Reuters reported on June 3, 2024 that Saudi Crown Prince Salman Jr. informed the U.S. side that the U.S.-Saudi security agreement, which is about to expire on the 9th of this month, will not be renewed with the United States.
After the collapse of the Bretton Woods system in 1972, the dollar was decoupled from gold and instead tied to oil, forming the petrodollar system. This system occupies an important position in the global economy and establishes the dominance of the US dollar in international oil transactions.
Saudi Arabia's decision not to renew its security agreement with the United States means that Saudi Arabia's oil is no longer simply tied to the dollar. This marks the possible beginning of the disintegration of the petrodollar system, providing more opportunities and space for other currencies such as the euro, the yuan, the rial, etc.
Saudi Arabia may settle oil transactions in multiple currencies, which not only weakens the dollar's monopoly in the international oil market, but also shakes the foundations of the dollar's hegemony.
For the United States, the loss of Saudi Arabia, an important oil supplier, is undoubtedly a huge threat. The United States is likely to respond to this situation with a range of measures, including political pressure, economic sanctions, or military threats.
For Saudi Arabia, despite pressure from the United States, its position in the international arena is becoming increasingly important, and its cooperation with other countries is becoming more and more extensive. If Saudi Arabia can form a synergy with other countries to counter US pressure, then it may succeed in breaking free from the shackles of the dollar and diversifying its oil transactions.
It is unclear whether this is a negotiating tactic by the Saudi royal family or if it really does not want to cooperate with the United States. If it is a negotiation strategy, Saudi Arabia may be seeking more favorable terms of cooperation; If there is a genuine lack of cooperation, then this will have a profound impact on the global financial landscape.
In short, Saudi Arabia's decision not to renew the security agreement with the United States is an important event in the political and economic landscape of the Middle East and the world. This decision could have far-reaching implications for the petrodollar system and the international monetary system.