WSJ, By The Editorial Board ,
In case you missed it amid the war news, the Journal this week reported that Saudi Arabia is edging closer to accepting the yuan as payment for oil shipments to China. This is one more cost, and a potentially significant one, of the Biden Administration’s bungled handling of a strategically important ally.
Details of the potential new Saudi-Chinese oil-trading arrangements remain vague. The two sides have talked for years about pricing some oil sales in yuan, and it may not happen. Some 80% of global oil sales are priced in U.S. dollars, the yuan is not freely convertible as a reserve currency must be, and Saudi Arabia’s currency, the riyal, is pegged to the dollar.
Yet the two sides are said to be keen, and news of renewed discussions sends an alarming signal. Saudi Arabia committed in 1974 to conduct its oil trade only in dollars, in exchange for security guarantees from Washington. The Biden Administration has undermined that relationship at every turn, and by all accounts the Saudis are fed up.
One of the Administration’s first foreign-policy actions was to end U.S. support for the Saudi war against the Iran-backed Houthis in Yemen. It also removed the terrorist designation from the Houthis. The White House then postponed a scheduled arms sale to Riyadh—a security slap-in-the-face that wasn’t reversed until late last year.
The Houthis have returned Mr. Biden’s gift by sending drones and missiles to attack the oil fields and cities of Saudi Arabia and its ally, the United Arab Emirates. Meanwhile, the Saudis watch, aghast, as Mr. Biden chases a new nuclear deal that will give Iran the resources to finance proxy wars against Saudi Arabia—until Tehran gets its own nuclear bomb.
Mr. Biden and his advisers say this is all about human rights. They rode into town on a high horse concerning the Riyadh-orchestrated 2018 murder of journalist Jamal Khashoggi. Secretary of State Antony Blinken cited humanitarian concerns when lifting the terrorist designation from the Houthis.
The Khashoggi murder was outrageous and Yemen’s plight is desperate, but Saudi Crown Prince Mohammed bin Salman has made other moves toward domestic liberalization. More to the point, the U.S. needs every friend it can keep in a difficult part of the world. The high-minded internationalists populating the Biden Administration assume, wrongly, that a power such as America has the luxury of cooperating only with the morally pure.
The Saudis are recalculating their interests now that they fear they can’t rely on the U.S.—amid the Biden Administration’s hostility and the horrifying Afghanistan withdrawal. The Crown Prince has refused Mr. Biden’s entreaties to pump more oil, and he is reported even to have refused to take the President’s phone call.
Beijing is happy to step into the breach, and it could benefit if it can coax Riyadh into a yuan-for-oil arrangement. Doing so would help Beijing start building the scaffolding for a global yuan, including greater dispersion of the currency around the world. This in turn could open the door for China to offer the yuan as a trading currency to U.S. adversaries such as Russia and Iran. U.S. economic sanctions would be that much less effective.
There’s a lot of ruin in a reserve currency, and the greenback’s global pre-eminence endures for now. But Washington should push back on any budding challenges—especially from strategic rivals. This is an urgent job for Treasury Secretary Janet Yellen, assuming she can pull herself away from campaigning for global taxes and climate regulation.
The Saudi bungle highlights the failure of Mr. Biden’s brand of righteous liberal internationalism. President Trump too often gave short shrift to American values, but Mr. Biden has swung too far in the opposite direction. He and his foreign-policy advisers seem to think grandstanding about human rights and the climate will win the day for U.S. interests. Successful Presidents, such as Ronald Reagan, have blended idealism with realism about the world’s bad actors and the need for friends.
In this new era of Great Power competition, the U.S. can’t afford to alienate allies that can help deter authoritarian aggressors bent on harming U.S. interests and values. The U.S. is paying the price in the Ukraine crisis for having lost the Saudis.