Saudi Arabia Ends 80-Year-Old PetroDollar U.S. Agreement: Joins China-Led Central Bank Digital Currency Coalition

by Brian Shilhavy, Health Impact News:

 

This past Sunday (June 9, 2024) Saudi Arabia made the historical move to not renew an 80-year-old agreement with the United States that established the U.S. Dollar as the world currency to purchase Saudi oil, in what should have been headline news, but seems to have been blacklisted in U.S. financial news publications, even in alternative financial news publications such as ZeroHedge News.

Here is the coverage of this historic event from the The Business Standard, a Bangladeshi daily newspaper.

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Saudi Arabia’s petro-dollar exit: A global finance paradigm shift

The crucial decision to not renew the contract enables Saudi Arabia to sell oil and other goods in multiple currencies, including the Chinese RMB, Euros, Yen, and Yuan, instead of exclusively in US dollars. 

Significant financial upheaval is potentially ahead of the financial world as Saudi Arabia has decided not to renew its 80-year petro-dollar deal with the United States.

The deal, which expired on Sunday 9 June, was a cornerstone of the United States global economic dominance.

Originally signed on 8 June 1974, the deal established two joint commissions, one based on economic cooperation and the other on Saudi Arabia’s military needs.

At the time, it was said that it heralded an era of close cooperation between the two countries, says Katja Hamilton of BizCommunity.

This latest development signifies a major shift away from the petrodollar system established in 1972, when the US decoupled its currency from gold, and is anticipated to hasten the global shift away from the US dollar. (Source.)

While I could find no major U.S. English publication covering this as headline news, there was plenty of discussion on Twitter/X.

One U.S. investor, Andrei Jikh, who has over 2 million subscribers on YouTube, published a video on just what the end of the petrodollar means, and that video has accumulated almost 1 million views over the past couple of days.

The video is just over 15 minutes long, but the facts regarding the end of the petrodollar is only covered in the first 12 minutes.

Everything after that is this investor’s views, including his view that people should continue investing in the U.S. Stock market and also invest in Bitcoin, certainly a view that myself and many others would not agree with.

But his summary of the history and significance of the Petrodollar is excellent, and well worth the 12 minutes to watch.

The petrodollar agreement between Saudi Arabia and the United States included more than just the agreement to require the purchase of oil with U.S. dollars, as it also included a promise from the U.S. to protect Saudi Arabia militarily, and also contained provisions for establishing the State of Israel in 1948, something that President Roosevelt actually opposed, but was adopted by his successor, President Truman.

The Quincy Pact

Saudi Arabia reportedly did not renew “its 50-year petrodollar agreement with the United States”, an agreement that expired on Sunday, June 9, 2024.

While it is permissible to doubt the existence of a half-century-long agreement, it was indeed in 1974 that the petrodollar emerged. Three short years after the end of the Bretton Woods agreements.

From a historical perspective, the origins of the petrodollar date back even to 1945.

On his way back from the Yalta conference, President Roosevelt made a stop unbeknownst to the British along the Suez Canal. It was aboard his cruiser USS Quincy that he met King Abdulaziz Al Saud.

It will later be said that this meeting birthed the “Quincy Pact.”

This diplomatic anchorage went so well that Roosevelt offered his wheelchair to the Saudi king, who was also disabled.

Despite this goodwill, the king refused to allow Jewish settlement in Palestine.

However, the American president ensured the essential by sidelining British Petroleum in favor of American oil companies.

This tacit agreement prevented the creation of a Jewish state, but Roosevelt would die two months later. His successor, Harry Truman, would be a strong supporter of the founding of Israel.

He would recognize the Hebrew state 11 minutes after the Israelis declared themselves a nation, against the advice of his Secretary of State.

Henry Kissinger’s Masterstroke

It was in 1974 that the second historic meeting between the Saudis and the American government took place. Henry Kissinger had been Secretary of State for a year.

His mission? To impose the dollar on the ingrates of the old continent who dared to demand gold.

His strategy began with an intervention in favor of Israel in the Yom Kippur War.

[For more context, note that Henry Kissinger is Jewish. He fled Nazi Germany at the age of 15 and would return in uniform five years later to fight in France and Germany.]

In retaliation, Arab countries ceased their oil exports, primarily to European nations. The United States, for its part, was self-sufficient. By 1974, the price of a barrel had quadrupled, going from $3 to $12.

This oil embargo was all the easier to implement as the United States had been pushing for years for the emancipation of Iraq, Iran, Kuwait, the United Arab Emirates, Qatar, and Libya from European companies (British Petroleum, Royal Dutch-Shell, and the French Petroleum Company, ex-Total).

Kissinger wanted the price of the barrel to explode to weaken the old continent. He knew well that the American army would have the last word if things escalated, allowing him to impose himself at the heart of international relations.

International discord would reach its peak when President Gerald Ford recognized Jerusalem as the capital of the Hebrew state.

Petrodollar

In response, Saudi Arabia continued to raise the price of the barrel, without knowing that it was playing into the hands of Henry Kissinger, who would ultimately threaten to use force to remedy what he called “the strangulation of the industrialized world”. The London Sunday Times revealed in February 1975 the existence of the “Dhahran Option Four” plan, which planned to invade Saudi Arabia to take possession of its oil wells.

King Faisal would hear these drums of war very clearly. At the end of 1974, he finally gave in to Henry Kissinger’s demands, who promised him the unlimited sale of arms, a backpedal on the Jerusalem issue, and a return of Israel to its 1948 borders (plus a myriad of technologies).

In exchange, Saudi Arabia had to:

1. Sell its oil exclusively in dollars.
2. Invest its dollar surpluses in American debt (It was anyway impossible for a kingdom of 10 million inhabitants to spend the thousands of billions of petrodollars).

All OPEC countries would agree in 1975 to denominate their oil in dollars. Here are the broad lines of the genesis of the petrodollar. King Faisal would be assassinated on March 25, 1975, on the day of the Mawlid, the anniversary of the birth of the prophet Muhammad. Subsequently, Israel would never return to its 1948 borders. (Source.)

I was amazed that this news of the petrodollar agreement ending Sunday was barely mentioned, if mentioned at all, in the corporate news in the U.S.

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Originally Posted at https://www.sgtreport.com