Finance expert Henry C. Johnston debunks rumors about a supposed U.S.-Saudi oil contract expiring, which some claimed would spell the end of the petrodollar system. Instead, he explains that the real shift is happening due to new economic alliances among BRICS nations, especially China, Russia, and India, who are trading oil using their own currencies. Johnston suggests these rumors might be pushing for more yuan-based oil trades with China offering advanced tech in return. Meanwhile, U.S. sanctions are intensifying currency battles, with the yuan maintaining its value against the ruble despite pressure.
A June 23 RT editorial by its Moscow-based editor Henry C. Johnston, an experienced financial correspondent, took up the matter of widespread Internet claims in mid-June that a “50-year U.S.-Saudi contract had been allowed to expire on June 8,” implying “the death of the petrodollar.” Johnston concludes that the “contract,” which purportedly required Saudi Arabia to sell oil only in US dollars in exchange for the US providing strategic security and stability, was always informal and did not “expire” recently or otherwise. However, he identifies the source of this rumor—which arose more from Indian people and blogs than anywhere else—as the fundamental “erosion” of the petrodollar system as a result of new arrangements among BRICS states, especially nations other than Saudi Arabia.
According to Johnston, the first proposal for a “neutral reserve asset,” based on productive power and commodities, to reform or replace the dollar system of US dominance was a March 2009 paper titled “Reform the International Monetary System” by People’s Bank of China (PBOC) Governor Zhou Xiaochuan. Since the U.S. Treasury’s monster sanctions on Russia on February 24, 2022, the China-Russia-India-Southeast Asia reorientation of oil trade has created a “petro-yuan,” he claims, not in buying oil from Saudi Arabia, but from Russia—and even India has made some purchases in yuan, among much larger ones in rupee and UAE dirham. Saudi Arabia and China have been conducting large-scale currency swaps since November 2023, paving the way for Saudi Arabia to participate in these arrangements, whether or not it has done so. According to Johnston, speculations regarding the Saudi-US deal “expiring” could just be an encouragement to extend the yuan trade in oil products in exchange for China’s high-technology capital goods.
Johnston makes no mention of the United States Treasury’s secondary sanctions imposed on Chinese and foreign banks and firms who conduct business with Russia on June 12, 2024. The escalated “embargo” attempt resulted in the yuan-ruble currency exchange rate becoming Russia’s benchmark for all other currencies, including the dollar. Since then, there has been constant pressure—no doubt initiated by the US Treasury—to drive the yuan below its months-long stable value of 12 rubles. Moscow and Beijing, however, have maintained that “peg”.
Recently, GreatGameIndia reported that Saudi Arabia’s decision to terminate its 80-year petrodollar deal on June 9, 2024, could reshape global oil markets. The country is considering selling oil in currencies such as the Chinese yuan, potentially impacting U.S. economic dominance.
