With Trump, the Truth seldom leaves his lips. Now millions believe his telling false truths.

Reports circulating online that Saudi Arabia “ended a 50-year petrodollar deal” with the United States to switch exclusively to the Chinese yuan are based on a viral internet rumor rather than a real event.

The actual economic reality behind the headlines, how Saudi Arabia operates, and what this means for U.S. Treasury bonds breaks down as follows:

1. The Myth vs. Reality of the “Petrodollar Agreement”

• There was no formal, expiring 50-year treaty: The viral rumor claimed a formal contract signed in June 1974 expired 50 years later. In reality, the U.S. and Saudi Arabia formed an informal arrangement in 1974. The Saudis agreed to price oil in dollars and reinvest excess reserves into U.S. debt in exchange for American military protection and weapons. No binding treaty dictates oil sales exclusively in dollars, nor was there a expiration date set for June 2024. Radio Free Asia+ 2
• Saudi Arabia is exploring other currencies, but not abandoning the dollar: Saudi Arabia has expressed a willingness to settle small amounts of oil sales to China in yuan (and to India in rupees). However, the overwhelming majority of global oil trade—including Saudi exports—continues to be priced and settled in U.S. dollars. PolitiFact

2. How This Impacts America

Because the dollar wasn’t suddenly dropped, there is no immediate economic shock to the U.S. Economy. However, the gradual shift where countries trade in local currencies (often called de-dollarization) reflects broader long-term trends:

Atlantic Council

• The Saudi Riyal is Pegged to the Dollar: The Saudi riyal has been strictly pegged to the U.S. dollar at a rate of 3.75 riyals per dollar for decades. As long as that peg remains, Saudi Arabia must hold massive U.S. dollar reserves to maintain its currency stability.
• Gradual Trade Diversification: As China has become the world’s largest importer of crude oil, Saudi Arabia naturally wants stronger trade relationships with Beijing. Accepting limited yuan for oil lets Saudi Arabia purchase Chinese imports (like manufacturing goods or infrastructure projects) directly without converting currencies.
• The U.S. is No Longer Dependent on Saudi Oil: In the 1970s, the U.S. was heavily reliant on Middle Eastern crude. Today, thanks to domestic production (shale oil), the U.S. is the world’s largest oil producer and a net energy exporter. The dynamic of the 1974 arrangement has fundamentally changed on both sides. Atlantic Council

3. Will Countries Stop Buying U.S. Treasury Bonds?

No, countries will not stop buying U.S. Treasuries.

While the share of central bank reserves held in dollars has slightly declined over the last two decades (from around 70% to under 60%), the U.S. Treasury market remains the backbone of the global financial system. Here is why:

1. Market Liquidity and Safety: The U.S. Treasury market is the largest, most liquid financial market in the world. No other country—including China—has a financial system deep enough or open enough to absorb the trillions of dollars of global excess cash generated by world trade.
2. Capital Controls in China: For the Chinese yuan to replace the dollar or U.S. Treasuries as the premier global reserve currency, China would have to lift strict capital controls and allow money to flow freely in and out of the country. Beijing has shown little desire to dismantle these controls because doing so would weaken its command over its own economy.
3. Who Buys Treasuries: Even if foreign central banks reduce their Treasury purchases slightly, massive buying continues from domestic U.S. institutions, pension funds, commercial banks, and global investors seeking a safe-haven asset.

Summary

The U.S. dollar hasn’t been discarded overnight, nor has Saudi Arabia severed financial ties with the U.S. While global trade is slowly becoming more multi-currency as nations like China expand their economic footprint, the liquidity, stability, and depth of U.S. financial markets mean the U.S. dollar and Treasury bonds remain the dominant forces in international finance.

Atlantic Council