U.S.-Saudi Petrodollar Pact Ends after 50 Years

  

U.S.-Saudi Petrodollar Pact Ends after 50 Years

June 11, 2024 — 11:01 am EDT

Written by Paul Hoffman for TipRanks ->

 

The 50-year-old petrodollar agreement between the U.S. and Saudi Arabia was just allowed to expire. The term “petrodollar” refers to the U.S. dollar’s role as the currency used for crude oil transactions on the world market. This arrangement has its roots in the 1970s when the United States and Saudi Arabia struck a deal shortly after the U.S. went off the gold standard that would go on to have far-reaching consequences for the global economy. In the history of global finance, few agreements have wielded as many benefits as the petrodollar pact did for the U.S. economy.

A Boon to U.S. Bonds

The petrodollar agreement, formalized after the 1973 oil crisis, stipulated that Saudi Arabia would price its oil exports exclusively in U.S. dollars and invest its surplus oil revenues in U.S. Treasury bonds. In return, the U.S. provided military support and protection to the kingdom. This arrangement was a win-win situation for both; the U.S. gained a stable source of oil and a captive market for its debt, while Saudi Arabia secured its economic and overall security. 

Status as the Reserve Currency

Oil being denominated in U.S. dollars alone has significance beyond the categories of oil and finance. By mandating that oil be sold in U.S. dollars (DXY), the agreement elevated the dollar’s status as the world’s reserve currency. This, in turn, has profoundly impacted the U.S. economy. The global demand for dollars to purchase oil has helped to keep the currency strong, making imports relatively cheap for American consumers. Additionally, the influx of foreign capital into U.S. Treasury bonds has supported low interest rates and a robust bond market. 

In his recent book, Bonfire of the Sanities (December 2023), bestselling author and investment manager David Wright argues the strength of the dollar is a key factor behind America’s high standard of living. Wright declares that the reason why people in the U.S. enjoy “as high of a standard of living as we do is because the dollar is strong.” Wright then explains this strength is partly because of faith in our economy “and because energy can’t be bought without U.S. dollars.”

Potential to Disrupt the Global Financial Order

However, the petrodollar’s dominance may be facing its most significant challenge yet. The agreement between the U.S. and Saudi Arabia expired on June 9, 2024. This expiration has far-reaching implications, as it has the potential to disrupt the global financial order. 

The shifting power dynamics in the oil market are a critical factor in this development. The rise of alternative energy sources, such as renewables and natural gas, has reduced the world’s reliance on oil. Furthermore, the emergence of new oil-producing nations, such as Brazil and Canada, has challenged the traditional dominance of the Middle East. 

U.S. Dollar’s Future

The petrodollar’s expiration could weaken the U.S. dollar and, by extension, the U.S. financial markets. If oil were to be priced in a currency other than the dollar, it could lead to a decline in global demand for the greenback. This, in turn, could result in higher inflation, higher interest rates, and a weaker bond market in the United States. 

Key Takeaway – A Significant Shift in Global Power Dynamics

The expiration of the petrodollar agreement represents a significant shift in global power dynamics. It highlights the growing influence of emerging economies and the changing energy landscape. While the full implications of this shift remain to be seen, investors should at least be aware that on a macro level, the global financial order is entering a new era. The U.S. dollar’s dominance is no longer guaranteed.

The Canadian ETF Market, Retail and Institutional Usage of ETFs, Liquidity, Execution, and TradingThe Canadian ETF Market, Retail and Institutional Usage of ETFs, Liquidity, Execution, and Trading

Saudi Arabia ends 50-year petrodollar agreement with U.S.

 Saudi Arabia ends 50-year petrodollar agreement with U.S.

https://obektivno.bg/sauditska-arabiya-slozhi-kraj-na-80-godishnoto-sporazumenie-sas-sasth-za-petrodolara/

PAD

13.06.2024

Author:Objectively

Photo: Pixabay

Significant financial turmoil lies ahead in the financial world as Saudi Arabia has decided not to renew its 50-year petrodollar agreement with the United States. The deal, which expired on Sunday, June 9, was a cornerstone of American global economic dominance, The Business Standard commented.

Signed on June 8, 1974, the treaty included the creation of two joint commissions: one based on economic cooperation and the other on Saudi Arabia's military needs.

