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5 Apr, 2019 04:09

Saudi Arabia ready to ditch petrodollar as ‘nuclear option’ to stop NOPEC bill – reports

Saudi Arabia ready to ditch petrodollar as ‘nuclear option’ to stop NOPEC bill – reports

Saudi Arabia is reportedly threatening to sell its oil in other currencies if the US passes a bill permitting antitrust lawsuits to be filed against OPEC members in US courts, a move which would decimate the tottering petrodollar.

If the US infringes on OPEC states' sovereign immunity and greenlights lawsuits for antitrust violations, energy officials in Riyadh are prepared to sell their oil in other currencies, according to multiple sources familiar with Saudi energy policy, one of whom told Reuters the threat has already been communicated to high-ranking US energy officials.

“The Saudis know they have the dollar as the nuclear option,” one of the sources reportedly said, while another cited Saudis as saying “let the Americans pass NOPEC and it would be the US economy that would fall apart.”

Such a move has the potential to topple the US dollar’s status as the world’s reserve currency, particularly since other OPEC members –namely Iran and Venezuela– have their own reasons to ditch the petrodollar, under US sanctions as they are, and non-OPEC oil producers like Russia also mulling such a measure.

The bill in question, called the No Oil Producing and Exporting Cartels Act (NOPEC), was first introduced in 2000, and would potentially give Washington ability to control global oil output and prices through threats of lawsuits against OPEC members.

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However, it never gained significant traction until the current administration took over. Trump himself has not come out in favor of the bill, preferring to back Saudi Arabia’s political objectives in return for good behavior in the oil market, though he did speak out in favor of NOPEC in a 2011 book. Qatar, a former member of OPEC, felt threatened enough by the distant possibility of the bill’s passage to leave the oil cartel in December, however.

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The Saudi riyal is pegged to the dollar, and the kingdom has nearly $1 trillion invested in the US, investments it has also mulled liquidating should NOPEC pass, according to the Saudi sources cited by Reuters. Saudi Aramco is the world’s largest oil exporter, with sales of $356 billion in 2018, and trading in oil derivatives is also largely dollar-denominated, with trade volume reaching $5 trillion on the top two global energy exchanges last year.

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