Saudi Arabia’s induction into the BRICS alliance threatens the US dollar’s prospects as the de-facto currency for oil payments. Mohammed Al-Jadaan, Saudi Arabia’s Finance Minister announced a week before the 15th BRICS summit in August that the Kingdom was considering dropping the US dollar for international oil trade. The statement ruffled a lot of feathers in the US and the Western world but was welcomed by developing countries.
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Oil is Saudi Arabia’s primary and most valuable natural resource. The Kingdom exports millions of barrels of oil every year to both developing and developed countries in the West. Al-Jadaan’s comments indicate that Saudi Arabia might someday accept all local currencies for oil payments and not the US dollar.
The move comes straight from the BRICS playbook as the alliance is looking to bring the US dollar down by controlling the oil sector, which is helmed by Saudi Arabia. In this article, we will highlight how the US dollar will be affected if Saudi Arabia & BRICS ditch the USD for oil trade.
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BRICS: What Will Happen If Saudi Arabia Accepts Local Currencies & Not US Dollar For Oil?
Trillions worth of US dollars will come back to America if Saudi Arabia ditches the US dollar for oil trade. If Saudi Arabia drops the US dollar for oil, many other countries will follow suit and sell their treasury bonds. All countries offloading US treasury bonds to buy oil from Saudi Arabia will begin to settle trade in local currencies.
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The development will strengthen the BRICS local currencies and their native economies going forward. If trillions of US dollars are sold, inflation will begin to spiral in America. The US will find it hard to fund its deficit and the situation might also lead to hyperinflation. Read here to know how many sectors in the US will be affected if BRICS completely stops using the dollar.