Making headlines in both mainstream media and alternative media, has been the sudden rise in political tensions between Saudi Arabia and the United States. Having a vastly interconnected relationship on a variety of fronts, this apparent rift in relations sparks a number of questions regarding what’s really happening behind the scenes. While there may not be a perfect answer as of yet, one can start to connect the dots by closely examining the data points, as they currently exist, in the hopes of developing some type of coherent picture of rational possibilities.
The world today is very different compared to when Saudi Arabia and the U.S. first linked up, meaning the dynamics of the relationship have changed. It’s important that people understand these international geopolitical relations, so that when external conflicts arise in the future, they will be able to see them for what they truly are, instead of being duped by fear mongering propaganda pieces. A knowledgeable public is the only way a true democracy works.
The first place to start is history, as one cannot fully comprehend any situation without the proper context. As many in alternative media have already come to understand, the petrodollar is at the very core of American hegemony and global economics. The main mechanism for the petrodollar is the international oil trade, which is almost exclusively transacted in U.S. dollars. Essentially, the U.S. acts a middleman in the transaction of oil across borders, forcing countries to buy U.S. dollars in order to purchase oil. This creates an artificial demand for the U.S. dollar, as countries need large reserves of dollars in order to keep markets liquid. It’s safe to say, that without the petrodollar system, the U.S. would not enjoy the standard of living it does today.
At the heart of the petrodollar system has been Saudi Arabia, the largest oil producer in the world, yet weak militarily and unpopular internationally. With pressure to recover from the gold standard breakup, the United States made a set of deals with the Saudi family from 1972-1974, in which the United States secured the protection of Saudi Arabia (particularly the Royal Family) in exchange for their promise to sell all their oil in U.S. dollars. According to Nick Giambruno of The Crux, Saudi Arabia agreed to,
- Use its dominant position in OPEC to ensure that all oil transactions would happen in U.S. dollars.
- Invest a large amount of its dollars from oil revenue in U.S. Treasury securities and use the interest payments from those securities to pay U.S. companies to modernize the infrastructure of Saudi Arabia.
- Guarantee the price of oil within limits acceptable to the U.S. and prevent another oil embargo by other OPEC members.
What the petrodollar essentially did was allow America to accumulate assets cheaply at the expense of the rest of the world, while the Saudi Royal Family ruled Saudi Arabia with an iron fist without the threat of being challenged. Considering oil would go on to become the most important commodity in international markets; both parties became extremely enriched and greatly enjoyed this mutually beneficial relationship, despite having vast cultural differences. The U.S. held on to its throne as the dominant force in international politics, while Saudi Arabia developed into a power player in the Middle East. Despite the success of both countries over the last 40 plus years, the world is changing quite rapidly, placing new stressors on a once impenetrable relationship.
A Changing World
One of the major differences in the global economy today, compared to when the petrodollar system was first created, is that the U.S. is no longer the unquestioned king of global politics and economics. Though it might not be so obvious just yet, the East is starting to rise up and challenge the reign of the West, especially China and Russia. China’s rise comes more in the form of economics, where their currency, the Yuan, has been slowly gaining credibility for use in international trade. Not only is the Yuan set to be included in the Special Drawing Rights basket (SDR), an IMF reserve asset that is convertible to any of the five currencies selected by the IMF to be included (Chinese Yuan, U.S. Dollar, Japanese Yen, British Pound, and European Euro), but many have even speculated that the SDR could become the new world reserve currency, replacing the almighty dollar. China has also hinted that the Yuan may even become a gold backed currency, which comes on the heals of the Libyan invasion, a country also aiming to create a gold back currency. Obviously this would be quite a threat to the petrodollar.
In many ways, China seems very intent on bringing back the gold standard or at least restoring the value of gold, as they opened their own gold exchange on April 19th, 2016 in Shanghai, in order to exert more influence over the price of gold. This is a direct threat to the virtual monopoly the London Exchange has over the pricing of gold and silver throughout the world. Interestingly enough, just last week Deutsche Bank just came out and admitted to rigging the price of gold and silver, along with the collusion of other big banks, which it agreed to expose as part of its legal settlement. What is also interesting to note, is that many countries, such as Russia, China, India, Singapore, and others, are buying gold in bulk, seeing it as a strong form of money in the current times. These continued developments should be worrisome to any westerner, in that gold and silver have held strong as money for thousands of years, while fiat currencies, like the U.S. dollar, which is backed by nothing tangible, have historically always collapsed. A true re-valuation of currencies worldwide could be in the process of happening and it doesn’t seem to be in favor of the west.
In general, the demand for dollars is decreasing all over the world, as the writing on the wall is starting to become clear that the United States is rigging the system in their own favor. As a result, many countries are aiming to conduct international trade in other currencies, as well as divest their reserve assets in more promising securities. The East has even created its own central bank and development bank to rival the IMF and World Bank, in what’s referred to as the BRIC’S system. On multiple fronts, the dollar is falling out of favor around the world.
