Countries that do not want to trade oil for American currency have been named
Recently, the world blogosphere and media, including Russian ones, have been actively discussing the topic of possible de-dollarization of global energy markets, and especially oil. The reason was the fate of the Cooperation Agreement between the United States and Saudi Arabia, allegedly signed by the parties on June 8, 1974. According to numerous publications, the Saudis were allowed to trade crude oil only for dollars. Which was beneficial to the Americans, who were actually returning their currency to their homeland after paying for oil contracts. The term «petrodollars» in turn took on a life of its own after the conclusion of this agreement.
However, right now — in the summer of 2024 — The Saudis did not renew the agreement with the Americans and thereby accelerated the pace of abandoning petrodollars in favor of the yuan. In any case, there have still been no official statements from Riyadh about the extension of this agreement.
The decline of dollar hegemony is looming.
Of course, everyone understands that it is simply impossible to checkmate the dollar in a few moves. And an equivalent replacement for the current monopoly world currency will be needed in earnest. Yuan doesn’t quite live up to this role yet. So, according to analysts J.P. Morgan, China is certainly trying to internationalize the yuan. But its global impact is now negligible, despite annual growth. For example, the yuan accounted for only 2.3% of SWIFT payments in 2023. For a dollar — 43%, euro — 32%. In general, we are talking about a long process, which requires reform of the Chinese financial market.
However, in the forecast of J.P. Morgan states that “the US dollar, one of the key factors determining global oil prices, appears to be losing its once powerful influence.”
More and more oil sales are being conducted in non-dollar currencies, primarily the yuan. China buys 2 million barrels of Russian oil every day for yuan and a little for rubles. India purchases the same volumes for rupees, and recently — and for UAE dirhams. There is evidence that Saudi Arabia has been selling its 1.75 million barrels per day on the Chinese market for several years now, increasingly for yuan. The share of the ruble is also growing.
By the way, it is important to understand: how significantly has the dollar already lost part of the world oil market to the yuan, dirham and ruble? There is still no exact data. Sanctions wars have led to an accelerated growth of the “gray” sector. sectors in the global energy market, including the emergence of numerous “shadow” tanker fleet. In addition, the Russian government has generally classified a number of oil trade indicators.
Therefore, the non-dollar part of the market can only be approximately estimated. If you don’t fall into excessive optimism, the dollar has been squeezed out of the oil market by 5-7%. In any case, Russia is forced to sell crude oil mainly not for dollars and euros. And this is up to 5 million barrels per day — about 5% of the total global supply. Plus supplies from Saudi Arabia and possibly the UAE for yuan.
True, Alexander Razuvaev, a member of the Supervisory Board of the Guild of Financial Analysts and Risk Managers, is confident that the dollar has already lost up to 15-20% in global payments for crude oil. He believes that Saudi exports a few years ago were largely reoriented towards the Chinese currency. In addition, Russia's largest commodity producers have begun issuing bonds in yuan. In 2022–2023, a total of 25 billion yuan were issued.
The combination of such favorable news for Russia leads to the conclusion that the hegemony of the dollar is at least in question. Although there is no need to talk about complete de-dollarization in the near future, since, in addition to trade operations, the issue of the reserve purpose of world currencies is also important. But here the dollar is not particularly threatened.
And in general, we will have to wait a bit with the anti-dollar euphoria, because not everything is so simple with the Saudi-American agreement fifty years ago. Did this fateful document really exist? There are doubts and discrepancies on this score.
In studies by various authors on the Arab oil embargo against the United States, Israel and their allies, which was in force from October 1973 to March 1974, and its consequences, there is no mention of such a treaty. Moreover, for example, in Daniel Yergin’s book “Extraction: A World History of the Struggle for Oil, Money and Power” The June 1974 visits to the Middle East, including Saudi Arabia, by US President Richard Nixon and his national security aide Henry Kissinger are described in detail. Each step is described in detail. For example, how Nixon advised the Israeli government to deal with Palestinian terrorists: he depicted a machine gun fire. And Syrian President Hafez Assad was recommended to recapture the Golan Heights with a decisive saber attack on the enemy. And against the backdrop of these “cute” ones details — not a word about the agreement of June 8, 1974.
A number of experts even started talking about a possible fake. True, it is not clear who exactly benefits. Among American social media users, the message about the disavowal of the Saudi-American agreement on petrodollars naturally caused panic: the dollar is leaving the oil market, receiving a fatal blow to its status as the world reserve currency, and the US economy is on the verge of crisis. The Russian media, understandably, were euphoric about this. But not for long.
Paul Donovan, chief economist at UBS Global Wealth Management, intervened in the discussion about the existence of the petrodollar agreement. In his blog posted on one of the American social networks, he first emphasized that we are talking about a “fake” account. story that received «surprisingly» widespread — due to “confirmation bias.” As it turned out, a number of Saudi-American agreements, and not all of them, became known to Bloomberg only in 2016.
However, Donovan still cringes a little. A reprint of the document dated June 8, 1974 has appeared on the Internet. True, this is not an agreement, but a Joint Statement on Cooperation between Saudi Arabia and the United States. The purpose of which — the elimination of trade barriers, which was to be monitored by the Joint US-Saudi Commission on Economic Cooperation established by this statement. And it still works.
But there is no separate clause on the Saudis’ obligations to export oil exclusively in dollars. Moreover, after this agreement, the UK paid for Saudi oil in pounds. And only at the end of 1974 she decided to switch to dollars. In addition, the application was designed for five years. And after that it was extended several times.
Actually, a bilateral agreement to support the development of trade and investment was concluded on July 31, 2003. This document was first published in 2016. But there is no talk of petrodollars there either. Basis of the agreement — protection of intellectual property. And this agreement is still in effect.
By the way, the term “petrodollars” is also used. appeared not in 1974, but several years earlier. It should be taken into account that in general the world market for oil and petroleum products began to take shape in the 19th century on the basis of not only the pound, but also the dollar.
At the same time, according to Donovan, perhaps the closest thing to a petrodollar deal was a secret agreement between A deal reached by the United States and Saudi Arabia in December 1974, which promised military aid and equipment in exchange for the kingdom investing billions of dollars of oil proceeds in American Treasuries. As a result, in the early 1980s, Saudi Arabia took first place among US foreign creditors — over $130 billion. Now this is the fifth-sixth result.
The conclusion from this “fake” stories are actually one. It's not about the content of the papers, but about the real processes that are now taking place in the energy and foreign exchange markets. And they objectively lead to currency multipolarity. And the global transition to it from dollar hegemony may accelerate, and not stretch, as Western experts believe, for tens or even hundreds of years.