Petrodollar Deal: Saudi Arabia has given a big blow to America. Saudi Arabia has refused to extend its 50-year-old petrodollar deal with America, which expired on June 9. Saudi Arabia can now sell oil in many currencies including Chinese RMB, Euro, Yen, Rupee and Yuan instead of just US Dollar.
Saudi Arabia is getting closer to China and Russia. Now America’s sovereignty is decreasing in the Saudi market. Saudi is expanding its business scope and strengthening its relations with Russia, China and Japan. Taking a big step in this regard, the Saudi government has given another blow to America. Saudi has refused to extend its 50-year-old petro dollar deal with America, which expired on 9 June.
This move is being seen as a move to promote the use of other currencies instead of the US dollar for business around the world. Its impact can be seen directly on America. This deal proved to be a major milestone in establishing America’s economic dominance around the world. But there seems to be no possibility of restarting it.
What is Petro Dollar Deal?
According to Investopedia, the petro dollar deal came into existence after the US moved away from the gold standard for trading. In the 1970s, after the oil crisis following the Israel war, the US signed a petro dollar deal with Saudi Arabia. Under this deal, Saudi Arabia would sell its gold across the world in dollars.
In return for this deal, America guaranteed Saudi Arabia its security and America got many benefits from this. Firstly, they got Saudi oil. Secondly, their currency reserves started increasing all over the world. Experts say that this deal was a WIN-WIN condition for America. That means a win from all sides.
How will the oil be sold after the deal is over?
Saudi Arabia is the largest exporter of crude oil in the world and sells its oil to many countries. According to Birx News, Saudi Arabia will now sell oil in many currencies including Chinese RMB, Euro, Yen, Rupee and Yuan instead of just US Dollar.
Growing closeness with China-Russia
Saudi Arabia has moved closer to China and Russia under Crown Prince Mohammed bin Salman. This shift has happened after differences with the US on Middle East security. For example, Yemen’s Houthis were removed from the list of terrorism after Joe Biden became president. Recently, there have been differences between the Saudi administration and the US over America’s role in the Gaza war.
