Now that King Salmon has gone to Moscow and bought the Russian’s S-400 air defense system, all sorts of things become possible.
China is the marginal buyer of oil in the world, and there has been a big shift in its imports toward Russia and away from Saudi Arabia. The Iranian sphere (Iran+Iraq+Oman) remain roughly constant:
China may now have the leverage to persuade the Saudis to accept RMB payment for oil. That would be a giant step towards internationalization of the RMB. A year ago I would have dismissed this as science fiction. Now, maybe not so much.
Nikkei Asian Review reported last month that China is preparing to launch a crude futures contract priced in yuan:
China is expected shortly to launch a crude oil futures contract priced in yuan and convertible into gold in what analysts say could be a game-changer for the industry.
The contract could become the most important Asia-based crude oil benchmark, given that China is the world’s biggest oil importer. Crude oil is usually priced in relation to Brent or West Texas Intermediate futures, both denominated in US dollars.
China’s move will allow exporters such as Russia and Iran to circumvent US sanctions by trading in yuan. To further entice trade, China says the yuan will be fully convertible into gold on exchanges in Shanghai and Hong Kong.