On Tuesday, Saudi Arabia’s Finance Minister, Mohammed Al-Jadaan, spoke to Bloomberg TV from Davos, Switzerland, the 2023 World Economic Forum venue. Al-Jadaan surprised reporters by saying Saudi Arabia will trade in foreign currencies. He says, “We may negotiate how we pay our trade agreements in the U.S. dollar, the Saudi riyal, or the euro.” He added, “I don’t think we are waving away or ruling out any discussion that will help improve trade around the world.”
The Saudi finance minister’s remarks were seen as another move toward de-dollarization. You need to contextualize Al-Jadaan’s remarks to get a clearer picture. After Nixon and the U.S. government scrapped the gold standard in 1971, oil prices surged for three years. In 1973 and 1974, government officials and Treasury Secretary William Simon met with kings in Riyadh.
Simon encouraged the Saudis to exchange their oil for dollars and buy Treasury bonds, creating the petro-dollar. All of OPEC valued their oil in U.S. dollars, including the Saudis. Many say this has granted the U.S. an unfair competitive advantage and caused many wars in recent decades. Recently, the dollar’s dominance appeared to be under threat.
There have been several tensions between Saudi Arabia and the United States. Sources said Saudi officials, including Crown Prince Mohammed bin Salman, put down Biden’s intelligence in October 2022. On Tuesday, Al-Jadaan said Saudi leaders get along with China and others. Whether the move by the Saudi Arabian government will benefit its economy, only time will tell as we wait to see how the United States will respond to this latest development.
