Saudi Arabia has decided not to renew its 80-year petrodollar deal with the United States, which expired on June 9, 2024. The agreement, originally signed on June 8, 1974, was a cornerstone of US economic influence, allowing Saudi oil sales exclusively in US dollars.

The petrodollar deal facilitated economic cooperation and addressed Saudi Arabia’s military needs. American officials had hoped the agreement would encourage increased oil production and strengthen ties with Arab nations. However, by choosing not to renew the contract, Saudi Arabia can now sell oil and other goods using various currencies, such as the Chinese RMB, Euros, Yen, and Yuan.

This decision signals a significant shift from the petrodollar system, established when the US decoupled its currency from gold in 1972. The move is expected to accelerate the global trend towards using currencies other than the US dollar in international trade. There is also speculation about exploring digital currencies like Bitcoin for transactions.

In addition to ending the petrodollar deal, Saudi Arabia has joined Project mBridge. This initiative explores a digital currency platform shared among central banks and commercial banks, aiming to facilitate instant cross-border payments and foreign-exchange transactions using distributed ledger technology.

Project mBridge, launched in 2021, involves several prominent central banks and financial institutions worldwide. It has recently reached the Minimum Viable Product (MVP) stage, inviting private-sector firms to propose innovations and use cases to further develop the platform.

Saudi Arabia’s decision to move away from the petrodollar system marks a significant shift in global economic dynamics. This change not only diversifies Saudi Arabia’s currency options but also reflects broader trends in international finance, reducing dependency on the US dollar.

The expiration of the petrodollar deal and Saudi Arabia’s engagement with Project mBridge illustrate the evolving landscape of global trade and finance. These developments indicate a potential reconfiguration of economic relationships and currency usage on the global stage.

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