U.S. officials at the time expressed optimism that the deal would motivate Saudi Arabia to increase its oil production. They also saw the agreement as a plan to promote economic cooperation between Washington and other Arab countries.

The decision not to renew the contract allows Saudi Arabia to sell oil and other commodities in multiple currencies, including Chinese RMB, euros, yen and yuan, instead of just U.S. dollars.

This latest development marks a major departure from the petrodollar system established in 1972 when the U.S. decoupled its currency from gold, and is expected to accelerate the global move away from the U.S. dollar.

The dominance of the U.S. dollar is waning as Russia and Saudi Arabia consider using the Chinese yuan for oil deals and investors may need to start reconsidering their long-term investment strategies, said the CEO and founder of one of the world's largest independent financial advisory and asset management firms, DeVere Group.

Nigel Green's warning states that the change in the way global oil trade is conducted will have far-reaching consequences for economies and, therefore, for investors around the world.

"One of the most significant results of the three-day summit in April between Russian President Vladimir Putin and his Chinese counterpart Xi Jinping was that Putin announced that Russia now supports the use of the Chinese yuan for oil agreements," Green said. This suggests that the world's second-largest economy – China – and Russia are actively intent on reducing the dominance of the US dollar as the basis of the international financial system.

"Separately, Sudanese oil company Aramco plans to supply two Chinese companies with a total of 690,000 barrels per day of crude oil, reinforcing its position as China's largest supplier of crude," Green added. "It was reported that Saudi Arabia is also in talks with Beijing to pay in yuan instead of dollars."

Aramco is one of the largest oil producers in the world and is wholly owned and controlled by the Saudi government.

It seems that the rivals of the United States, led by China, are forming a new large economic bloc. If Saudi Arabia, which has vast oil reserves that are estimated to be the largest in the world, really switches to the yuan, it will bring about a huge change in the global economic system.

Cross-border CBDC transactions

Saudi Arabia has announced its participation in mBridge, a project that is exploring a central bank digital currency platform (CBDC) shared between central and commercial banks from different countries. The platform allows instant cross-border payments and foreign currency transactions.

The project involves more than 26 countries with observer status, including the South African Reserve Bank, which received the green light as a member this month.

The more prominent observers of mBridge are the Bank of Israel, the Bank of Namibia, the Bank of France, the Central Bank of Bahrain, the Central Bank of Egypt, the Central Bank of Jordan, the European Central Bank, the International Monetary Fund, the Federal Reserve, the Bank of New York, the Reserve Bank of Australia, and the World Bank.

The project's steering committee created a personalised governance and legal framework, including a rulebook, tailored to the decentralized nature of the platform.

Evolution of the mBridge project

The mBridge project is the result of an extensive collaboration that began in 2021 between the BIS Innovation Hub, the Bank of Thailand, the Central Bank of the United Arab Emirates, the Digital Currency Institute of the People's Bank of China, and the Monetary Authority of Hong Kong.

In 2022, a pilot project was carried out with transactions of real value. Since then, the mBridge project team has been exploring whether the prototype platform can evolve to become a minimum viable product (MVP) – a milestone that has already been reached.

mBridge is now inviting private sector companies to propose new solutions and use cases that could help develop the platform and show its full potential.

EN — LARRY ROMANOFF: The Power Behind the Throne (REVISITED)

   

The Power Behind the Throne

 

By Larry Romanoff

 

Photo: Alawar.com

CHINESE   ENGLISH  JAPANESE  POLSKI   ROMANIAN

 PDF 

With an automatic Table of Contents

 

LARRY ROMANOFF: A Sample of the E-Book — BIOLOGICAL WARFARE IN ACTION

                                                   

 

 A SAMPLE OF THE E-BOOK

Biological Warfare

in

Action

by

LARRY ROMANOFF

 

  Biological Warfare in Action 

EN -- LARRY ROMANOFF: America - The World's Bully

  

America – The World’s Bully

By Larry Romanoff

 

ENGLISH    ROMANIAN

 PDF

Contents

Iranian Oil & The US Banking System

The Swiss Banking System

The Japanese Yen and The Plaza Accord

The RMB Exchange Rate

International Financing

The Financial Rating Agencies

Bank Card Payment Systems

Russian Art

Europe’s Galileo GPS System

What’s Yours is Mine

Canada’s Softwood Lumber Industry

Canada’s Northwest Passage

Rice Marketing, American Style

US Military Bases in Okinawa

I Can Sue You, But You Can’t Sue Me

Accounting Standards and Procedures

French Embassy in Belgrade

Airline passenger information

US-UK Extradition Treaty

If You’re Not With us, You’re Against us

Extra-territorialism

 

