Fact-Check: Reports of Saudi Arabia ending Petrodollar Deal is misleading
Washington D.C. — Recent reports suggesting Saudi Arabia's termination of a longstanding petrodollar deal with the United States have ignited widespread online discussions regarding the potential decline of the US dollar as the world's reserve currency. However, several experts have pointed out a fundamental flaw in these reports: there was never a formal petrodollar agreement to begin with.
Paul Donovan, chief economist at UBS Global Wealth Management, addressed the issue in a blog post, highlighting that the narrative had gained unwarranted traction, serving as a clear example of "confirmation bias." He noted, "The story seems to have started in the crypto world. Many crypto speculators desperately want to believe in the dollar’s demise."
The reports suggested that an agreement, allegedly signed between Saudi Arabia and the US in 1974, expired on June 9, 2024, without renewal. This so-called 'petrodollar deal' was purportedly crucial for maintaining the dollar's global dominance. Donovan clarified that while the US and Saudi Arabia did establish a Joint Commission for economic cooperation in June 1974 to help Saudi Arabia spend its sudden influx of oil dollars on US products, this was not a formal petrodollar agreement. In July of that year, Saudi Arabia agreed to invest oil revenues in US Treasuries, a move that was confidential until 2016.
Furthermore, Donovan explained that oil has historically been traded in various currencies, not exclusively the dollar. "In January 2023, Saudi indicated it was happy to negotiate oil sales in other currencies. The possibility changes little for financial markets. Saudi Arabia’s riyal remains pegged to the dollar, and its stock of financial assets are dollar-focused. The dollar’s reserve status depends on how money is stored, not how transactions are denominated," Donovan stated.
The US-Saudi relationship remains robust, with Riyadh continuing to be a key ally in the Middle East. This alliance is particularly significant for the purchase of US arms, which are priced in dollars. Despite China's substantial dollar reserves compared to Saudi Arabia's, efforts to diminish the dollar's global reserve currency status have seen minimal success.
The dominance of the dollar in global oil trade, encompassing transactions, transport, and insurance, is unlikely to wane even if Saudi Arabia were to consider selling oil in yuan. This preference for dollars simplifies transactions, unlike India's experience of buying Russian oil in local currency, where surplus accumulation poses investment or lending challenges for Moscow.
While Riyadh might explore using oil payments for Chinese exports, this is feasible with dollars as well. The oil industry's reliance on the dollar as the primary trade medium is expected to remain unchallenged, maintaining the dollar's predominant role in global financial markets.
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UP: Misled by GPS navigation, car falls into river from partially constructed bridge, 3 dead
Bareilly (UP), Nov 24: Three people died when their car fell into the Ramganga river from a partially constructed bridge here on Sunday, police said, adding that they suspect the driver was misled by its navigation system into taking the unsafe route.
The accident occurred around 10 am on the Khalpur-Dataganj road when the victims were travelling from Bareilly to Dataganj in the Badaun district, they said.
"Earlier this year, floods had caused the front portion of the bridge to collapse into the river, but this change had not been updated in the system," Circle Officer Ashutosh Shivam said.
The driver was using a navigation system and did not realise that the bridge was unsafe, driving the car off the damaged section, the police said.
There were no safety barriers or warning signs on the approach to the damaged bridge, leading to the fatal accident, Shivam said.
Upon receiving information, police teams from Faridpur, Bareilly and Dataganj police station rushed to the spot. They recovered the vehicle and the bodies from the river, Shivam added.
The circle officer said that bodies had been sent for post-mortem. Further investigation into the matter is underway.
— Bareilly Police (@bareillypolice) November 24, 2024
