Saudi Arabia is threatening to sell its oil in currencies other than the dollar if Washington passes a bill exposing OPEC members to U.S. antitrust lawsuits, three sources familiar with Saudi energy policy told Reuters.
The sources said the option had been discussed internally by senior Saudi energy officials in recent months. Two of the sources said the plan had been discussed with OPEC members; and one source briefed on Saudi oil policy said Riyadh had also communicated the threat to senior U.S. energy officials.
The chances of the U.S. bill known as NOPEC coming into force are slim. Furthermore, Saudi Arabia would be unlikely to follow through. However, the fact Riyadh is considering such a drastic step is a sign of the kingdom’s annoyance about potential U.S. legal challenges to OPEC.
In the unlikely event Riyadh were to ditch the dollar, it would undermine its status as the world’s main reserve currency; reduce Washington’s clout in global trade, and weaken its ability to enforce sanctions on nation states.
“The Saudis know they have the dollar as the nuclear option,” one of the sources said.
Origin of this Saudi threat to the US
NOPEC, or the No Oil Producing and Exporting Cartels Act, was first introduced in 2000. This act aims to remove sovereign immunity from U.S. antitrust law, paving the way for OPEC states to be sued for curbing output in a bid to raise oil prices.
Indeed, the bill has never made it into law despite numerous attempts. Nonetheless, the legislation has gained momentum since U.S. President Donald Trump came to office. Trump said he backed NOPEC in a book published in 2011 before he was elected, though he has not voiced support for NOPEC as president.
Instead, Trump has instead stressed the importance of U.S-Saudi relations, including sales of U.S. military equipment, even after the killing of journalist Jamal Khashoggi last year.
Saudi Arabia’s weight
Saudi Arabia controls a 10th of global oil production, roughly on par with its main rivals – the United States and Russia. Its oil firm Saudi Aramco holds the crown of the world’s biggest oil exporter with sales of $356 billion last year.
Depending on prices, oil is estimated to represent 2 percent to 3 percent of global gross domestic product. At the current price of $70 per barrel, the annual value of global oil output is $2.5 trillion.
In the event of such a drastic Saudi move, the impact would take some time to play out given the industry’s decades-old practices built around the U.S. dollar – from lending to exchange clearing.
Other potential threats raised in Saudi discussions about retaliation against NOPEC included liquidating the kingdom’s holdings in the United States.
The kingdom has nearly $1 trillion invested in the United States and holds some $160 billion in U.S. Treasuries.
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