Saudi stockpile of US Treasuries hits its lowest in over six years
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According to Treasury Department figures, the Kingdom sold more than $3 billion in US government debt in June for the third straight month.
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US President Joe Biden and Saudi Crown Prince Mohammed bin Salman during the Jeddah Security and Development Summit (GCC+3) in Jeddah on July 16, 2022. (AFP)
According to Bloomberg, Saudi Arabia's holdings of US Treasury bonds have dropped to their lowest level in more than six years.
Figures from the Treasury Department show that the Kingdom sold more than $3 billion in US government debt in June for the 3rd consecutive month, bringing its total holdings to $108.1 billion.
Meanwhile, $4 billion was sold by the United Arab Emirates.
Read more: The US is living on borrowed money: NYT
With the US dollar losing hegemony, the Gulf is looking for new ways to invest for greater returns. Saudi Arabia, whose Treasury holdings have fallen by more than 41% since early 2020, has increasingly focused on assets such as stakes in Lucid Group Inc., Uber Technologies Inc., and Newcastle United.
Bloomberg Economics details that the proportion of Saudi Arabia's foreign wealth held in hazardous assets will be over 40% by the end of 2022. It has more than quadrupled since 2016 when MBS stated that it was seeking investments other than oil.
According to Ziad Daoud, a chief emerging markets economist, “Domestically, higher risks mean potential losses for the kingdom. Globally, the re-allocation of Saudi wealth could result in higher US interest rates.”
Regulatory filings released on Monday show the Saudi sovereign wealth fund's stated holdings in US-traded stocks increased about 10% in value to around $39 billion in the second quarter.
The Public Investment Fund, as it is known, increased its interests in firms such as electric car producer Lucid and Chinese e-commerce behemoth Alibaba Group Holding Ltd.
Read more: China's trillion-dollar investment in the Middle East threatens US
According to the most recent numbers provided on Tuesday, China sold $11.3 billion in Treasuries in June, bringing its holdings to the lowest level since mid-2009. Japan and the United Kingdom were among the top buyers of what is largely regarded as one of the safest assets to hold.
While the Kingdom is the world's largest oil exporter and a foundation in the petrodollar system, it is now aiming to enhance ties with key trading partners, particularly China, as part of a move to diversify the economy away from petroleum.
Higher oil prices and output used to immediately translate into increased Saudi foreign reserves. However, authorities indicated a year ago that the monarchy intended to keep the money, although it is unclear to what end.
The National Development Fund, which has been charged with investing in the development of the kingdom's infrastructure, and the wealth fund are two other potential receivers of transfers.
This year, the Kingdom's effort to boost petroleum prices through output restrictions has resulted in considerably lower earnings from foreign oil sales. Following a windfall of about $326 billion in 2022, Saudi Arabia is at risk of posting a budget deficit for the second time in almost a decade.
Experts say Saudi investment of oil income in American assets, as well as Riyadh's oil production and price strategies, and the dollar's sustained dominance are all part of current conversations between the two countries.
US push for a Saudi-'Israel' deal is all about China: Bloomberg
Meanwhile, Bloomberg previously reported that US President Joe Biden's strategic moves in the Middle East are being painted as a maneuver to counter China's growing influence, marking a significant policy shift.
The newsletter wrote that the attempt to normalize relations between "Israel" and Saudi Arabia, seemingly for the sake of Middle East peace, is actually an effort to curb China's sway in a pivotal region.
This initiative underscores the extent to which the US is willing to invest to prevent Saudi Arabia from falling under China's sphere of influence. Despite the ongoing talk of the US pivoting towards Asia, this reveals the enduring significance of the Middle East in global geopolitics,
