MENA Oil & Gas in the Energy Crisis: A Thorn Bed for Washington?
MED THIS WEEK, ITALIAN INSTITUTE FOR THE STUDY OF INTERNATIONAL POLITICS
“Since last year, the world has been facing a growing energy crisis. While the COVID pandemic reduced demand, economies worldwide have started to grow again and expose shortages in all energy types, from gas to oil. With Russia’s invasion of Ukraine likely to reduce the country’s share of oil exports, the US recently asked Saudi Arabia to increase production – a request that has been ignored so far. Washington’s appeal also coincides with Saudi Arabia’s growing ties to China, a growing rival for the Americans. Their relationship seemed to break new ground the other week when Riyadh and Beijing proposed to use the Chinese yuan to pay for future Saudi oil sales. If it happens, it will boost Chinese ambitions to make the yuan a global currency and make the Saudis less reliant on the dollar. However, the Saudi-Chinese move may not be enough in itself. For one, dollars make-up more than 80% of world trade while the yuan makes up 2%. For another, the yuan will need to become more available than it currently is. Right now, the yuan only makes up 2% of central banks’ foreign reserves compared to 60% of dollars and 20% of euros. Additionally, some conditions will also need to be met for Beijing to achieve its goal, including more predictable and transparent monetary policies that would make banks and firms want to use the yuan.”
Guy Burton, Adjunct Professor, Vesalius College; and Visiting Fellow, Sectarianism, Proxies and De-sectarianism Project, Lancaster University
