Has Saudi Arabia Exited The Petro-Dollar Deal With US?: Future Of International Transactions
June 9, 2024, marks a historic day as the Kingdom of Saudi Arabia decided not to renew the 50-year Petro-dollar deal with the United States. The agreement, which was signed by then Secretary of State Henry Kissinger and the Saudi authorities, had expired on June 9. Notably, the Kingdom’s crown prince last Sunday refused to renew the deal according to some reports. The deal had reportedly helped the US to keep the dollar’s dominance over global trade.
With Saudi’s hesitance to renew the agreement, there can be a major transformation in the global financial transactions, according to analysts. The absence of the deal allows Saudi to sell its oil and other goods in different currencies. It can sell its oil and other goods in currencies other than the US dollar, including the Chinese RMB, Euros, Japan’s Yen, and Yuan, among others.
As per the agreement signed on June 8, 1974, Saudi Arabia had to sell their oil to the US in return for the US guarantee of protection from foreign attacks, especially their oil fields. The US was the biggest beneficiary of the deal and continue to be, as oil is one of the major global commodities. The deal expedited the dollar’s global acceptance. International transactions began to be dependent on dollars, making US economy stable.
Read also: Any Visa Holders Can Now Perform Umrah, Announces Saudi Arabia
The dollar’s acceptability helped the USA thrive as the country came to a position where it could print any amount of dollars and get away with it. Trillions worth of dollars came into usage in the derivatives market in most swap agreements. The dollar dominance also allowed the US to build strong influence in international affairs, including in the functioning of the World Bank.
Notably, it is learnt that the Saudi’s decision not to renew the agreement would hit the US ambitions. Moreover, the kingdom’s recently announced initiative for a multi-central bank digital currency (CBDC) platform would enable the country to make instant cross-border payments settlements and foreign-exchange transactions. The entry of Saudi Arabia into the BRICS has also boosted the country’s confidence to enhance the use of local currencies in trade and financial transactions.
Read also: US To Hold Talks In Saudi Arabia On Normalising Ties With Israel
