Saudi Arabia To Discontinue Petrodollar Deal With America

Saudi Arabia has chosen not to renew its 80-year petrodollar agreement with the United States, which expired on Sunday, June 9. The agreement, originally established on June 8, 1974, was a significant aspect of US global economic influence.

Saudi Arabia’s Petro-Dollar Deal

This deal established joint commissions for economic cooperation and addressing Saudi Arabia’s military needs. At the time, American officials hoped it would prompt Saudi Arabia to increase oil production and strengthen economic ties with Arab nations. But by opting not to renew this contract, Saudi Arabia can now sell oil and other goods in various currencies.

Currencies including the Chinese RMB, Euros, Yen, and Yuan, instead of solely relying on US dollars. There is also consideration of using digital currencies like Bitcoin for transactions.

This marks a drastic change in the petrodollar system that the US established in 1972 when it detached its currency from gold, and experts expect it to accelerate the global move away from the US dollar.

Saudi Arabia’s Project MBridge

Recently, Saudi Arabia announced its active participation in Project mBridge, which investigates a multi-central bank digital currency platform shared among central and commercial banks. This platform uses distributed ledger technology to facilitate instant cross-border payment settlements and foreign exchange transactions.

The project includes over 26 observing members, and this month, the South African Reserve Bank approved its membership. Renowned members include the Bank of Israel, Bank of Namibia, Bank of France, Central Bank of Bahrain, Central Bank of Egypt, Central Bank of Jordan, European Central Bank, International Monetary Fund, Federal Reserve Bank of New York, Reserve Bank of Australia, and the World Bank.

Project mBridge has evolved through extensive collaboration since 2021 among the BIS Innovation Hub, the Bank of Thailand, the Central Bank of the UAE, the Digital Currency Institute of the People’s Bank of China, and the Hong Kong Monetary Authority. A pilot with real-value transactions was conducted in 2022.
Now, as it reaches the Minimum Viable Product (MVP) stage, Project mBridge is inviting private-sector firms to propose new solutions and use cases to further develop and showcase the platform’s potential.

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