Saudi Arabia has not renewed the “petrodollar” deal with the US

Saudi Arabia has decided not to renew the “petrodollar” agreement, which expired on June 9, ending nearly 50 years of ties with the United States.

An agreement signed in 1974 with Henry Kissinger created an agreement to pay in US dollars for Saudi oil exports.

The alliance integrated the currency into a global currency in the energy sector and placed the Saudis at the top of the oil trade and export pyramid.

From 2022, Saudi Arabia failed to comply with the agreement, giving China, its new biggest buyer, the option to pay in yuan.

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

This means Saudi Arabia can now sell oil and other commodities in RMB, Euro, Yen, Yuan and many other currencies instead of US Dollars.

This major shift challenges the dominance of the petrodollar system, which has been in place since the US pegged its currency to gold in 1972. Additionally, the decision is expected to speed up the demonetisation process.