According to reports, Saudi Arabia is considering conducting oil transactions in Chinese yuan instead of US dollars, which is a significant change for the BRICS alliance.
According to the Atlantic Council, this move could signify the end of the petrodollar era, which has been a cornerstone of global oil trade for the past 50 years.
In 1974, Saudi Arabia agreed to use the dollar for all its oil transactions, solidifying the dollar’s status in the global economy and benefiting the Saudis. However, current data suggests that increased cooperation within the BRICS framework may become more likely if Saudi Arabia abandons the petrodollar.
The introduction of the petrodollar in the 1970s helped establish the US as a global economic leader. However, since then, the landscape has changed significantly, with America’s share of the global GDP declining from 40% in 1960 to 25% today.
At the same time, the US has reduced its dependence on Saudi oil due to increased domestic production, while simultaneously seeking to strengthen its trade ties with China.
Saudi Arabia potentially transitioning to the yuan aligns with China’s position as the kingdom’s largest oil buyer, accounting for over 20% of its exports. This move could contribute to the BRICS bloc’s goal of de-dollarization.
Saudi Arabia, which has shown interest in joining the BRICS, has already accepted an invitation to join the group, although its membership has not yet been finalized.