Most analysts are betting on the US dollar’s strength for the long term. Besides, invoices for petroleum products are still settled in dollars and this practice will hardly be revised. Does this mean that the US dollar is set to reign forever? Time will tell!

According to some experts, the transition of some countries to other currencies will not undermine the greenback's hegemony. One of such countries is Saudi Arabia. However, the US dollar is sure to survive both Riyadh's refusal to sell its oil for dollars and the BRICS' attempts to create their own currency. Such ambitious plans certainly need time for implementation.  

Market participants and analysts were worried when Saudi authorities decided not to extend the security agreement with the US, which mandated selling oil exclusively for dollars. In this context, the issue of a looming US dollar’s collapse resurfaced among investors. In fact, these fears are unfounded as they do not consider several important circumstances.

Firstly, as of April 2024, Saudi Arabia held $135.4 billion in US Treasuries. According to experts, its share of the US federal debt does not exceed 3%. Moreover, the new agreement that Washington plans to sign with Riyadh does not require the Kingdom's authorities to buy American national debt or conduct all transactions in dollars. Therefore, the dependence of the US economy on Saudi Arabia's policy is exaggerated. The Kingdom can sell oil for any currency, but the main one remains the US dollar.

Secondly, the greenback's hegemony will not be undermined by transactions in yuan between Riyadh and Beijing. Currently, the countries carry out some of their contracts in the renminbi, but the yuan's role in mutual settlements is unlikely to grow sharply. Meanwhile, the US dollar remains the most convenient means of payment. It is used for market quotes, derivatives, trade settlements, etc.

"The global financial system will not be changed by the fact that the Saudi regulator signed an agreement with the People's Bank of China for 50 billion yuan ($7 billion), and the Kingdom joined the mBridge project to create a cross-border central bank digital currency (CBDC)," analysts explain.

Thirdly, global trade has changed. It used to be based on commodities like crude oil or wheat. However, now the trend is shifting towards finished products and services. In 2023, global exports increased to $23.8 trillion, with oil and petroleum products accounting for less than 10%. Saudi Arabia's share in the global export of these hydrocarbons was 11%. Thus, no drastic changes in global markets are expected even if Riyadh adopts transactions in yuan, rupees, or liras.

Fourthly, many analysts overestimate the significance of BRICS countries and their role in dismantling the well-established dollar’s reign. Despite attempts to create their own currency, the group lacks a clear action plan and significant progress in this direction. "To issue a truly unified currency, they have to solve a number of issues such as different economic structures, high inflation, budgetary and financial policies, etc.," experts point out.

A more realistic forecast is that the world is not facing the collapse of the US dollar or the creation of unified currencies, but the establishment of separate currency zones. However, such crucial changes will take several decades. At the moment, the greenback remains the leader. Indeed, not only the US but other countries benefit from the unified dollar system.