Presidential elections and changing global economic realities - EDITORIAL

We are entering the second half of this election-charged year. All major presidential candidates are now presently directing their political campaigns Northwards. The three main candidates are pledging various promises to the people of this once war-ravaged province.
President Wickremesinghe from around a month-and-a-half earlier has been visiting the North and the East, holding meetings with diverse political groupings and political parties. He has promised to find a permanent solution to the political problems of the Northern people. The president has also been allocating funds for the development programmes in the North.

The President made similar promises earlier while premier, but was unable to fulfill them for one reason or another. However, traditional Tamil political leaders have been able to strike a sympathetic cord and confrontational politics with him were few if any.
Anura Kumara Dissanayake of the NPP/JVP combine, seen by sections of poll forecasters as being at the forefront of the three candidates, appears to have made a complete political u-turn on the ‘National Question’.

The political combine has now promised to change the Constitution if elected to power, via a clause incorporating a solution to the national issue. But it’s not a blank cheque. It comes with a codicil -’agreed by all’.
What practical measures or steps is the NPP/JVP taking to bring about this national consensus? Do they go beyond proposals that Past President Chandrika Kumaratunga proposed in 2020? The JVP torpedoed that effort.

The NPP/JVP statement is a good starting point, yet most people remember the racist politics they played leading an armed uprising against the implementation of the 13th Amendment and opposing the establishment of Provincial Councils as a means to increase devolution of power to the regions.

Sajith Premadasa and his SJB too, traversed the North. Premadasa has promised to not only fully implement the 13 Amendment to the Constitution, but go beyond this.
Amid the cacophony of sudden concern of Southern politicians for the welfare of the Tamil people in the North and the East, earth-shaking events of international dimensions seem to have been overlooked. Saudi Arabia decided not to extend its 50-year-old petrodollar contract with the US on June 9 this year.

The term ‘petrodollar’ (USD) is used exclusively as the currency for crude oil transactions on the world market. It stipulated that Saudi Arabia and OPEC by extension, would price oil exports, exclusively in USD. These countries would also invest their surplus oil revenues in US Treasury bonds. In exchange, the US would provide military support and protection to the kingdoms.
This helped the USD cement its position as the world’s reserve currency and ushered in an era of prosperity for Americans. The inflow of foreign capital into US Treasury Bonds has supported low interest rates and a robust bond market.

All that is set to change. Saudi will now be selling oil and other goods using different currencies, such as Chinese RMB, Euros, Yen, Indian Rupiah and Yuan, instead of only US dollars.
With Saudi Arabia free to price oil in multiple currencies, the global demand for the US dollar will decrease. Historically, the petrodollar system bolstered the dollar’s position as the world’s primary reserve currency. The potential use of the Chinese Renminbi as an alternative reserve currency could shift financial power towards China and other emerging markets.
The expiration of the petrodollar agreement represents a fundamental shift in global economic and financial dynamics. The US dollar’s weakening, and the rise of potential alternative reserve currencies commencing.

Saudi movements away from the dollar are part of a larger diplomatic effort by that country to gain more flexibility in dealing with major global powers like the Chinese and the Russians.
Recent developments suggest this trend isn’t going away. For example, after receiving an invitation to the G-7 Summit for the first time ever, the Saudi regime declined the invitation. Nonetheless, it is sending its Foreign Minister to Russia for this week’s BRICS summit.
The trend is not inductive a definite break with the US dollar, nonetheless is continued evidence of an ongoing decline in US control over the Middle East, global currency markets and the geopolitical order.