• Saudi Arabia’s Finance Minister, Mohammed Al-Jadaan, said the kingdom is open to trading in currencies other than the U.S. dollar.
• This move away from the US Dollar signals a changing economic landscape.
• The Saudi Arabian finance minister’s statements have been interpreted as another step toward de-dollarization.
After nearly a half-century of trading solely in the US Dollar, Saudi Arabia’s Finance Minister, Mohammed Al-Jadaan, made a shocking statement this week that the kingdom is now open to trading in currencies other than the US Dollar. His comments came after China’s President, Xi Jinping, urged Gulf monarchs to accept the Chinese yuan for oil, and Riyadh officials announced last March they would consider accepting the Chinese currency.
The significance of Al-Jadaan’s statement comes from the history of the US Dollar. In 1971, the US government and President Richard Nixon ended the gold standard, and over the next three years oil prices skyrocketed. In 1973 and 1974, US officials and US Treasury Secretary William Simon visited the monarchs in Riyadh.
It was at the World Economic Forum in Davos this week that Al-Jadaan spoke to Bloomberg TV and said that Saudi Arabia is open to discussing trade arrangements in the US Dollar, Euro, or the Saudi Riyal. He went on to say that the kingdom is encouraging communication between China, the US, and other countries in order to bridge the divide and improve trade around the world.
These comments have been interpreted as another step toward de-dollarization, a term used to describe the process of countries and businesses replacing the US Dollar with other currencies in international transactions. While the US Dollar is still the leading currency in most international markets, countries such as Russia, India, and China are pushing for a shift away from this dominance.
The implications of de-dollarization are far-reaching. It could affect the US economy, international trade, and global politics. As more countries move away from trading in just the US Dollar, it could lead to instability in the world’s currency markets. It could also lead to higher costs for US companies that do business abroad and higher prices for consumers.
Only time will tell how this move away from the US Dollar will affect the global economy, but it is clear that Saudi Arabia’s decision to open up to trading in other currencies is a sign of a changing economic landscape.