The agreement signed in 1974 consisted of the creation of a treaty so that Saudi oil exports are paid in US dollars.
Arab oil. Photo: Internet
Saudi Arabia decided not to renew the “Petrodollar” agreement, which expired on June 9, putting an end to a relationship of about 50 years with the United States.
The agreement, signed in 1974 with Henry Kissinger as its architect, it consisted of the creation of an agreement so that Saudi oil exports are paid in US dollars.
Oil extraction. Photo: Unsplash
The alliance consolidated said currency as global currency in the energy sector and put the Saudis at the top of the commercial and oil export pyramid.
From 2022, Saudi Arabia began to breach the agreementgiving China, your new big buyer the possibility that will pay in yuan.
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What will happen now?
Although the agreement could be renewed on June 9, 2024 – 50 years after the original signing – the Saudi kingdom decided not to make use of the renewal and to operate with complete freedom in the marketing of oil through different currencies.
Petroleum. Photo: Reuters.
This means that Saudi Arabia can now sell oil and other goods in currencies such as RMB, euro, yen, yuan and moreinstead of just the US dollar.
This big change challenges the dominance of the petrodollar systemwhich has been in force since the United States stopped pegging its currency to gold in 1972. In addition, this decision is expected to accelerate the de-dollarization process.
