by By Lee Barney
The financial markets are bracing for disruption now that Saudi Arabia decided not to renew its 50-year petrodollar partnership with the United States, MSN reported.
This opens the door for Saudi Arabia to sell oil and other goods — instead of exclusively in the U.S. dollar — in multiple other currencies, including the Chinese renminbi, and in euros, yen, and digital currencies such as bitcoin.
Saudi Arabia’s shift to other currencies is expected to hasten the global movement away from the dollar.
The contract, originally signed on June 8, 1974, expired on June 9, 2024, although the petrodollar system was established in 1972, when the U.S. decoupled its currency from gold.
The 1974 security agreement that the U.S. and Saudi Arabia signed heralded close cooperation between the two countries by establishing two joint commissions, one on economic cooperation and the second on Saudi Arabia’s military needs.
The United States’ goal was to motivate the Kingdom of Saudi Arabia to ramp up its oil production and foster cooperation not only with that country but other Arab nations as well.
Saudi Arabia recently announced it joined Project mBridge to explore a multicentral bank digital currency (CBDC) platform involving central and commercial banks. The CBDC is built on a distributed ledger technology for instant cross-border payment settlements and foreign exchange transactions.
More than 26 nations are mBridge members, including Federal Reserve Bank of New York, International Monetary Fund, World Bank, European Central Bank, Reserve Bank of Australia, Bank of Israel, Bank of France, Central Bank of Bahrain, Central Bank of Egypt, Central Bank of Jordan, Bank of Namibia, and South African Reserve Bank.
Five financial institutions spearheaded Project mBridge with extensive collaboration that started in 2021. They are the BIS Innovation Hub, the Bank of Thailand, Central Bank of the United Arab Emirates, Digital Currency Institute of the People’s Bank of China, and the Hong Kong Monetary Authority.