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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BJP flags ‘suspicious’ circumstances in Kerala trekker Sharanya case, seeks probe
Madikeri (Karnataka) (PTI): The BJP on Wednesday demanded a thorough investigation into the case of Kerala trekker GS Sharanya, who went missing for three days and was later found.
Members of the BJP’s Kodagu unit lodged a complaint at the Napoklu police station, seeking a probe and stating that the case appeared suspicious.
Sharanya, who had gone on a trek to Tadiandamol hill near Kakkabbe, went missing and was later found on Sunday following a search operation by the police, forest department, and residents.
Kodagu BJP leader P Danoj submitted a complaint to the Station House Officer, seeking a proper investigation into the case.
Speaking on the occasion, he said the behaviour of Sharanya, who was found on the fourth day, had raised suspicions.
“It is impossible for anyone to survive in a dense forest for four days without food. Naxal activities are taking place in several areas, and this case has further raised suspicion,” he said.
He demanded that the police conduct a thorough investigation and inform the public of the truth.
Napoklu BJP Shakti Kendra president Ambikaryappa alleged that Sharanya’s disappearance could be a "publicity stunt".
“It appears to be a drama aimed at tarnishing the tourism prospects of our district. Moreover, it is suspicious that Sharanya, who was in the dense forest for four days, was found without any signs of fatigue,” Ambikaryappa said.
