In a move that could have significant implications for the global economy, Saudi Arabia has entered into a new trade alliance with China, Russia, India, Pakistan, and four Central Asian nations. This alliance is seen as a significant shift away from the US dollar as the primary currency for international trade, which has been the norm for several decades.
The trade alliance is called the Shanghai Cooperation Organisation (SCO), and it was established in 2001 to promote regional cooperation and stability in Eurasia. The SCO comprises eight member states, namely China, Russia, Kazakhstan, Kyrgyzstan, Tajikistan, Uzbekistan, India, and Pakistan, with Afghanistan, Belarus, Iran, and Mongolia as observer states.
This move by Saudi Arabia is a significant shift in its foreign policy and could have far-reaching implications for the global economy. In this article, we will explore the background of this alliance, the implications of Saudi Arabia's entry into the SCO, and the potential impact on the global economy.
Background of the Shanghai Cooperation Organisation (SCO)
The SCO was founded in Shanghai, China, in 2001, with the aim of promoting regional cooperation and stability in Eurasia. The organisation was established by China, Russia, Kazakhstan, Kyrgyzstan, Tajikistan, and Uzbekistan. The main objectives of the SCO are to promote economic cooperation, regional security, and stability in the region. Since its inception, the SCO has expanded to include India and Pakistan as full members, with Afghanistan, Belarus, Iran, and Mongolia as observer states.
The SCO has been actively promoting economic cooperation among its member states. In 2018, the SCO member states accounted for nearly 20% of the world's GDP and around 45% of the world's population. The organisation has established the SCO Development Bank and the SCO Interbank Consortium to promote investment and financing among its member states.
Saudi Arabia's Entry into the SCO
Saudi Arabia's entry into the SCO marks a significant shift in the country's foreign policy. Historically, Saudi Arabia has maintained close ties with the United States, with the US dollar being the primary currency for oil sales. However, the recent move by Saudi Arabia to enter the SCO is seen as a response to the changing geopolitical landscape and the desire to diversify its economic partnerships.
Saudi Arabia has been actively seeking new economic partnerships with countries in Asia, particularly China and India. In 2019, Saudi Arabia signed several trade agreements with China, including a $10 billion refining and petrochemical complex in China's northeastern province of Liaoning.
The entry of Saudi Arabia into the SCO is seen as a significant development for the organisation. Saudi Arabia is one of the largest oil producers in the world and a major player in the global economy. Its entry into the SCO is expected to boost the economic cooperation among the member states and strengthen the organisation's role in the global economy.
Implications for the Global Economy
The entry of Saudi Arabia into the SCO could have significant implications for the global economy. The US dollar has been the primary currency for international trade for several decades. However, the recent move by Saudi Arabia to enter the SCO could be seen as a sign of the declining influence of the US dollar in the global economy.
The SCO member states have been actively promoting the use of their national currencies in trade and investment. In 2019, China launched the Digital Currency Electronic Payment (DCEP) system, which is expected to promote the use of the Chinese yuan in international trade.
The entry of Saudi Arabia into the SCO could further boost the use of national currencies in international trade and investment. This could have significant implications for the global financial system and