The United States' efforts to court Saudi Arabia appear to have hit a snag, as a significant cooperation announcement between Saudi Arabia and China has emerged.
This development holds profound implications for the global energy market and monetary system.
Previously, the U.S. attempted to secure Saudi support by offering security guarantees, lifting restrictions on arms sales, and proposing cooperation in areas like artificial intelligence and green energy.
However, American demands included normalization of relations with Israel and reducing cooperation with China.
For Saudi Arabia, these conditions evidently lacked sufficient appeal.
Ultimately, Saudi Arabia opted to deepen cooperation with China instead.
Reports indicate that the Saudi Central Bank has joined the "Multiple Central Bank Digital Currency Bridge" project initiated by the Bank for International Settlements and China.
This project aims to test and promote the use of central bank digital currencies in international payments, enhancing speed, efficiency, and transparency in cross-border transactions.
This development is particularly significant for Sino-Arab oil trade settlements, potentially bypassing the use of the U.S. dollar for transactions and signaling a new international payment paradigm.
As a major player in the global oil market, Saudi Arabia's decision not only affects the stability of the global energy market but also has far-reaching implications for the monetary system.
Historically, the U.S. tied the dollar to oil through the so-called "petrodollar agreement" with Saudi Arabia since the 1970s, ensuring that Saudi oil export revenues were mainly used to purchase U.S. treasuries and accepting dollars as the settlement currency for oil trades.
This arrangement expanded to other OPEC member states and became foundational to global oil trade.
Through this mechanism, the U.S. secured global demand for the dollar, solidifying its status as the world's primary reserve currency.
This system allowed the U.S. to wield influence over global financial markets through monetary policy and financial sanctions, bolstering its geopolitical power.
However, if oil trades are no longer settled in dollars, it could significantly impact the U.S. Firstly, global demand for the dollar might decrease, leading to depreciation.
This could weaken the dollar's dominance in international financial markets, potentially prompting other countries to reduce dollar holdings and increase reserves in other currencies or gold.
Secondly, the U.S. would lose its ability to exert economic and geopolitical influence through controlling oil transactions.
Previously, the U.S. used control over the SWIFT system (the primary international financial transaction settlement system) and implemented financial sanctions to achieve diplomatic goals.
However, if oil is no longer settled in dollars, the effectiveness of these measures could be severely diminished.
For China, decoupling oil from the dollar presents a significant opportunity for the yuan's development.
China has long sought to reduce dependence on the dollar, especially in its global trade and financial activities.
The U.S. had previously threatened to exclude China from the SWIFT system, prompting China to explore alternatives for international transactions bypassing the dollar.
Now, with strengthened cooperation between Saudi Arabia and China, particularly with the support of a major oil producer like Saudi Arabia, the prospect of oil settlements bypassing the dollar is not just a distant dream but a soon-to-be reality.
In summary, the U.S. has long relied on its control over the dollar in the global economy and geopolitics, especially through its link to oil.
However, with Saudi Arabia choosing to deepen ties with China, this system could undergo fundamental change.
In the future, with the development of digital currencies and new technologies, the global monetary system and energy market landscape could experience profound transformations, impacting global economic, financial, and geopolitical dynamics extensively.
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