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
- 22 -
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 $.