Saudi Arabia’s Finance Minister Mohammed al-Jadaan said his country is open to trading in currencies other than the U.S. dollar after 48 years of relations solely with the dollar. The remarks came as Chinese President Xi Jinping urged Gulf monarchs to accept the renminbi for oil, and Riyadh officials said last March they would consider accepting the Chinese currency.
Saudi Arabia’s move away from the U.S. dollar signals a change in economic conditions
This week, as the world’s elite gathered in the Swiss Alps town of Davos for the 2023 World Economic Forum, Saudi Finance Minister Mohammed al-Jadaan gave an interview to Bloomberg TV on Tuesday. Al-Jadaansurprised reporters by saying that Saudi Arabia is open to trading in other currencies. Finance Minister Al-Jadaan said, “We have no problem discussing how to settle trade arrangements, whether in US dollars, euros, or Saudi Riyals.” The finance minister added,
We don’t think we will wave away or exclude any discussion that would help improve trade around the world.
The Saudi finance minister’s remarks have been interpreted as another step toward de-dollarization. To understand why Al-Jadaan’s statement is important, we need to go back in time: in 1971, the U.S. government and President Richard Nixon abolished the gold standard, and for the next three years, oil prices soared. In 1973 and 1974, federal officials and U.S. Treasury SecretaryWilliam Simonvisited the monks. William Simonvisited the monarch in Riyadh.
It was at this point that Simon convinced the Saudis to sell their oil in dollars and to buy government bonds, and the Petrodollar was born. Not only the Saudis, but all of the Organization of Petroleum Exporting Countries (OPEC) followed suit and priced their oil in US dollars. Many believe this has given the U.S. an unfair advantage and has been the root cause of many wars in which the U.S. has been involved over the past several decades. More recently, the hegemony of the U.S. dollar appears to be under threat.
Saudi Arabia’s growing tensions with the United States
For example, Saudi Arabia has recently considered joining the BRICS countries, which include Brazil, Russia, India, China, and South Africa. At the China-GCC summit, Chinese President Xi Jinping asked Saudi Arabia to begin accepting RMB for a barrel of oil. Additionally, last March, Saudi Arabiasaidthat it was considering accepting the Chinese currency for oil. The Wall Street Journal noted that Saudi Arabia had complainedabout U.S. pull-thermal {45}