At the moment Saudi Arabia and Iran do not even have diplomatic relations (they were severed in 2016). A huge amount of disagreement has accumulated between the two countries. They have been waging a proxy war against each other in Yemen for years. There are also religious differences – Sunni (Saudis) vs. Shiite (Iranians). There is a continuous struggle for influence in the region. In short, irreconcilable enemies.
But there is also something that will unite the two countries more and more in the future. I mean the contradictions with the United States and the growing friendship with China. While for Iran the Americans have long been enemies, for the Saudis the U.S. has long been a strategic partner. But lately everything has changed, and the former partnership is only a memory. Relations between the two countries have deteriorated sharply this year. And it is clear that they will certainly not get any better under the current U.S. administration.
Let me remind you that Biden has publicly accused the crown prince of SA of murdering an opposition journalist (https://t.me/markettwits/201066). So the ways back are all cut off. The Saudis took a very harsh swipe at Biden this year when he begged the kingdom to increase oil production. Considering that the U.S. is not the main buyer of oil from the Saudis for a long time, it makes no sense for the Saudis to follow the U.S. administration’s orders.
And the most interesting process, which in no way can please Americans, is around the transition to payment for oil in yuan, which was recently discussed by China and CA at a summit in Riyadh (more on this topic https://t.me/MarketDumki/3802). This is already a fundamental threat to the dollar, the most formidable weapon of the United States. The two leaders made it clear at the last meeting that they would actively step up cooperation in this area.
So what happens then? China has long been Iran’s main trading partner. Now China will become one for Iran as well. Such a triangle is formed within which the two countries are at enmity with each other, but all three of them intend to confront the United States to varying degrees. Then there is the Russian Federation, which is actively building up cooperation with the three countries and is also in stiff contradiction with the United States. The current relations between RF and SA, RF and Iran, RF and China have never been at such a high level before.
Thus, life itself will push the sworn enemies to establish relations with each other. Their old differences will fade into the background against the United States. And if it succeeds, just imagine how the oil market could change if the three major oil producers (CA, RF and Iran) start selling oil for RMB on the Chinese exchange in Shanghai? Any oil buyer will be able to come to the exchange and buy oil futures for RMB! This is the beginning of a bipolar financial system in the world. There will be no need to own dollars to buy oil. And it won’t even be necessary to translate the price into dollars. And besides oil, there are also industrial metals, which are already traded on Chinese exchanges. If the Chinese organize everything correctly, a huge part of liquidity will flow to their platforms.
If it comes to that, most other OPEC countries will start selling part of their oil for yuan. Everybody understands now the risks of settlements in one currency only. Today you are allowed to use it, but tomorrow they may block all your accounts. As life has shown, using and storing part of reserves in yuan has fully justified itself.
Of course, the U.S. will not sit back and watch the dollar lose its monopoly position as the measure of value and price of any commodity. There will be every possible way to put pressure on all four of these countries. And under such circumstances, the Saudis and Iran may well forget about the accumulated contradictions, and begin to act together. @marketdumki Translated with www.DeepL.com/Translator (free version)