News
The End of the 50-Year “Petrodollar” Pact: What Does It Mean for the Future?
The longstanding “petrodollar” agreement between Saudi Arabia and the United States has come to an end, marking the end of a 50-year-old tradition. The term “petrodollar” has become a common phrase, but what exactly is this agreement that has been in effect for half a century?
The earliest reports of this development came from an article by a junior journalist at India Today on June 9, titled “Saudi Arabia Terminates 80-Year Oil-Dollar Agreement with the US.” The article claimed that the “petrodollar agreement” between Saudi Arabia and the United States, signed in 1974, had not been renewed and expired on June 9, 2024. While the claim of an 80-year agreement is questionable, this news did spark significant interest and debate in the investment community, especially among virtual currency investors who began promoting the idea that the era of dollar dominance was over, with virtual currencies poised to become the new international hot money hub.
On June 11, a columnist from Nasdaq cited the India Today report, further fueling the conversation. On June 13, the X media account BRICS News reposted the story, garnering widespread attention. However, the BRICS News account, which claims to focus on news from the BRICS countries, has a history of spreading unverified and misleading information, raising doubts about its credibility.
In China, discussions about this topic were not limited to social media. On Zhihu, four related questions appeared, accumulating over 1,000 answers, with some respondents maintaining Zhihu’s tradition of questioning the existence of the agreement. On Reddit, a popular discussion thread on June 12 dismissed the news as fake, attributing it to gold enthusiasts, cryptocurrency fans, and Russian bot accounts.
On June 17, both the India Today report and Nasdaq clarified that there was no such agreement. According to the Chief Economist of UBS Global Wealth Management, “From the beginning, there was no such agreement between Saudi Arabia and the United States.” He added, “This story seems to have originated in the cryptocurrency world, where many speculators are eager to convince investors that the dollar is dying.”
The “Inspection” column of the People’s Daily reported on this incident and provided a detailed explanation of the actual agreement between Saudi Arabia and the United States in 1974. In 2016, Bloomberg, using the U.S. Freedom of Information Act, requested the disclosure of government documents. During the first oil crisis, the United States sought to eliminate the use of oil as an economic weapon by persuading Saudi leaders to invest the billions of dollars they earned from oil sales in U.S. Treasury bonds. In return, the United States promised to purchase oil from Saudi Arabia and provide military assistance and equipment. The agreement focused on strategic financial cooperation, solar seawater desalination technology, and desert agriculture technology, without stipulating that Saudi Arabia had to price its oil exclusively in dollars.
The U.S. National Archives and Records Administration’s electronic documents show that the agreement had a five-year validity period, which was continuously extended. Therefore, there is no public information indicating the existence of the “petrodollar agreement.” Moreover, oil-producing countries have long been exploring the use of multiple currencies to settle oil trade. If there were indeed a “petrodollar agreement” that had come to an end, it would have been a major financial news event, yet the dollar has shown no signs of significant impact in the markets, with the dollar even rising last week.
CATEGORIES
LATEST NEWS
CONTACT US
Name: Ms Tina
Mobile：+8613884463677
Tel：+8613884463677
Whatsapp：+8613738490136
Email：[email protected]
Add：Room2104-3, Block A, Ningbo Chamber Of Commerce Building, 558 Tiantong South Road, Shounan Street, Ningbo, Zhejiang, China