JAKARTA - The United States and Britain are increasing pressure on Saudi Arabia to pump more oil and join efforts to isolate Russia, while Riyadh has shown little readiness to respond and has revived threats to dump dollars in its oil sales to China.
British Prime Minister Boris Johnson flew into the world's biggest crude exporter on Wednesday, a day after US security adviser Brett McGurk arrived with a US delegation.
Saudi Arabia and neighboring the United Arab Emirates, which are among the few producers with spare capacity, have resisted Western calls for more crude to 'cool off hot prices' and stick to OPEC+ supply pacts with Russia and others.
McGurk and other US officials met with senior Saudi officials on Tuesday, urging them to pump more oil and find a political solution to ending the war in Yemen, where Saudi-led forces are battling the Iran-backed Houthi group, two sources said.
"You are wrong to think Washington will give up on these two files," one of the two sources, familiar with the discussions, told Reuters, as quoted March 17.
Meanwhile, a senior US administration official said McGurk was in the Middle East to "discuss various issues, including Yemen", but declined to elaborate.
Separately, the British Prime Minister described Saudi Arabia and the UAE as "key international partners" in a bid to wean the world off Russian hydrocarbons, putting pressure on Russian President Vladimir Putin after Moscow invaded Ukraine.
But Abdulkhaleq Abdulla, a leading Emirati political analyst, said PM Johnson should not expect much. "Boris will return empty-handed," he wrote on Twitter.
The Saudi government did not immediately respond to a Reuters request for comment on the US and UK visits.
For now, Saudi Arabia is showing no sign of abandoning the oil supply pact struck between the Organization of the Petroleum Exporting Countries and its allies, including Russia, which has seen the group known as OPEC+ only gradually increase oil output.
At the last OPEC+ meeting on March 2 - less than a week after Russia invaded Ukraine and as the West stepped up sanctions against Moscow - ministers avoided the Ukraine issue in talks and quickly agreed to stick to existing policies.
Meanwhile, Riyadh has signaled it wants to forge closer ties with Beijing by inviting Chinese President Xi Jinping to visit this year. The Wall Street Journal said Saudi Arabia was in talks to price some of the crude it sells to China in yuan. Read more
"If Saudi Arabia does that, it will change the dynamics of the forex market," said a source familiar with the matter, adding that such a move, which the source says has long been requested by Beijing and which Riyadh has been threatening since 2018, might call on buyers. others to follow.
The Saudi energy ministry declined to comment, while state oil giant Saudi Aramco did not respond to a request for comment.
One diplomat said Riyadh was turning to an 'old threat' to push back into the West, though diplomats and others said any shift to the yuan would face practical challenges, given that crude oil is priced in dollars, the Saudi riyal is pegged to the greenback and the yuan doesn't play the same role. as reserve currency.
"This would be reckless, given global oil prices in dollars and pegged currencies, not to mention the amount of Saudi debt valued in dollars, their dollar-denominated reserve assets and their holdings of US equities," said Karen Young, a resident scholar at the Corporate Institute. America.
"There may be some contracts in yuan between Saudi Arabia and China, but there is no reorientation of Saudi monetary policy," he said.
Saudi Arabia's central bank had assets worth US$492.8 billion at the end of January, including US$119 billion in US Treasuries. The government has foreign currency debt, mostly in dollars, of $101.1 billion at the end of 2021, while the Saudi sovereign wealth fund holds $56 billion in US equities.
Monica Malik, chief economist at Abu Dhabi Commercial Bank, said Saudi Arabia could slowly shift some of its sales to the yuan. "The gradual shift will have limited impact," he said.
To note, when US officials met in Riyadh, the US State Department said on Tuesday that Washington was not asking its allies to choose between the United States and China.
While US-Saudi relations are at a low point, Saudi Arabia's Crown Prince has responded by strengthening ties with Russia and China, although the kingdom still has close security ties with Washington.
Prince Mohammed bin Salman, the kingdom's de facto ruler, has faced sharp Western criticism over the 2018 killing of Saudi journalist Jamal Khashoggi, Riyadh's human rights record and the Yemen War. US President Joe Biden has, so far, refused to have direct contact with the prince.
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