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Saudi Arabia threatens to ditch dollar oil trades to stop ‘Nopec’

Saudi Arabia threatens to ditch dollar oil trades to stop ‘Nopec’

LONDON: Saudi Arabia is threatening to sell its oil in currencies other than the dollar if Washington passes a bill exposing Opec members to US antitrust lawsuits, three sources familiar with Saudi energy policy said.

They 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 US energy officials.

The chances of the US bill known as Nopec coming into force are slim and Saudi Arabia would be unlikely to follow through, but the fact Riyadh is considering such a drastic step is a sign of the kingdom’s annoyance about potential US legal challenges to Opec.

In the unlikely event Riyadh were to ditch the dollar, it would undermine the 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 familiar with the matter said. A US state department official said: “as a general matter, we don’t comment on pending legislation.”

The US Energy Department did not respond to a request for comment. Energy Secretary Rick Perry has said that NOPEC could lead to unintended consequences.

NOPEC, or the No Oil Producing and Exporting Cartels Act, was first introduced in 2000 and aims to remove sovereign immunity from US antitrust law, paving the way for Opec states to be sued for curbing output in a bid to raise oil prices.

While the bill has never made it into law despite numerous attempts, the legislation has gained momentum since US President Donald Trump came to office. Trump said he backed NOPEC in a book published in 2011 before he was elected, though he not has not voiced support for NOPEC as president.

Trump has instead stressed the importance of U.S-Saudi relations, including sales of US military equipment, even after the killing of journalist Jamal Khashoggi last year.

A move by Saudi Arabia to ditch the dollar would resonate well with big non-Opec oil producers such as Russia as well as major consumers China and the European Union, which have been calling for moves to diversify global trade away from the dollar to dilute US influence over the world economy.