Saudi, UAE Sell Off US Debt; Oil Nations Dismantling Petrodollar
August 15th report, the Kingdom Holding of Saudi Arabia, the world's largest oil-producing country, invested in three major Russian energy companies from February 22nd to March 22nd this year, including Gazprom, Rosneft, and Lukoil, with a total investment exceeding $500 million.
It is noteworthy that the outbreak of the Russia-Ukraine conflict began on February 24th. This directly indicates that Saudi Arabia, the world's largest oil-producing country, bet $500 million in an attempt to gain considerable profits from Russia's oil market share. Considering that Russia's crude oil production capacity is on the same scale as Saudi Arabia, when Saudi Arabia invests in Russian energy companies, it implies that there is a win-win situation in the energy field between the Saudi and Russian economies.
According to shipping data, in the second quarter of this year, Saudi Arabia imported 647,000 tons of fuel from Russia through Russian and Estonian ports, compared to 320,000 tons in the same period last year. This means that Saudi Arabia doubled its import of Russian crude oil in the second quarter. Analysts believe that Saudi Arabia may have purchased Russian crude oil at low prices and resold it to the US and European markets. At the same time, considering the series of restrictions on Russian oil by the US economy and the US dollar, Saudi Arabia's purchase of Russian oil has indirectly initiated the process of de-dollarization.
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This also means that Saudi Arabia, which has been following the US dollar settlement system for many years, is experiencing changes in the face of the global currency landscape. This can be illustrated by the continuous and significant sale of US debt by Saudi Arabia. Data shows that from February 2020 to May of this year, Saudi Arabia has been continuously selling US debt. The US debt holdings have dropped from $184.4 billion at that time to $114.7 billion, which means Saudi Arabia has cumulatively sold $69.7 billion in US debt, with a sale ratio of nearly 38%. Among the world's oil-producing countries, Saudi Arabia's sale of US debt is second only to Russia, which has almost cleared US debt a few months ago and now holds only a single-digit share of US debt.
In other words, while Saudi Arabia is increasing cooperation with Russian energy companies, it seems to be catching up with Russia's process of de-Americanizing its debt. Analysts believe that this is not only a blow to US debt but also an impact on petrodollars. This is because it was based on the petrodollar agreement signed between Saudi Arabia and the United States in the 1970s that allowed the US dollar to become the global commodity transaction currency, and US debt became the foreign exchange reserve of central banks worldwide, thus forming the organic cycle of "petro-dollar US debt" as a commodity currency debt.
Therefore, Saudi Arabia's continuous and significant sale of US debt has a profound impact on petrodollar US debt. As the cycle of petrodollar US debt continues to disintegrate, the advantage of the US economy is becoming increasingly fragile. Perhaps based on this, the US economy previously issued a NOPEC bill, intending to stop the global oil discourse led by Saudi Arabia's OPEC and further maintain the status of petrodollar US debt.
However, what was unexpected for petrodollar US debt was that the Saudi economy directly countered, once claiming that it might terminate the petrodollar agreement. If the "NOPEC" is passed, it would sell oil in currencies other than the US dollar, with the US dollar being the core option. It is worth noting that Saudi Arabia and another oil country, the United Arab Emirates (UAE), have already started using cryptocurrencies for transactions in their bilateral trade, bypassing the US dollar directly, and the matter goes far beyond this.
Shipping data also shows that the UAE's Fujairah emirate has received at least 2.07 million tons of Russian fuel this year. This further indicates that while the US restrictions on Russian oil have actually failed, the UAE may directly use non-US dollar currencies in energy transactions with Russia. Energy currency experts believe that this is also a part of the UAE's de-dollarization process.
Similar to Russia's near clearance of US debt and Saudi Arabia's continuous and significant sale of 38% of US debt, the UAE has been significantly selling US Treasury bonds for at least 8 out of 12 months from June last year to May this year, showing a continuous selling trend. US debt holdings have plummeted from a peak of $60.8 billion to $38.3 billion, which means the UAE has cumulatively sold $22.5 billion in US debt, with a cumulative sale ratio of 37%. This sale scale is basically synchronized with Saudi Arabia. Combined with the previous analysis, it further understands the impact of the global main oil-producing countries selling US debt on petrodollar US debt and the impact on the advantage of the US economy is not to be underestimated.
Before this, at least 7 major oil-producing countries have already shown their swords to the US dollar. Among them, while Russia is de-Americanizing its debt, it has also started a comprehensive process of de-dollarization; Iran has replaced the US dollar's foreign exchange status with the renminbi and the euro and directly trades oil in non-US dollar currencies; even Iraq and Iran no longer use the US dollar for bilateral trade transactions, and the two countries use the euro, their own currencies, and other non-US dollar currencies for settlement...Qatar and Bahrain decided to trade oil in non-US dollar currencies as early as eight years ago; Venezuela has been accelerating the process of trading in its national oil currency and trading oil in non-US dollar currencies; Nigeria launched the first electronic currency in Africa, eNaira, and will conduct cross-border settlements... Clearly, with the addition of Saudi Arabia and the United Arab Emirates mentioned in this article, at least nine oil-producing countries around the world are challenging the US dollar. Behind their move away from the US dollar and US debt, there may be a continuous wave of iteration in the anchor of global commodity transaction currencies.
Former US Secretary of State Dr. Henry Kissinger once said: "If you control oil, you control the world economy; if you control currency, you control the world." This statement reveals the logic behind the United States' profit from the advantages of petrodollars and US debt over half a century. However, the above signs indicate that at least nine major oil-producing countries are dismantling the "petrodollar US debt" system, and the profit logic of the US economy is also changing.
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