Saudi Arabia Open to Trading in Currencies Other Than US Dollar, Signaling a Shift Toward De-Dollarization

After a 48-year relationship solely with the U.S. greenback, Saudi Arabia’s Finance Minister, Mohammed Al-Jadaan, mentioned the dominion is open to buying and selling in currencies apart from the U.S. greenback. The statements comply with China’s president, Xi Jinping, urging the Gulf monarchs to simply accept yuan for oil, and Riyadh officers saying final March the nation would think about accepting the Chinese forex.

Saudi Arabia’s Move Away from US Dollar Signals Changing Economic Landscape

This week, the world’s elite met within the Swiss Alpine city of Davos for the 2023 World Economic Forum, and Saudi Arabia’s Finance Minister, Mohammed Al-Jadaan, spoke to Bloomberg TV on Tuesday. Al-Jadaan stunned reporters when he mentioned Saudi Arabia is open to buying and selling in different currencies. “There are no issues with discussing how we settle our trade arrangements, whether it’s in the U.S. dollar, the euro, or the Saudi riyal,” Al-Jadaan mentioned. The finance minister added:

I don’t suppose we’re waving away or ruling out any dialogue that may assist enhance the commerce all over the world.

The Saudi Arabian finance minister’s statements have been interpreted as one other step towards de-dollarization. To perceive why Al-Jadaan’s feedback are vital, one should go back in time. In 1971, the U.S. authorities and President Richard Nixon ended the gold commonplace, and over the following three years, oil prices skyrocketed. In 1973 and 1974, federal officers and U.S. Treasury Secretary William Simon visited with monarchs in Riyadh.

At that point, the petro-dollar was born as Simon satisfied the Saudis to promote oil in U.S. {dollars} and instructed them to buy Treasury bonds. In addition to the Saudis, the entire Organization of the Petroleum Exporting Countries (OPEC) adopted go well with and priced their oil in U.S. {dollars}. Many consider this has given the U.S. an unfair benefit and that it has been the foundation explanation for lots of the wars the U.S. has been concerned in over the previous couple of a long time. In newer instances, the U.S. greenback’s hegemony has been seemingly threatened.

Growing Saudi Tensions With U.S.

For occasion, Saudi Arabia has just lately been considering becoming a member of the BRICS nations, which embody Brazil, Russia, India, China, and South Africa. At the China-GCC summit, China’s President Xi Jinping urged Saudi Arabia to begin accepting yuan for barrels of oil. Moreover, final March, Saudi Arabia said it was occupied with accepting the Chinese forex for oil. The Wall Street Journal famous that the Saudis had been not pleased with U.S. President Biden’s dealings with Iran over the nation’s nuclear program.

In October 2022, reports additional claimed that members of the Saudi authorities, together with Crown Prince Mohammed bin Salman, privately mocked Biden’s psychological acuity. Al-Jadaan detailed on Tuesday that the leaders in Saudi Arabia have an excellent bond with China and different nations.

“We enjoy a very strategic relationship with China and we enjoy that same strategic relationship with other nations, including the U.S. and we want to develop that with Europe and other countries who are willing and able to work with us,” Al-Jadaan remarked. So far, Saudi Arabia’s statements have been thought of rhetoric, and not one of the aforementioned concerns (accepting yuan for oil, becoming a member of BRICS) has come to fruition.

What do you suppose the potential transfer away from the U.S. greenback by Saudi Arabia means for the way forward for international commerce and finance? Let us know your ideas about this topic within the feedback part beneath.