SAUDI ARABIA
Saudi Arabia is in the news because of its war in Yemen, its feud with Iran, its support of the Syrian opposition, its interference in the internal politics of Lebanon, its behindthe-scenes friendship with Israel, its awful human rights record, and its newly-formed military and economic agreements with China and Russia. Surely, it couldn’ t get more complicated...? The current situation has its roots in the 70s when Nixon took the US off the gold standard, which began to affect confidence in the dollar as the world’ s reserve currency.
arrangement remain secret
Kissinger’ s answer came to be known as the“ petrodollar”, whereby Saudi Arabia would only accept payment in dollars for its oil. In return the USA guaranteed Saudi Arabia’ s military security. The Saudis had to buy US Treasuries which, in turn, helped to finance US military expenditure. The Saudis demanded that this arrangement remain secret because its Arab neighbours would literally have been“ up in arms” that it had entered into such an agreement with Israel’ s main ally, especially so shortly after the 1973 Yom Kippur War.
Over a 40 year period, the USA never once condemned Saudi Arabia’ s terrible human
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rights record, its financial and political support of Wahhabism or its role in the events of 9 / 11. In the last few years, however, strains have appeared in the relationship at a time when the Saudi economy has hit relatively hard times. The oil price has halved and is causing financial difficulties within the Kingdom.
Analysts are beginning to question why Saudi apparently only has $ 113bn US Treasuries when at least $ 5 trillion was transferred to the US Treasury in that period. Has the $ 5 trillion been spent on US military expenditure and leaving Saudi with a pittance? To put this into perspective, even the cash-strapped UK officially has $ 214bn US Treasury Bonds.
Saudi assets frozen
In 2016 the US Congress passed a law allowing victims of 9 / 11 to sue Saudi Arabia for damages which resulted in various Saudi assets being frozen, thus further damaging Saudi Arabia. The huge investment in the US fracking industry has also dealt a blow to Saudi oil sales to the US.
China has taken up the slack in Saudi oil production which further complicates matters, as they don’ t want to pay in US $.