Reports are gushing in about Saudi Arabia planning to drop the petrodollar for the Chinese yuan in an economic pivot toward East Asia and away from the US, but experts have stressed that the story is not as it seems with relations with Washington apparently on the mend.
Back in March, The Wall Street Journal reported that Saudi Arabia is considering to trade some futures with Beijing in the Chinese yuan with almost all oil exports handled in the dollar since 1974.
This was viewed as a boost for the struggling Chinese currency and also a message from Riyadh to Washington that it was unhappy with a lack of security support from the US.
The announcement has sparked a flurry of reports that Saudi Arabia was poised to adopt the yuan for its oil exports, which would be a remarkable economic and political win for Beijing.
BRICS News reported that a 1974 agreement between Washington and Riyadh had now expired with Saudi Arabia preparing to sell its oil in multiple currencies.
“Saudi Arabia’s 50-year-old petrodollar agreement with the United States has expired, with no new agreement in place,” BRICS News tweeted.
“Saudi Arabia will now sell oil in multiple currencies, including the Chinese RMB, Euros, Yen, and Yuan, instead ofexclusively in US dollars.”
Many oil watchers reported this as a major shift in global energy trade and in economic power from the US to emerging countries in the Global South.
“Major blow to USD Hegemony! Saudi Arabia has refused to renew 50-yr Petrodollar agreement with the US,” tweeted ‘BhikuMhatre (Modi’s Family)’, an Indian finance professor.
“So now, Saudi is free to sell oil in multiple currencies, incl Euros, Yen, Yuan, Bharatiya Rupee etc. Major Blow to US!”
The problem is that no-such oil pact between Saudi Arabia and the US ever existed, at least not formally.
“As much as I’d like to believe this to be true, this 50-year expiry date on a petrodollar agreement is, as far as I can see and after quite a bit of research, purely made up,” pointed out energy watcher Arnaud Bertrand.
While the US and Saudi Arabia did hold talks in 1974 on ending a Riyadh-led oil embargo on allies of Israel, including Washington, there is no evidence that an official pact with a 50-year lifetime exists.
Saudi Arabia has moved closer to China and Russia under Crown Prince Mohammed bin Salman, following bickering with the US over regional security issues, such as the removal of Yemen’s Houthis from a terror list shortly after Joe Biden became president.
Riyadh has also made moves to join BRICS, an intergovernmental organisation founded by Brazil, India, China and South Africa supposedly as a counter-weight to US economic hegemony.
Relations between the US and Saudi Arabia, two long-time allies, have improved in recent months with talks on an unprecedented defence treaty with Washington, which will likely hinge on Riyadh normalising ties with Israel.
In a region long-dominated by the US, the Gulf has seen a sharp increase in investments, economic agreements, and even military ties with China, leading to friction with Washington.
