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Russia, Saudi, China and Renminbi July 11, 2015

Posted by hslu in China, Economics, Energy, Global Affair, Middle East, Oil, Putin.
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For years, Saudi has been the largest oil exporter to China averaging about 20% of China’s total import. Things got a bit unsettling for Saudi since 2014 when Saudi’s export to China dropped to 16%. The bottom fell out for Saudi in 2015 when Saudi lost that number one position to Russia.

2015-06-24   Russia overtakes Saudi Arabia as largest supplier of oil to China

Source: The Guardian

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So what have happened from 2013 to May 2015?

In 2013, Rosneft, Russia’s de facto national oil company, signed an $85 billion 10 year deal with China’s Sinopec to deliver 100 million tonnes of crude over 10 years.

Rosneft then overdid itself by singing an absolutely unprecedented deal worth $270 billion which would over the years double Russia’s oil export to China. Rosneft would get a $70 billion pre-payment from China too.

In return, China would get a steady supply of crude oil and the deal will be consummated not in U.S. dollar but in Renminbi 人民幣.

China could cut its oil import from Angola but it didn’t. Russia’s gain became Saudi’s loss. Why?

Is China sending a message to Saudi: I’ll cut oil import from Angola and keep buying your oil if you agree to take Renminbi.

I am sure the discussion is going on behind closed doors and I am sure that America is not invited.

I know that this is too big a risk for Saudi’s to take right now because Saudi has been tied closely with the U.S. after 1973 oil embargo.

But, who knows, it may happen some time.

One thing at a time.

Didn’t Saudi keep its oil productions purposely high to maintain its share of oil export in the world? And who got killed in the propose?

None other than many oil producers in the U.S. and the high paying jobs in North Dakota and Texas.

Be patient. The U.S. wants to get Iran off the sanction list while promising Iran a free hand to develop nuclear weapons after 15 years. In exchange, Iran can export its oil without restrictions.

Last time I checked, China also bought a significant amount of oil from Iran too and it is likely that this transaction is also paid by Renminbi also.

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Comments»

1. anniepani - July 19, 2015

Seeing as so many countries import so much stuff from PRC getting paid in RMB might not be a bad option these days. I do suspect though that once the west fully gets to work on Russia, PRC might regret this deal. There could be supply problems.


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