Saudi Arabia Ends 80-Year Petrodollar Deal with the United States


, Signaling Potential Collapse of Dollar Hegemony

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Saudi Arabia has chosen not to renew its 80-year petrodollar agreement with the United States, which officially ended on Sunday, June 9. This decision marks a significant shift in global economic dynamics and challenges the longstanding dominance of the US dollar in international trade.

The original agreement, established on June 8, 1974, was a cornerstone of US global economic influence. It ensured that Saudi oil sales were conducted exclusively in US dollars, thereby reinforcing the dollar’s status as the world’s primary reserve currency. The deal also fostered economic cooperation and bolstered Saudi Arabia’s military capabilities.

By opting out of this contract, Saudi Arabia now has the freedom to conduct oil and other trade transactions in various currencies such as the Chinese RMB, Euros, Yen, and Yuan. There is also consideration of using digital currencies like Bitcoin for future transactions.

This move is seen as a significant departure from the petrodollar system that has been in place since 1972, when the US decoupled its currency from gold. It is expected to hasten the global shift towards using alternative currencies in international trade, potentially undermining the dominance of the US dollar.

In addition to this strategic shift, Saudi Arabia has joined Project mBridge, a collaborative initiative exploring a digital currency platform for central and commercial banks. The project, which began in 2021, aims to facilitate instant cross-border payments and foreign-exchange transactions using distributed ledger technology. It has reached the Minimum Viable Product (MVP) stage, inviting private-sector firms to propose further innovations.

Saudi Arabia’s decision to end the petrodollar agreement and participate in Project mBridge marks a pivotal moment in global economic relations. While the full implications of these actions on international trade and finance are yet to be fully realized, they signal a potential decline in the US dollar’s hegemony on the world stage.

By Naija247news
By Naija247news
Naija247news is an investigative news platform that tracks news on Nigerian Economy, Business, Politics, Financial and Africa and Global Economy.

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