🛢 🇺🇸 🇨🇳 What the end of petrodollars means | Atlantic Council

🔶️ The age of the petrodollar is over. Saudi Arabia announced on June 13 2024 that it won’t renew a landmark agreement with the US — signed in June 1974 — to sell oil exclusively in US dollars in exchange for security guarantees. The deal has ensured that the dollar dominates the global oil trade, and its demise is the latest in a recent trend toward de-dollarization as countries from the BRICS and regions including the Middle East and Asia move to promote local currencies in cross-border payments—in the process gradually reducing the dollar’s importance in international finance. The end of the petrodollar reflects significant changes not just in the US-Saudi relationship, but in the global balance of power.

🔶️ Let’s take a look back to the Nixon administration. America was beset by high inflation and large current-account deficits amid an ongoing war in Vietnam, putting downward pressure on the dollar and threatening a run on US gold reserves. In 1971, the US ended the dollar’s convertibility to gold — which had been the lynchpin of the Bretton Woods international monetary system of fixed exchange rates. Major currencies began to float against each other in 1973. Then came the oil shock that fall, when the Organization of Petroleum Exporting Countries (OPEC) cut oil production and embargoed shipments to the US during the Yom Kippur war.

🔶️ Fast-forward fifty years, and the dominant global position once enjoyed by the US has weakened noticeably. Its share of world GDP has declined from 40% in 1960 to 25%. China’s economy has surpassed the US in Purchasing Power Parity terms. It now has to vie for influence with an increasingly assertive Beijing, while facing pushes even by allies such as Europe and elsewhere which want to become more autonomous from Washington in financial and foreign policy matters. Specifically, many countries have tried to develop alternative cross-border payment arrangements to the dollar to reduce their vulnerability to Washington’s increasing use of economic and financial sanctions.

https://www.atlanticcouncil.org/blogs/econographics/what-the-end-of-petrodollars-means/

🇺🇸📉 “Any great power that spends more on debt service than on defense will not stay great for very long. True of Habsburg Spain, true of ancien régime France, true of the Ottoman Empire, true of the British Empire, this law is about to be put to the test by the U.S. beginning this very year.”

🔗 Niall Ferguson

🇺🇸🌐 Bloomberg now running articles on the emergence of the multipolar world. If you still haven’t caught up to what is happening you’re just living in the past at this stage.

🔗 Philip Pilkington