With each passing day, “Psycho” Morrison’s Arc of Autocracy is twisted more out of shape. Today we have Saudi Arabia mulling a connection:
Saudi Arabia appears to be sending a political message to the U.S. with reports that it will consider accepting yuan payments for oil sold to China, currency strategists say.
The world’s largest crude exporter, which has been in talks with China over yuan-priced contracts for six years, has sped up the negotiations, the Wall Street Journal reported Tuesday. The offshore yuan erased earlier losses after the report, yet investors from Nordea Investment Management to Generali Insurance Asset Management said it changes little for the dollar’s status as the world’s reserve currency.
“I don’t know if it is really real,” said Guillaume Tresca, a senior emerging-market strategist at Generali in Paris. “It happens at a moment when the geopolitical order is moving. The Saudis are trying to play with what they can. It is just a signal sent to the U.S. they want more consideration.”
The House of Saud certainly meets the entry criteria of “evil dictator” so it could join the Arc. What does this forex action really mean?
It’s some marginal pressure on the US to not get too close to Iran post-deal. As well, Saudi has been pissed ever since Biden refused to sell it some weapons with which to kill Yemeni rebels. And it’s a reminder not to ignore the oil sugar daddy.
But, there are lots of good reasons why this is an act of evolution, not revolution:
- China/Saudi relations oil trade is nearly 4x larger than US/Saudi.
- The Saudi currency is pegged to the USD. This anchors oil revenues and prevents overly volatile forex outcomes.
- It also ensures Saudi stable pricing for its enormous purchases of the best US arms, which compromise 80% of its military hardware, not to mention alliance status, which is the cornerstone of Saudi regional power.
- The yuan is a piece of shit that can’t be reliably cycled into and out of Chinese debt owing to the closed capital account.
Most importantly, the problem with joining the Arc is that it looks more like the Blob of Bellicosity:
