World moving rapidly towards de-dollarization

By Andrew Powell

Saudi Arabia has officially ended its 50-year petrodollar agreement with the U.S. and will now be accepting multiple currencies to purchase its crude oil.

According to a report from the Atlantic Council, Saudi Arabia announced on June 13 that it will not be renewing its agreement with the U.S., which was signed in 1974 during the Nixon administration, to sell oil exclusively in U.S. dollars.

As Hung Tran, a non-resident senior fellow at the Atlantic Council’s GeoEconomics Center, stated in the report, the move is a step towards de-dollarization, although for the foreseeable future the U.S. dollar will remain dominant.

“Saudi Arabia’s decision marks a small but symbolic step down the road toward de-dollarization. Increasingly, countries are using their own currencies in cross-border trade and investment transactions. The arrangements necessary to do so exist entirely outside the influence of any major power,” Tran wrote.

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This comes as the New Development Bank, developed by BRICS countries – which added Saudi Arabia to its membership as of January 2024 – announced it will be considering funding for infrastructure and development projects to non-members as well, like the African nation of Kenya.

Meanwhile, Russian Foreign Minister Sergey Lavrov, who recently held a two-day BRICS meeting in Russia, accused Western countries of “building walls” and disrupting global trade.

“It is not us who divide the world into different blocks. We have never claimed to punish those who do not agree with our position, but the West is doing just that. Western countries do not want to build bridges, they use the bricks to build walls or to strike down doors who do not obey them. I’ve already said that it is not us who isolate ourselves from the West,” Lavrov said.

He added that the actions of Western countries will continually lead to confrontation and will offer no way out.

The term “BRIC” was first coined by a Goldman Sachs economist Lord Jim O’Neill in 2001 to describe Brazil, Russia, India and China as emerging economies predicted to dominate the world economy by 2050.

O’Neill stated in the document that at the end of 2000, BRICs aggregate size was about 23% of the global GDP, while noting that some of the countries had bigger economies than some G7 nations – namely, China’s economy was (and still is) larger than Japan’s and Canada’s.

Fast-forward to 2024, and BRIC has added a number of new countries to its alliance to become BRICS, which afforded membership to South Africa in 2010, while Iran, Egypt, Ethiopia, Saudi Arabia and the United Arab Emirates all joined in January 2024. Argentina was also invited to join, but pulled out in December 2023.

In total, the group has a population size of approximately 3.5 billion people, around 45% of the world’s population. And with the addition of Saudi Arabia, United Arab Emirates and Iran as members, BRICS controls around 44% of the world’s crude oil.

World Business Watch reported that Thailand has now formally made a bid to become the first Southeast Asian nation to join the emerging economies this coming October, when the BRICS summit will be held in the Russian city of Kazan.

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