(BRICS members: Brazil, Russia, India, China, and South Africa)
The East has also stood up geopolitically and militarily, especially Russia, which has gone into Syria and basically stopped the continued invasion of ISIS, which is nothing more than a foreign mercenary army used by the West as a proxy to destabilize Syria and oust the anti-western leader, Bashar al-Assad. From many reports, even amongst the mainstream media, Russia appears to have developed pretty advanced military weaponry not previously seen before, showing the infallible U.S. Army that it cannot simply do whatever it wants. It’s about time someone did this anyways, as it’s become apparent that any country that attempts to break away from the petrodollar and sell its oil in other currencies is then invaded shortly after. Just look at the most recent list, which includes Iraq, Libya, Syria and next on the chopping block is Iran if the war hawks in Washington get their way.
The other major change happening in the global economy is the move to a post-oil world. Alternative energy products are being increasingly built up all over the world, bringing down the demand of oil in the process. This especially affects countries like Saudi Arabia, whose entire economy is predominantly driven by the sale of oil. There’s no doubt that this has Saudi Arabia strategizing about the most effective way to transition into this vastly changing world. This change around the world in macroeconomic dynamics is also coupled with the fact that the U.S. and Saudi Arabia are in very different positions domestically compared to when the petrodollar system began, inevitably affecting how both countries must adapt moving into the future.
U.S. and Saudi Arabia In Dysfunctional States
Compared to the quickly developing country of the 1970’s with rich oil reserves and a strong U.S. ally to protect it, Saudi Arabia is going through some very difficult times at the moment. For one, they have an internal power struggle building in the country, in both the inner circle of power and amongst the people of the country. The King of Saudi Arabia, King Salman, is rumored to have developed dementia, which means there is not only a battle for power within the royal family, but there is an internal battle over the direction of Saudi Arabia moving into the future.
There is also a huge problem within the population of Saudi Arabia, as the people are developing a strong desire for social reforms in the country. With the Saudis being known for poor democratic institutions, harsh capital punishment laws, heavy restrictions for the rights of women, and poor humans right in general, this change is not only being pushed by the people of Saudi Arabia, but has been developing amongst the international community at large. Change is inevitable in Saudi Arabia, especially as the whole world modernizes and becomes more interconnected.
They are also having problems in oil, as there is a huge oversupply of oil in the markets right now, which is only going to get worse now that Iran has its sanctions removed. As stated earlier, driving down the price of oil especially hurts countries like Saudi Arabia which relies heavily on the price of oil to drive their economy. Their oil reserves have taken a hit as a result, as they have chosen to flood the market with reserves in order to make up for the losses they have incurred. Saudi also stretched its budget thin by engaging in an imperialist proxy war in Yemen against Iran, which is draining valuable resources and garnering international scrutiny from those who see the invasion as an obvious war crime. In many ways, the fall in oil prices and the excess in governmental spending on military operations have essentially rendered Saudi Arabia bankrupt, which is especially worrisome as their position in the world changes.
However, the U.S. is not much better off, as it is also broke. Having lived off its credit card for far too many years now, it has very little productive capacity in its savings account to salvage it from the dead. This is going to inevitably worsen as well, as the East rises economically and geopolitically. The breakdown in the dollar is really adding up and causing America to lose both respect on the international stage and in value of its currency. The U.S. can no longer get countries to fall in line as easily as it once did, which means that it is going to become increasingly hard to prop up the U.S. dollar, as countries start to conduct trade outside of its control. In many ways, the U.S. is becoming exposed for its exploitation of the petrodollar, and there are few spots left to hide, especially if Saudi Arabia were to jump ship and move outside the petrodollar system.
In many ways, both countries are trending down the more the world shifts in global economics and politics. As both continue to fall, both will inevitably aim to save themselves, as they have no other choice. So even though the two countries are heavily intertwined, even amongst criminal activity, they are both inevitably looking to save themselves, even if it’s at the expense of the other. This leads into different lines of speculation as to how the current dynamic in the relationship will play out moving into future.
The Current Dynamics Of U.S.-Saudi Arabia Relations
Oddly enough, much of the controversy in recent news between Saudi Arabia and the U.S. stems from a report that aired on 60 Minutes, which claimed that the U.S. was considering declassifying 28 pages about 9/11 that were previously hidden from the public. As many in alternative media have already known, these 28 pages are mainly about the Saudi Arabian connection to 9/11, specifically the funding of the alleged hijackers. As an obvious backlash to this report, Saudi Arabia has threatened to liquidate 740 billion dollars worth of U.S. treasuries that it holds in its excess reserves. As Saudi Arabia is the third largest holders of U.S. treasuries, this is no small action, even though the Federal Reserve could probably soak them up. In many ways, Saudi Arabia would be forced to liquidate their assets nonetheless, since their U.S. assets would be confiscated anyways if the victims of 9/11 successfully sued them.
