In June, news emerged that Saudi Arabia has ended its 50-year petrodollar agreement with the United States (US) and was now shifting to a multi-currency system for oil sales. The petrodollar agreement allowed Saudi Arabia to invest the dollars from oil sales in the US Treasuries. However Saudi Arabia did not confirm this development as also several experts pointed out that oil sales have been carried out in multiple currencies and not just dollars. But this news gave rise to the speculation about Saudi Arabia moving towards de-dollarization. 

The US dollar is not likely to totally lose its importance as a favoured currency globally and also in the Saudi Arabia-US engagements. However some of Saudi Arabia’s recent international interactions give an impression that it is taking a lead recalibrating the US’ role in the Gulf. 

One, since the start of the Russia-Ukraine war, Saudi Arabia has taken a balancing approach implying that it has not sided completely with the western countries and has continued to engage with Russia. Saudi Arabia’s stand has also prevented Russia’s isolation at the international stage. Saudi Arabia also brokered a deal in September 2022 that led to the release of 10 foreign prisoners of war. The Saudi-Russia bonhomie was also underscored by high-level bilateral visits post-Russia-Ukraine war. Saudi Arabia’s Foreign Minister Faisal bin Farhan visited Russia (and also Ukraine) in March 2023 while Russian President Vladimir Putin visited Riyadh in December 2023. Recently, Saudi Arabia also warned the G7 nations against seizing Russia’s $300 billion foreign exchange as it could set a wrong precedent.

Two, Saudi Arabia was one of the countries that joined the BRICS in 2023 following the grouping’s expansion. BRICS, which originally had Brazil, Russia, India, China and South Africa as its members, was expanded to become BRICS+ in 2023. The new members of this grouping include Saudi Arabia, the UAE, Iran, Egypt and Ethiopia. BRICS, formed as an organization of emerging economies, has been increasingly viewed as an anti-West organization due to China’s presence. Further continuing discussion on a possibility of a BRICS currency replacing the US dollar, although denied by India, underscores opposition to the West. Saudi Arabia’s presence in the BRICS is interpreted as the Gulf kingdom tilting towards China and Russia and moving away from the US.

Three, while the acceleration in the Saudi-China relations may seem recent, the bilateral ties have been strengthening over the past three decades. In these thirty years, China has become Saudi Arabia’s largest trading partner. Saudi Arabia has looked towards China for cooperation in the areas of investments in infrastructure, communication, high-tech industry, finance, transport and nuclear energy. Oil and non-oil engagements define the Saudi Arabia-China ties. While China has emerged as the largest buyer of the Saudi oil, Saudi Arabia is aligning its Vision 2030 with China’s Belt and Road Initiative thereby signaling a step towards post-oil economy.

Despite the impressions these developments give, the US’ role in the Gulf region has not diminished totally. The US, as also the West, remains an active strategic partner of the Gulf countries. The US Navy’s 5th Fleet, comprising of various manned and unmanned naval platforms, is stationed in Bahrain and has contributed to the maritime security in the Gulf region. Similarly France has military bases in the UAE and Jordan.

Besides, despite diversifying its economic engagements, Saudi Arabia is still strategically dependent on the US. The US remains Saudi Arabia’s largest arms supplier. According to Stockholm International Peace Research Institute’s (SIPRI) report on international arms transfer 2023, Saudi Arabia was the world’s second largest arms importer between 2019 and 2023. Saudi Arabia accounted for 8.4% of world’s total arm imports. During this period Saudi Arabia imported 75% of its total arms from the US. France (7.6%) and Spain (7%) were the second and third largest suppliers of arms to Saudi Arabia from 2019 to 2023. It implies that the West in general and the US in particular are still an integral part of Saudi Arabia’s strategic landscape. 

Saudi Arabia’s engagements with the non-western countries, particularly China and Russia, are a result of its independent foreign policy. Economic cooperation with China is important for Saudi Arabia’s post-oil economy. At the same time Riyadh has continued with the decades-old strong strategic cooperation with the US thereby balancing its international engagements.

Mr. Niranjan Marjani is a political analyst and researcher based in Vadodara, India.