dollar's hegemony of the global petroleum market."

Now, let's look at the two recent announcements which outline steps that have been taken to bring the two nations closer together.  Here is the first announcement from Saudi Aramco:

 

 

Huajin Aramco Petrochemical Company (HAPCO) is a joint venture between Aramco (30%), NORINCO Group (51%) and Panjin Xincheng Industrial Group (19%).  Construction of the $10 billion complex that will combine a 300,000 barrels per day refinery and a petrochemical plant with annual production capacity of 1.65 million metric tons of ethylene and 2 million metric tons of paraxylene will commence in the second quarter of 2023 after approvals are secured.

 

Here is a quote about the project from Mohammed Y. Al Qahtani, Aramco's Executive Vice President of Downstream:

 

 “This important project will support China’s growing demand across fuel and chemical products. It also represents a major milestone in our ongoing downstream expansion strategy in China and the wider region, which is an increasingly significant driver of global petrochemical demand."

  

Here is the second announcement from Saudi Aramco:

 

Aramco is paying RMB24.6 billion (US$3.6 billion) to acquire a 10 percent interest in Rongsheng Petrochemical Co. Ltd. to expand Aramco's downstream presence in China.  Aramco will supply 480,000 BOPD of Arabian crude under a long-term sales agreement with Rongsheng affiliate Zhejiang Petroleum and Chemical Company.

 

Here is a quote about this deal from Mohammed Y. Al Qahtani, Aramco's Executive Vice President of Downstream:

 

“This announcement demonstrates Aramco’s long-term commitment to China and belief in the fundamentals of the Chinese petrochemicals sector. It is an important acquisition for Aramco in a key market, supporting our growth ambitions and advancing our liquids to chemicals strategy.  It also promises to secure a reliable supply of essential crude to one of China’s most important refiners.”  

 

Here is a quote from Li Shuirong, Rongsheng's Chairman: 

 

“This strategic co-operation will take our long-term friendship and mutual trust to a new level, and paves the way for a bright future for the high-quality development of the world’s petrochemicals industry. I believe that Aramco’s involvement will greatly help Rongsheng implement its petrochemical growth strategy.” 

 

With these two projects, Saudi Arabia is enacting on its strategy to enter long-term demand for its oil.  It is also making significant moves to ensure its membership in the BRICS group of nations which will vote on Saudi Arabia's request to join the group, an issue that will be voted on by the world's fastest growing non-Western trading group later this year.  In addition, we can also see that, unlike their "woke" Western counterparts, it appears that both China and Saudi Arabia are not designing the future of their economies around freedom from fossil fuels, particularly given that Aramco is investing $10 billion into China's oil-based infrastructure.

 

The old world order for crude oil is rapidly evolving away from domination by the United States and Europe and into the hands of what were recently considered "third world nations" by the self-appointed elites of the global aristocracy.  It is almost as though we can see the domination of the United States dollar as the global currency of choice evaporate by the day, isn't it?