The statements follow Chinese President Xi Jinping’s call for Gulf monarchs to accept the yuan for oil, and Riyadh’s statement in March that it would consider accepting the Chinese currency.
Saudi Arabia moves away from U.S. dollar, sign of changing economic landscape
This week, the world’s elite gathered in the Swiss Alpine town of Davos for the 2023 World Economic Forum, and Saudi Finance Minister Mohammed Al-Jadaan spoke on Bloomberg TV on Tuesday. Al-Jadaan stunned reporters when he said Saudi Arabia was open to trading in other currencies. “There is no problem in discussing how we settle our trade agreements, whether in U.S. dollars, euros or Saudi riyal“, said Mr. Al-Jadaan. The finance minister added:
I don’t think we are ruling out or excluding any discussion that can improve trade in the world.
The Saudi finance minister’s statements have been interpreted as a further step toward de-dollarization. To understand why Al-Jadaan’s comments are significant, one must go back in time. In 1971, the U.S. government and President Richard Nixon ended the gold standard, and over the next three years, oil prices soared. In 1973 and 1974, federal officials and U.S. Treasury Secretary William Simon visited the monarchs in Riyadh.
It was during this time that the petro-dollar was born, with William Simon convincing the Saudis to sell their oil in U.S. dollars and asking them to buy Treasury bonds. In addition to the Saudis, all of the countries in the Organization of Petroleum Exporting Countries (OPEC) followed suit and priced their oil in U.S. dollars. Many believe that this has given the United States an unfair advantage and is the cause of many of the wars in which the United States has been involved over the past few decades. More recently, the hegemony of the U.S. dollar has apparently been threatened.
Growing tensions between Saudi Arabia and the United States
For example, Saudi Arabia recently considered joining the BRICS nations, which include Brazil, Russia, India, China and South Africa. At the China-GCC summit, Chinese President Xi Jinping urged Saudi Arabia to begin accepting yuan for barrels of oil. In addition, last March, Saudi Arabia said it was considering accepting Chinese currency for oil. The Wall Street Journal noted that the Saudis were not satisfied with U.S. President Biden’s negotiations with Iran over the country’s nuclear program.
In October 2022, reports further claimed that members of the Saudi government, including Crown Prince Mohammed bin Salman, privately mocked Biden’s mental acuity. Al-Jadaan explained Tuesday that Saudi leaders have good relations with China and other countries.
“We have a very strategic relationship with China and we have the same strategic relationship with other nations, including the United States, and we want to develop that relationship with Europe and other countries that are willing and able to work with us“, remarked Al-Jadaan. So far, Saudi Arabia’s statements have been seen as rhetoric, and none of the aforementioned considerations (acceptance of the yuan for oil, membership in BRICS) have materialized.