As the economic alliance seeks greater de-dollarization efforts, the BRICS economic alliance ditching the US dollar in the oil trade could be set to face a major roadblock. Specifically, Saudi Arabia could hold the keys to whether or not that sector would play a pivotal role in the dollar’s prominence within international finance.
Saudi Arabia, one of the six nations invited to join the alliance, has maintained close ties with the United States. Additionally, its native currency connection to the dollar could present a challenge to the BRICS bloc’s desire to lessen reliance on the currency. especially in the massively important oil trade, for which the BRICS maintains global control.
Saudi Arabia Presents Roadblock for BRICS Ditching the US Dollar in Oil Trade
The BRICS economic alliance has certainly had a positive 2023 thus far. The bloc has seen its prominence in international politics grow. Moreover, it has expanded the nation that currently comprises the alliance. Specifically, the alliance invited Saudi Arabia, the United Arab Emirates (UAE), Iran, Argentina, Ethiopia, and Egypt.
Yet, amid that expansion, the BRICS bloc’s hope of ditching the US dollar in global oil trade could face a major roadblock. Specifically, through the connection that Saudi Arabia has long had with the United States. Subsequently, how does that connection impact the country’s native currency?
Saudi Arabia’s currency, the Riyal, has been pegged to the US dollar since 1980. Moreover, the country has not stated any intention to change that or coincide with the overall de-dollarization plans that the bloc has been outspoken about implementing.
Many have assumed that Riyhad would be willing to partner with these efforts by joining the alliance, but that does not seem to be the case thus far. Indeed, Ziad Daoud and Scott Johnson of Bloomberg discussed how the dollar may not factor into the changing global power balance.
“The BRICS will change the world, but perhaps more because of their rising share of GDP and divergent political and economic systems than through the realization of policymakers grand plans,” they stated. Conversely, it will be interesting to see how the oil industry responds to US dollar abandonment attempts. Especially with Saudi Arabia maintaining control over the sector.