Saudi Arabia Ends 80-Year Petrodollar Deal, Boosting Other Currencies And Potential Bitcoin Use
The agreement created joint commissions for economic cooperation and supported Saudi Arabia’s military needs.
BIG Blow To US As Saudi Arabia Ends 80-Year Petrodollar Deal (Image Source: iStock)
Saudi Arabia has decided not to renew its 80-year petrodollar agreement with the United States, which expired on Sunday, June 9. This deal, originally signed on June 8, 1974, was a significant part of the US‘s global economic influence.
What is Saudi Arabia’s Petrodollar Agreement With US?
The agreement created joint commissions for economic cooperation and supported Saudi Arabia’s military needs.
What Is The Motive Of Petrodollar Agreement?
At the time, American officials hoped it would encourage Saudi Arabia to produce more oil and strengthen economic ties with Arab countries.
What Will Changes After Not Renewal Of This Agreement?
By not renewing this contract, Saudi Arabia is now free to sell oil and other goods using various currencies like the Chinese RMB, Euros, Yen, and Yuan, rather than only US dollars.
Exploration Of Digital Currencies
There is also talk of exploring digital currencies, such as Bitcoin, for transactions.
How Non-Renewal Of This Contract Will Be Beneficial?
This decision marks a major shift away from the petrodollar system, which has been in place since 1972 when the US stopped linking its currency directly to gold. It is expected to speed up the global trend of using currencies other than the US dollar in international trade.
Saudi Arabia’s New Move
Additionally, Saudi Arabia has joined Project mBridge, a collaborative effort to develop a digital currency platform shared among central banks and commercial banks.
What Is mBridge Project?
This project aims to facilitate instant cross-border payments and foreign exchange transactions using distributed ledger technology. Project mBridge began in 2021 and involves several prominent central banks and institutions worldwide. It has recently reached the stage of a Minimum Viable Product (MVP), inviting private-sector firms to propose innovations and use cases to further develop the platform.
