Saudi Arabia Ends Petrodollar Deal with US
NEW DELH, June 13: Saudi Arabia has decided against renewing its 80-year petrodollar deal with the United States, which expired on Sunday, media reports said.
This agreement, originally signed on June 8, 1974, had been a key part of US global economic influence. The deal set up joint commissions for economic cooperation and Saudi Arabia’s military needs. Back then, American officials hoped it would encourage Saudi Arabia to produce more oil and strengthen economic ties with Arab countries.
By choosing not to extend this contract, Saudi Arabia can now sell oil and other goods using different currencies, such as the Chinese RMB, Euros, Yen, and Yuan, instead of only US dollars. There’s also talk of exploring digital currencies like Bitcoin for transactions.
This decision marks a significant move away from the petrodollar system established in 1972 when the US stopped linking its currency directly to gold. It’s expected to accelerate the global trend of using currencies other than the US dollar in international trade.
Additionally, Saudi Arabia has joined Project mBridge, a collaborative effort exploring a digital currency platform shared among central banks and commercial banks. This project aims to facilitate instant cross-border payments and foreign-exchange transactions using distributed ledger technology.
Project mBridge began in 2021 and involves several prominent central banks and institutions worldwide. It recently reached the stage of Minimum Viable Product (MVP), inviting private-sector firms to propose innovations and use cases to further develop the platform. This move by Saudi Arabia marks the beginning of a major shift in global economic dynamics, though its full implications on international trade and finance remains to be seen.
(Manas Dasgupta)
