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Exploring the Implications of the Expiration of the US-Saudi Arabia 50-Year Petrodollar Deal

US-Saudi Arabia 50-Year Petrodollar

The 50-year petro-dollar deal between the US and Saudi Arabia expired on 9 June.

The historic security agreement inked on 8th June 1974 between the United States and Saudi Arabia marked a significant milestone in bilateral relations. This agreement established two pivotal joint commissions: one focused on enhancing economic cooperation and the other dedicated to addressing Saudi Arabia’s military requirements. It was celebrated as a pivotal moment that promised to deepen collaboration between the two nations.

American officials voiced enthusiastic expectations that the agreement would incentivize Saudi Arabia to bolster its oil production, thereby stabilizing global energy markets. Beyond energy concerns, the accord was seen as a blueprint for fostering robust economic partnerships not only between Washington and Riyadh but also with other Arab nations. The envisioned economic synergies were aimed at strengthening regional stability and prosperity.

The lapsed agreement has since prompted reflections on its historical impact and the evolving dynamics in Middle Eastern geopolitics. It underscores the intricate relationship between economic cooperation, military security, and diplomatic ties in the region, shaping the strategic calculus of both the United States and Saudi Arabia moving forward.

Cross-Border CBDC Transactions

Saudi Arabia recently announced its participation in Project mBridge, an innovative initiative exploring a multi-central bank digital currency (CBDC) platform. This project aims to facilitate seamless cross-border payment settlements and foreign exchange transactions using distributed ledger technology (DLT).

Currently, Project mBridge boasts over 26 observing members, with the South African Reserve Bank joining most recently. Notable participants include the Bank of Israel, Bank of Namibia, Bank of France, Central Bank of Bahrain, Central Bank of Egypt, Central Bank of Jordan, European Central Bank, International Monetary Fund, Federal Reserve Bank of New York, Reserve Bank of Australia, and the World Bank.

The project’s steering committee has diligently crafted a specialized governance and legal framework, complete with a comprehensive rulebook tailored to accommodate the decentralized nature of the platform.

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Unveiling Project mBridge: Pioneering Collaboration in Digital Finance

Initiated in 2021 through a pioneering collaboration between the BIS Innovation Hub, the Bank of Thailand, the Central Bank of the United Arab Emirates, the Digital Currency Institute of the People’s Bank of China, and the Hong Kong Monetary Authority, Project mBridge marks a significant milestone in digital financial innovation.

Following a successful pilot involving real-value transactions in 2022, the mBridge project team has transitioned towards developing a Minimum Viable Product (MVP). This pivotal stage signifies a critical advancement in the project’s evolution.

Now, as Project mBridge enters its MVP phase, it is actively seeking proposals from private-sector firms. These proposals aim to introduce innovative solutions and explore new use cases that can further enhance the platform’s capabilities and demonstrate its full potential.

This collaborative effort underscores a commitment to transforming cross-border financial transactions through advanced technology and strategic partnerships. Project mBridge is poised to shape the future landscape of digital finance, paving the way for more efficient and secure global transactions.

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