America – The World’s Bully

 

A MUST READ -- Dear American

 

June 3, 2024 | Categories: Articles & Columns | Tags: |  Print This Article

https://www.paulcraigroberts.org/2024/06/03/dear-american/

 

 

Dear American

Paul Craig Roberts

 

Dear American,

 

Do you realize that the Republican Speaker of the House, the House Democrat minority Leader, the Senate Majority Leader and the Senate Republican minority leader, along with an almost unanimous Congress have committed you to the support of the Israeli Genocide of Palestine, both the people and the country? “Our” representatives told Netanyahu that “we (meaning the US) join the State of Israel in your struggle against terror.” For eight months Israel has been terror bombing and destroying everything in Gaza, and “our” leaders see the slaughter of women, children, hospitals, all infrastructure as a “struggle against terror” rather than as an exercise of terror.

 

The Congress of the United States, supposedly our representatives, but in reality the representative of Zionist Israel, has invited Chief Genocide Leader of the World Netanyahu for whom arrest warrants are outstanding to address the United States Congress. The US Congress is doing this because the US Congress, especially its “leaders,” are paid by Israel Lobby campaign donations to defend the indefensible–the Genocide of the Palestinians and the suppression of all criticism of Israel. This will be the fouth time that Netanyahu has addressed the US Congress.

 

Only Senator Bernie Sanders objected: “Netanyahu is a war criminal. I certainly will not attend.” The rest of Congress is comfortable celebrating a war criminal for whom an arrest warrant is issued by the Hague-based International Criminal Court.

 

Dear American,

Does it bother you that “our” government has put our approval on genocide and has endorsed in our name the Genocide of the remnant of a peaceful people who Israel has demonized in order to steal their country?

 

Dear American,

Are you aware that you are about to be taken into nuclear war over the borders of Ukraine while your own undefended, wide open borders are welcoming in 3.6 million immigrant-invaders each year?

 

Dear American,

Are you aware that President Trump has been “convicted” in a Democrat Joseph Stalin type show trial of a non-existent crime?

 

Dear American,

Are you aware that the New York “justice (sic) system ” is the most corrupt of any on planet Earth? The New York “justice (sic) system” could not find justice if there was a quadrillion dollar reward.

 

Dear American,

Do you comprehend that you live in a country that is collapsing at light speed, morally, politically, economically, socially, militarily?

 

Dear “American,

Has it occurred to you to wonder why, while the streets of Budapest, Hungary, are filled with hundreds of thousands of people protesting the coming war with Russia that Biden is bringing us, there is no protest activity in America and elsewhere in Europe, and not a word in the media, and no opposition in Congress to the destruction of the Western world that war with Russia will bring?

 

Dear American,

My questions are for aware people, a status for which few Americans qualify. If Human history continues, which at this point of time seems doubtful, future historians will ask why the people did not protest their pending annihilation. How was it possible that entire populations could be so brainwashed that they were removed from the reality of their own destruction?

 

 

 

EN — LARRY ROMANOFF: Tiananmen Square Revisited — The Failure of an American-instigated 1989 Color Revolution

 

 

Tiananmen Square: The Failure of an American-instigated 1989 Color Revolution

Beijing: June 04, 1989

By Larry Romanoff

CHINESE   ENGLISH   ESPAÑOL   ROMANIAN   PORTUGUÊS

 

 

Introduction

 

There are few places in China that seem more burned into the consciousness of typical Westerners than Tiananmen Square, and few events more commonly mentioned than the student protests of 1989. But the stories are wrong on several levels. It was never reported in the Western media that there were two separate events that occurred in Beijing on June 4, 1989. One was a student protest that culminated in a sit-in in Tiananmen Square by several thousand university students, which had lasted for several weeks and finally terminated on June 4. The other was a one-day worker strike that occurred (perhaps not by chance) also on June 4, when a group of workers unhappy with their lot in life, organised their own protest independently of the students, and in a different place. For reasons that will become apparent, the workers’ protest is the necessary focus for understanding the events of that date, so I will begin there.

 

The Workers’ Revolt