Saudi Arabia’s finance minister, Mohammed Al-Jadaan, said the kingdom is open to trading in currencies other than the US dollar after 48 years of dealing only with the US dollar. The statements come after Chinese President Xi Jinping urged Gulf monarchies to accept the yuan for oil and Riyadh officials said last March that the country would consider accepting the Chinese currency.
Saudi Arabia’s move away from the US dollar is changing the economic landscape
This week, the world’s elite gathered in the Swiss Alps city of Davos for the 2023 World Economic Forum, and Saudi Finance Minister Mohammed Al-Jadaan spoke to Bloomberg TV on Tuesday. Al-Jadaan surprised journalists when he said that Saudi Arabia is open to trade with other currencies. “There is no problem discussing how to settle our trade agreements, be it in US dollars, euros or Saudi riyals,” Al-Jadaan said. The Minister of Finance added:
I don’t think we are avoiding or dismissing any discussion that would help improve trade around the world.
The statements of the finance minister of Saudi Arabia were interpreted as the next step in the direction of de-dollarization. To understand why al-Jada’s comments are significant, one must go back in time. In 1971, the US government and President Richard Nixon ended the gold standard, and over the next three years, oil prices skyrocketed. In 1973 and 1974, federal officials and US Treasury Secretary William Simon visited Riyadh with the monarchs.
At the time, the petrodollar was created because Simon convinced the Saudis to sell oil in US dollars and told them to buy Treasury bonds. Apart from the Saudis, all of the Organization of the Petroleum Exporting Countries (OPEC) followed suit and priced their oil in US dollars. Many believe this gives the United States an unfair advantage and is the root cause of many of the wars the United States has been involved in over the past few decades. More recently, the hegemony of the US dollar has been threatened.
Tensions are rising between Saudi Arabia and the United States
For example, Saudi Arabia recently considered joining the BRICS countries, which include Brazil, Russia, India, China and South Africa. At the China-Gulf Cooperation Council summit, Chinese President Xi Jinping called on Saudi Arabia to accept the yuan per barrel of oil. Moreover, last March, Saudi Arabia announced that it was considering accepting Chinese currency for oil. The Wall Street Journal noted that the Saudis are not happy with US President Biden’s relations with Iran regarding the country’s nuclear program.
In October 2022, reports further claimed that members of the Saudi government, including Crown Prince Mohammed bin Salman, privately mocked Biden’s mental acuity. Al-Jadaan detailed Tuesday that Saudi Arabia’s leaders have good relations with China and other nations.
“We enjoy a very strategic relationship with China, and we enjoy the same strategic relationship with other nations, including the United States, and we want to develop that with Europe and other countries that are willing and able to work with us,” Al-Jadaan noted. So far, Saudi Arabia’s statements have been regarded as rhetoric, and none of the above considerations (accepting the yuan for oil, joining BRICS) have come to fruition.
What do you think Saudi Arabia’s potential move away from the US dollar will mean for the future of global trade and finance? Let us know your thoughts on this topic in the comments section below.
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