HomeEconomySaudi Arabia did not renew the "Petrodollar" agreement with the US

Saudi Arabia did not renew the “Petrodollar” agreement with the US

The historic decision frees the Saudis from the hegemony of the dollar and opens the oil market in other currencies.

Saudi Arabia decided not to renew the “Petrodollar” agreement, which expired on June 9, ending a relationship of about 50 years with the United States.

The agreement, signed in 1974 with Henry Kissinger as its architect, consisted of the creation of an agreement for Saudi oil exports to be paid in US dollars.

The alliance consolidated this currency as a global currency in the energy sector and placed the Saudis at the top of the oil commercial and export pyramid.

From 2022, Saudi Arabia began to fail to comply with the agreement, giving China, its new large buyer, the possibility of paying in yuan.

Although the agreement could be renewed on June 9, 2024 - 50 years after the original signing -, the Saudi kingdom decided not to make use of the renewal and to operate with complete freedom in the marketing of oil through different currencies.

This means that Saudi Arabia can now sell oil and other goods in currencies such as the RMB, euro, yen, yuan and more, instead of just the US dollar.

This major change challenges the dominance of the petrodollar system, which has been in place since the United States stopped pegging its currency to gold in 1972. Additionally, this decision is expected to accelerate the de-dollarization process.

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