Despite US and Western sanctions imposed on the Russian government because of the war with Ukraine, some countries especially in the Asian continent have begun to buy Russian oil with the Chinese currency "yuan". The step confirms that the world is moving towards finding alternatives to mitigate the effects of sanctions that are harmful to many economies in the world.
In particular, India - one of the founding countries of BRICS, has begun to pay for Russian oil imports in the Chinese currency. Russia, India and China, along with Brazil and South Africa, are founding members of the "BRICS" group, all of which are working to issue their own currency during its next conference in South Africa in August. This step aims to reduce dependence on the US currency in its international commercial transactions gradually.
Western sanctions against Moscow are currently pushing countries to find alternatives to the US dollar to settle payments. Sanctions create new shifts in trade transactions, especially for countries that depend on oil to operate their various industries and services. India is considered one of Russia's main partners in the oil trade, and it is not in its interest to delay the value of the oil deals that is conducting with Russia. At the same time the Chinese currency is playing an increasing role in the Russian financial system as a result of the international sanctions. India began to emulate China in this direction, so that the two countries are working to buy Russian oil using the yuan for these transactions.
As a result, oil refiners importing Russian oil are increasingly spurred to deal with currencies other than the dollar for their transactions. This happens at a time when the volume of foreign imports of Russian oil to those countries is increasing.
It is well known that Russia has been excluded from dealing with the global financial system "SWIFT" operated by the Association of Global Financial Communications between global banks to obtain rapid payments to finance global trade. Therefore, the alternative is to pay in currencies other than the dollar even as the value of the Chinese currency is rising particularly in oil-related deals.
This trend may help Saudi Arabia to implement its decision to use the "yuan" when selling oil during the coming period. Te Chinese government succeeded in 2015 in persuading the International Monetary Fund to include the "yuan" in the basket of currencies of Special Drawing Rights (SDR), lifting the "yuan" to third place after the dollar and the euro in the weight of the five currencies that make up the SDR basket, along with the British pound and Japanese yen. It is expected that China will succeed in including its currency to price oil deals for countries in Asia and the Gulf region in the coming years.
Saudi Arabia has previously held active talks with Beijing to price some of its oil sales to China in "yuan", which confirms that this step would reduce the dominance of the dollar in global oil markets in the future. All these steps are taking place within the framework of the geopolitical transformations taking place in the Middle East and the wider world.
Oman Observer is now on the WhatsApp channel. Click here
