How China's Yuan and Iran's Oil Are Tied Together

When Iran sells oil to China, almost no US dollar changes hands, so what currency actually settles this trade? Today we learn why China is the main buyer of Iran's oil, and how that trade settles in yuan instead of dollars Because this yuan shapes part of the government's foreign currency income and Tehran's dollar and coin prices The yuan is China's currency; small independent refiners in Shandong are the main buyers of Iran's oil Because secondary sanctions scare big Chinese banks away from the dollar system, payment never clears in dollars That is why tankers switch off their transponders, or change their flag and name, to avoid being tracked In exchange for that risk, the Chinese refiner buys Iranian oil below the Brent price and pays in yuan Today, August nineteenth, Brent crude was ninety one dollars, and one dollar bought about six point seven four yuan A hypothetical fifteen dollar discount turns one million barrels into about five hundred seventeen million yuan Some of that yuan is spent right there on Chinese goods, and some slowly enters Iran's own currency market When oil revenue rises, it usually helps calm Tehran's free market dollar and coin prices a little The first common mistake is thinking all of Iran's oil goes to China, most of it does, but not all The second mistake is treating the discount as a pure loss, without it this volume of sales would not happen at all The one thing to remember, Iran's oil settles in yuan, not dollars, and that yuan reaches the toman slowly Now you have the answer, China's yuan buys Iran's oil, not the US dollar. Sahmino's next lesson is here again tomorrow