50 years The Petro Dollar An agreement with Saudi Arabia to use the US dollar for oil payments expired in June 2024. With the country’s recent inclusion in the BRICS alliance, Saudi Arabia may choose a new currency to trade in the oil industry, such as the bloc’s digital currency.

In 1974, a directive ensured that Saudi Arabia would use dollars in all its oil settlements. This mandate protected the US dollar, as it is important to the global economy. It also allowed Riyadh to benefit from the use of the world’s most prominent currency. Furthermore, it placed the US dollar in a dominant position among reserve currencies. However, BRICS influence in Saudi Arabia could increase if the petro-dollar actually takes off.

China is now Saudi Arabia’s largest customer for oil trade and initiates deals worth billions each year. By 2024, China will account for 20% of all Saudi Arabia’s oil exports, giving it greater influence in the sector. Other BRICS countries, including Russia, are also trying to increase oil trade. A major factor in Saudi Arabia’s involvement in this alliance was its abundance of oil supplies. Now, Block Petro can benefit from one of the world’s largest oil exporters on the dollar.

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Will BRICS CBDC replace Petrodollar?

US Dollar USD Petro Dollar Oil Gas Saudi ArabiaUS Dollar USD Petro Dollar Oil Gas Saudi Arabia
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For Saudi Arabia, there are plenty of currencies that could replace the petrodollar and usher in a new era of oil trade. The Russian ruble, Chinese yuan, and other BRICS local currencies are all legitimate choices until the BRICS currency is officially launched.

However, recent updates in Saudi Arabia prove that the country and CBDCs may be closely related, to the benefit of BRICS. The Saudi central bank announced that it would join the Ambridge project at the same time it ended the 80-year-old petrodollar contract. An IMF report in June also noted that 19 countries in the Middle East and Central Asia are exploring the establishment of central bank digital currencies. As such, the concept of CBDCs is gaining popularity in this particular region, which BRICS can benefit from if its influence spreads.

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As CBDCs and blockchain technology spread globally, Saudi Arabia is increasingly likely to use the digital currency to trade oil. Some analysts speculate that the country may abandon the US dollar and end transactions in the yuan, CBDC, or another gold-backed digital currency. All three currencies are growing in popularity in the BRICS collective. As such, the petrodollar may be in danger of never coming back.

However, since the Saudi royal is still pegged to the US dollar, using a brand new currency for trade will be difficult. Saudi Arabia has been actively working on devaluing the dollar since joining BRICS, so if the USD is completely abandoned, a BRICS digital currency could be included as an alternative.

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