Saudi Arabia has opted not to renew its 80-year petrodollar agreement with the United States, which expired on Sunday, 9th June, according to media reports.
This accord, first established on 8th June 1974, had been a cornerstone of US global economic dominance.
The agreement established joint commissions for economic cooperation and Saudi Arabia’s military requirements. At the time, American officials anticipated that it would encourage Saudi Arabia to increase oil production and bolster economic relations with Arab nations.
By opting not to extend this contract, Saudi Arabia can now sell oil and other goods using various currencies, such as the Chinese RMB, Euros, Yen, and Yuan, rather than solely US dollars. Additionally, there is discussion about exploring digital currencies like Bitcoin for transactions.
This decision marks a major shift 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.
Saudi Arabia has also joined Project mBridge, a collaborative effort exploring a digital currency platform shared among central and commercial banks. This project aims to allow instant cross-border payments and foreign-exchange transactions using distributed ledger technology.
Started in 2021, Project mBridge involves several prominent central banks and institutions worldwide. It recently reached the Minimum Viable Product (MVP) stage, 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 remain to be seen.
Image source: India Today
