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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Tragedy strikes IAF Airshow at Chennai's Marina Beach: Four dead, 96 hospitalized
Chennai: In a tragic incident during the Indian Air Force (IAF) airshow held at Marina Beach in Chennai, four spectators have reportedly lost their lives, and 96 others have been hospitalised. The event, which took place on Sunday, was part of the 92nd IAF Day celebrations and was attended by several dignitaries, including Chief of Air Staff Air Chief Marshal Amar Preet Singh, Tamil Nadu Chief Minister M. K. Stalin, Deputy Chief Minister Udhayanidhi Stalin, state ministers, Chennai Mayor R. Priya, and a host of other officials.
The airshow featured several aircraft, including the Sukhoi Su-30 MKI, Tejas, and helicopters from the Sarang display team, showcasing the IAF’s aerobatic prowess. The event drew large crowds to Marina Beach, which stretched from the Lighthouse to Chennai Port. Eyewitnesses reported seeing a sudden commotion as some people in the audience started collapsing.
Emergency services were immediately activated, and those affected were rushed to nearby hospitals, including the Government General Hospital and private facilities.
The airshow, which was part of a nationwide series of events to commemorate IAF Day, has been temporarily suspended as officials assess the situation.
Further details are awaited as authorities probe into the circumstances leading to the casualties.