The problem with the 9/11 “story” is that Saudi Arabia and the U.S. are heavily interlocked in both 9/11 and the financing of Islamic terrorism, so unraveling the true core of those topics is bound to reveal a lot more than either government wishes to see exposed. In fact, Obama recently met with Saudi Arabia and expressed his support for not releasing the 28 pages for fear that if they were released, it would allow victims of 9/11 to sue the Saudi Arabian government, which would then open up the U.S. government to being sued as well. This is actually quite revealing in itself; this is basically an indirect admission of U.S. government involvement in 9/11. What is also interesting to note, is that there is almost no way that the 9/11 “missing 28 pages” will go into any type of depth as to what really happened on 9/11 and who specifically was involved. While some small fries could come under fire, the big fish in the U.S. and Saudi Arabia are far too interconnected at the highest levels to allow any real leaks to come out. The 28 pages seem to be nothing more than a limited hangout that will provide a little truth, but completely hide the much bigger picture.
This also comes at a time where Saudi Arabia and U.S. relations are becoming increasingly stressed, mainly revolving around the U.S. engaging in relations with Iran, the Saudi’s sworn enemy in the region. The House of Saud is slowly losing influence in the region, which is reflected in the U.S. opening ties with Iran and the depletion of its oil reserves. Many even speculate that Saudi might have already hit peak oil, meaning they have no choice but to start to transition towards something different. Saudi Arabia is also upset with the U.S. for not playing a more active role in its war on Yemen; feeling they are not holding up their end of the bargain in the petrodollar system.
It seems very apparent to some researchers in alternative media that Saudi Arabia is becoming increasingly aware that they need to pivot east. Not only is the U.S. falling out of place internationally and economically with the slow fall of the dollar, but China is now the largest oil market in the world, and Saudi Arabia must transition away from oil. This would explain why Saudi Arabia is considering selling some of its oil assets, like ARAMCO, to foreign companies in a move to develop a sovereign wealth fund that will help it pivot east and transition the country towards a post-oil world. They almost seem to have no choice, as America is known to throw countries under the bus that fall out of favor. Saudi Arabia also has quite a lot of gold, which means that the growing build-up of a gold-backed economy could be something that benefits Saudi Arabia if they were to pivot east.
It seems that the U.S. is using the 9/11 card as a political ploy against Saudi Arabia, threatening them not to wander too far away from their petrodollar relationship in the hopes that they will not turn towards the East. The Saudis pivoting east would really be devastating for the petrodollar, and the U.S. economy overall. If Saudi Arabia does decide to pivot east, it could result in the destabilization of the country, either through a CIA lead Saudi Spring (Similar to the Arab Spring) or an influx of Western backed “Islamic terror” in the region. This seems to be the card most often played by the West in order to bring countries into line with their agenda, and considering Saudi Arabia is not very well liked on the international stage, political cover for such an action would not be very hard to obtain.
They also already have the internal problem of human rights in the country, which would provide further political cover for bringing “freedom and democracy” to the region, like in a Saudi Spring. Not to mention that Saudi Arabia has tons of oil, which America is always lurking to steal. It could also be an option to blame Saudi Arabia for the inevitable collapse of the U.S. dollar, which in turn would give the U.S. “justification” in the eyes of the public to go to war with Saudi Arabia. It seems pretty apparent that the 9/11 card could easily be used to dupe the public into supporting a war against Saudi Arabia for being the “masterminds” of the attack, despite how utterly false that claim is. These are all cards that have been used many times over, so there is no reason to believe that they will not repeat themselves.
Though there are many threads here to explore, it does seem pretty clear that the relationship between Saudi Arabia and the U.S. is starting to break apart, as Saudi Arabia sees the writing on the wall and pivots east in a last-ditch effort to save its kingdom from falling all the way down. The U.S. also seems to be coming to the realization that it needs to either keep Saudi Arabia in line or punish it for breaking away from their bread and butter: the petrodollar. Only time will tell what will happen, but this is an important relationship whose breakup could unravel in a very nasty way. It’s increasingly important that people pay attentions to these matters, so that wars are averted and the real criminals, even inside one’s own government, are brought to justice. This is the only way peace will come about and a just world can manifest. Knowledge is power; so keep your eyes open and stay informed.
Sources: http://www.mintpressnews.com/saudi-king-hospitalized-for-dementia/210145/, http://thecrux.com/why-the-u-s-saudi-relationship-is-extremely-important-to-your-wealth/, https://www.youtube.com/watch?v=H9UE5KStL6o, http://www.telegraph.co.uk/news/worldnews/europe/russia/12047257/Russia-sends-warning-to-West-with-show-of-strength-in-Syria.html, http://www.zerohedge.com/news/2016-04-11/was-saudi-arabia-behind-911-these-28-pages-have-answer, http://www.huffingtonpost.com/entry/saudi-arabia-oil_us_56fea15ce4b083f5c60788d7