Saudi Arabian Finance Minister Mohammed al-Jadaan said on Tuesday that his government is willing to consider alternatives to the U.S. dollar for international trade.
The process of reconciliation between the Saudis and the U.S. included a deal for the Saudis to invest their oil profits with the U.S. Treasury, and to price their oil in U.S. dollars on the international market.
This created the mighty “petrodollar,” from which both the Saudi and American economies drew great benefits. The Saudi riyal formally married the U.S. dollar in 1986, completing a financial fusion that provided much-desired stability to the rather volatile Saudi economy of that time.
Decoupling the riyal from the dollar would be a major change for both countries and for the global oil market. Analysts have long considered such a change potentially cataclysmic but unlikely, especially while the Saudis are embarked on Crown Prince Mohammed bin Salman’s Saudi Vision 2030, an ambitious reform agenda to diversify their economy away from petroleum.
Al-Jadaan said at the World Economic Forum (WEF) in Davos that Saudi Arabia is open to considering other currencies.
“There are no issues with discussing how we settle our trade arrangements, whether it is in the U.S. dollar, whether it is the euro, whether it is the Saudi riyal. I don’t think we are waving away or ruling out any discussion that will help improve the trade around the world,” he said.
Al-Jadaan said the Saudis wish to develop economic flexibility so they can build stronger economic relationships with other partners, specifically mentioning China, an eager customer for all manner of fossil fuels.
“We enjoy a very strategic relationship with China and we enjoy that same strategic relationship with other nations including the U.S. and we want to develop that with Europe and other countries who are willing and able to work with us,” he said.
The Saudi finance minister added that working with other currencies would make it easier for Saudi Arabia to participate in multinational programs to shore up “vulnerable” economies, particularly Pakistan.
Chinese dictator Xi Jinping told a summit of Gulf Arab leaders in Riyadh in December that Beijing wants to buy oil and gas with yuan. Crown Prince Mohammed bin Salman (MBS) held two summits with Xi during his trip, during which the two signed several partnership agreements. Last month Saudi Arabia signed a deal with China’s telecom giant Huawei for cloud computing services, despite U.S. warnings that Huawei equipment poses security risks.
“We don’t see this as a zero sum game. We do not believe in polarization or in choosing between sides,” Saudi Foreign Minister Prince Faisal bin Farhan al-Saud said reassuringly.
MBS has clearly been seeking to realign and diversify Saudi Arabia’s international connections ever since President Joe Biden threatened to make him a global “pariah” during the 2019 Democrat Party primary. Biden was later reduced to begging MBS for oil – to no avail – and may soon find himself begging for MBS to keep the riyal pegged to the dollar.
Another Saudi diplomat, Minister of State for Foreign Affairs Adel al-Jubeir, strongly hinted from Davos on Wednesday that Biden could win some points with Riyadh by putting the moribund Iran nuclear deal out of its misery and working harder to prevent Tehran from obtaining nuclear weapons.