Petrodollar System: Saudi Arabia, Gold And The Dollar

The petrodollar system built in 1974 tied Saudi oil sales to the dollar and recycled the proceeds into American assets. Felix Nikolas Prehn explains how the recent missile strike on Riyadh's main airport has accelerated a quiet shift in Saudi Arabia's security and financial alignments. With defence pacts now signed with Turkey and Pakistan, and calls going to Paris and Islamabad rather than Washington, the episode examines whether the other side of the original bargain still holds. It covers Saudi Arabia's sale of roughly 11 billion dollars in US treasuries in a single month, the fixed riyal peg maintained since 1986, the mBridge payment system that bypasses the dollar, and central banks continuing to buy gold through its worst quarter since 2013. Prehn argues the key signal to watch is Saudi Arabia's official gold reserves, a number that has barely moved for years but may soon start climbing.

In this episode:
00:00 Missile strike on Riyadh airport and US response
00:57 Origins of the 1974 petrodollar arrangement
04:07 The Saudi riyal peg and foreign reserves
06:30 Saudi treasury sales and shifting alliances
07:48 Strait of Hormuz, Red Sea and shipping costs
09:07 mBridge and alternatives to dollar settlement
10:18 Central banks buying gold into a downturn
10:59 Portfolio checks for oil shock exposure

Sources mentioned:
The New York Times, https://www.nytimes.com
Saudi Central Bank (SAMA), https://www.sama.gov.sa
mBridge (BIS project), https://www.bis.org

Felix Nikolas Prehn is an economist and former investment banker. He co-founded TradeVision.io and founded Winston Daily and The Prehn Institute. The Prehn Institute gives no financial advice, and neither does this podcast.

Newsletter: Winston Daily, https://winstondaily.com
Research: https://prehninstitute.com
Author site: https://felixprehn.com

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