Norris McDonald | Saudi Arabia, petrodollar, BRICS and other things on my mind

Will the American dollar be dropped as the major currency for international trade?

Saudi Arabia recently announced that they may soon drop the petrodollar as the money benchmark in which their oil export prices are quoted. They would now be using the Chinese Yuan.

This is a shocking development.

Saudi Arabia has functioned as an American protectorate in the Middle East, doing her bidding in Yemen, Iraq and elsewhere. There are now plans by America to use Saudi Arabia to establish a ‘Middle East NATO’. This is aimed at curtailing the revolutionary, national independence aspiration of countries in the region who have thrown off, or want to throw off, historical neocolonialist and imperialist yolk.

But if there are political tensions between America and Saudi, what will happen to the grandiose, militaristic plans?

Prince Mohammad Bin Salman is the de facto ruler of Saudi Arabia. He consolidated his power in 2015.

The 2018 brutal Jamal Khashoggi murder, ostensibly ordered by the Saudi’s ruling circles, led to open hostility after President Joe Biden said in 2019 that he would make “Saudi Arabia a pariah”, akin to someone with leprosy who is shunned.

President Biden frantically called his Saudi friends, and the calls reportedly went unanswered.

At least in the ‘Jeopardy’ game show, when you call a friend you know you will be helped!

My friends, the petrodollar has been one sign of deep America Saudi relations. Its introduction in 1971 helped save a debt-ridden American economy that was running out of her gold stock.

By tying the US dollar to Saudi oil, America was able to establish and consolidate its economic hegemony over the world. Therefore, if Saudi Arabia goes ahead and dump the petrodollar, this certainly may perhaps create negative shocks to the American economy and the world monetary system built around the US dollar.

America has been able to use the ‘dollar hegemony’ to blackmail and cut countries from the international, money-exchange relations if they earn her wrath.

Already, we are seeing a rise in non-US dollar trade, as many countries dump the US dollar and now use their national currencies in international trade.

The removal of the middleman role played by the American dollar will significantly affect financial leakages, in my opinion, from the rest of the world to America.

Of all the countries standing up against American hegemony, one would not have expected Saudi Arabia to be so assertive against an historical friend and ally.

And yet we see this in the coy, assertive way Saudi Arabia’s de facto ruler, Prince Mohammad bin Salman, coldly rebuffed President Joe Biden during his desperate recent July trip.

Another thing. In the wake of the Russian-Ukraine war, and Western sanctions blowback, he made his July visit but came away sad, disappointed.

How much has the world changed, my dear friends?

Who would image that Saudi Arabia would treat America like a deep-frying Thanksgiving turkey, looking on with delightful satisfaction as it simmers in boiling oil.

Oh so, indeed!

BRICS, RUSSIA, AND CHINA

The Western economic sanctions imposed on Russia – because of the Ukraine war – have helped to push oil prices to well over US$100 per barrel and created ‘pain-at-the-pump’ for American consumers, and the rest of the world.

A few years ago, Saudi Arabia was in financial woes. According to the May 2020 Brookings Institute, “Saudi Arabia need oil to be at US$85 to fund its budget”, but because of the COVID-19 economic shocks and other structural weaknesses in the global economy, oil prices had dropped to roughly US$25 per barrel in 2020.

Russia played a key role in helping bail out Saudi Arabia with the OPEC Plus arrangement. This is the oil cartel, the Organization of the Petroleum Exporting Countries, teaming up with Russia to stabilise world oil prices.

In the wake of the Russia-Ukraine war, the Saudis bought heavily discounted “sanctioned oil and gas” from Russia for domestic use, and sold theirs at the world market prices of over US$100 per barrel.

Prior to the Russia-Ukraine war, the Saudis invested US$500 million in the three major Russian oil and gas companies. Now they are expected to invest a whopping US$5 billion in Russia’s huge Sakalin-2 Arctic Sea liquefied natural gas project.

The Russian-Ukraine war has been a boon to Saudi Arabia. Their largest state firm, Saudi Aramco, recently reported a humongous profit of US$48 billion so far for this year.

Prior to the February 2019 drastic oil price rise to over US$100 per barrel, the Saudis were running low on cash.

They have been admitted as a prospective member to the China-Russian bloc of countries – BRICS. This is a new multilateral group of Brazil, Russia, India, China, and South Africa. BRICS is to be further enlarged, in which we may see Turkey, Argentina, Indonesia, Egypt, Senegal, Nigeria, the United Arab Republic, Thailand, and Kazakhstan becoming members.

This is an increasing sign of a new, emerging, multipolar world in which countries are attempting to shake off the neo-colonialist relations that have been cultivated by America and Europe over the years.

THE CARICOM QUEST

My dear friends, CARICOM is now on Saudi Arabia’s agenda. Saudi Arabia has been expanding diplomatic and trade relations with CARICOM. A high-powered investment team led by His Excellency Badar Al Badar recently toured the Caribbean.

Jamaica, Barbados, Guyana, and Dominican Republic were important stops for the Saudi delegation. Some 60 Saudi firms participated in the launching of a Saudi-Caribbean investment forum in the Dominican Republic.

As to how this will pan out, time will time.

In the final analysis, however, beyond this Saudi investment initiative, CARICOM must become more assertive in developing investment and trade ties with countries such as India, Brazil, South Africa, Nigeria, among others. The idea is to continue seeking new sources of investment to create jobs and increase regional wealth.

Regional governments must, however, ensure that workers’ rights are protected, and that national entrepreneurs are not put at a disadvantage through any form of bad behaviour, albeit because the countries are desperate for money!

That is just the ‘bitta’ truth!

Norris McDonald is an economic journalist, political analyst, and respiratory therapist. Email feedback to columns@gleanerjm.com and miaminorris@yahoo.com.