Saudi Arabia Gets Rid Of T-Bond

Financial analysts believe this could be about the “dismantling” of the petrodollar system created by the USA in the 1970s.

Saudi Arabia is systematically reducing its holdings in US government bonds. According to Riyadh’s finance ministry, in June, Saudi Arabia “disposed” of more than $3 billion worth of US long-term Treasury bonds. Riyadh currently holds $108.1 billion of US sovereign debt, which is the lowest in 6 years. According to Bloomberg Economics analysts, over the past 3.5 years, the portfolio of US government bonds controlled by Riyadh has decreased by 41 percent.

The United Arab Emirates, which recently reached an agreement with India on payments for oil exports in rupees and dirhams, also got rid of $4 billion of such treasury bonds in June.

According to international analysts, this is a clear demonstration that the de-dollarization process launched by Russia and China is apparently yielding first results.

Russia has reduced its investment in US Treasury bonds, which now account for just 0.1% of Russia’s international reserves that were estimated in August 2023 by Central Bank of the Russian Federation at $586.6 billion. China is also getting rid of assets labeled “toxic”: in June, Beijing sold a record $11.3 billion worth of US government bonds, thus reducing its dependence to a historic low in the last 14 years. As a reminder, the two largest holders of the US federal debt are Japan ($1.082 billion) and China (about $850 billion). Russia began phasing out US government bonds as early as 2018, reducing investment in US Treasury bonds from $96 billion to less than $15 billion in 2023.

International experts point out that for many decades Saudi Arabia has been the basis and cornerstone of the global oil trading system, denominated exclusively in US dollars. For 50 years, the Saudi rial has been firmly linked, or rather, leashed to the dollar. For this reason, the sale of US Treasury bonds by the Arab Kingdom is of particular importance. Riyadh is actively working to diversify its economy by developing political, economic, and trade ties with China and India that are Saudi Arabia’s two largest non-Western partners.