In 2005, the Quincy Pact, which guaranteed the survival of the Saudi regime, was renewed for another 60 years by President Bush and King Abdullah Ben Abdelaziz Al Saud. A country was selling its future in exchange for oil and Aramco, the world’s largest company, which markets it.
In 1973 the Arab war with Israel changed the equation that until then had underpinned the post-war period even more solidly than the Bretton Woods agreements. The imperialists took a further step towards parasitism: oil was replaced by the petrodollar.
It has gone down in history as “the oil crisis”. The Arab oil-producing countries embargoed oil sales to the United States and countries complicit with Israel. It lasted only four months, but the oil crisis never abated. It had a devastating effect on the world economy.
The crisis culminated on January 20, 1974 with a threatening speech by President Nixon to Congress. The Saudi regime had to back down and lift the embargo in exchange for the promise of a solution to the Arab-Israeli war. Israel was to withdraw from all Palestinian territories occupied in the 1967 war.
The commitment was never fulfilled because Israel never fulfills its obligations and no one is able to get it to do so.
On June 9, 1974, a second strategic component was added to the oil crisis: for fifty years, Saudi Arabia undertook to fix the price of its oil in dollars and to invest the profits in US treasury bonds.Thus was born the petrodollar that led the United States to subsist in exchange for driving its economy into parasitism.Since then, financial capital is the closest thing to a casino, although instead of gambling it issues debts of all kinds: public and private, internal and external. Fiduciary money and, in particular, the dollar, has inflated world markets.The United States prints dollars and countries, such as Saudi Arabia, keep them and put them into circulation.The process runs parallel to the abandonment of the gold standard, i.e. the recognition of bankruptcy by the United States.It is the difference between a road bike and an exercise bike: no matter how much the rider moves the pedals, he is not trying to go anywhere but to sweat.
The Saudi regime filled the world with oil and the United States filled it with dollars.The oil was used to prevent the unbridled issuance of paper from sinking the dollar. A high U.S. currency made imports cheaper and thus maintained the high standard of living, consumption and economic profligacy.
The same was true for the public sector: with oil revenues, the Saudis bought U.S. Treasury bonds. Public institutions could spend hand over fist because the waste was paid for with more paper and debt.
Now one of the two taps has been turned off.The Quincy Pact is still in force, but the petrodollar is losing ground.The agreement between the United States and Saudi Arabia expired last week and the wall of silence has been the characteristic note. Press agency reports have limited themselves to stating that from now on China will pay in yuan for oil from Saudi Arabia.
In addition, there are other means of payment. For example, the Saudi Central Bank has joined the Bank for International Settlements’ central bank’s digital currency project, mBridge, to enable instant cross-border payments.
There are also other sources of energy besides oil.Of course, there are more producing countries, such as Russia, which have limited the strength of the traditional ones, coalitioned in OPEC. The “green” policies sanction this new correlation of forces and seek to reinforce it: what the West does not like is not exactly oil but the countries that produce it.
In 2022 China and Saudi Arabia began negotiating payment for oil purchases in yuan.In January of the following year Saudi Finance Minister Mohammed Al Jadaan announced that they were willing to collect in currencies other than dollars. “There is no problem in discussing how we will settle our trade agreements, whether in U.S. dollars, euros or Saudi rials,” he said.
In November China and Saudi Arabia signed a $7 billion national currency swap agreement to facilitate mutual economic cooperation.
A month later, the Wall Street Journal reported that last year about 20 percent of global oil transactions were settled in currencies other than the dollar.But the percentage falls far short. More than half of the world’s oil trade may no longer be paid in dollars, hurting both the U.S. financial system and the dollar, which could ultimately lose a third to a half of its current value.
Saudi Arabia’s decision to become a member of the mBridge platform will facilitate the de-dollarization of oil trade. Riyadh has joined more than 26 other observer members, including the South African Reserve Bank, which was given the green light for membership this month.
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