Saudi Arabia would have put an end to the petrodollar system, we can read everywhere on X. What is it really?
The Quincy Pact
Saudi Arabia would not have renewed “its 50-year petrodollar agreement with the United States”. An agreement which expired on Sunday June 9, 2024, we can read here and there.
If one can doubt the existence of a half-century-long agreement, it was in 1974 that the petrodollar emerged. Three short years after the end of the Bretton Woods agreements.
From a historical point of view, the beginnings of the petrodollar even date back to 1945. Returning from the Yalta conference, President Roosevelt made a stopover without the knowledge of the British along the Suez Canal. It was aboard his cruiser USS Quincy that he met King Abdelaziz Al Saud. It would later be said that this interview gave birth to the “Quincy pact”.
This diplomatic anchorage went so well that Roosevelt offered his wheelchair to the Saudi king, also crippled. Despite this good understanding, the king refused to authorize the settlement of Jews in Palestine. The American president still 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 died 2 months later. His successor Harry Truman will be a fierce supporter of the founding of Israel. He will recognize the Jewish state 11 minutes after the Israelis declared themselves a nation, against the advice of his foreign minister.
Henry Kissinger's masterstroke
It was in 1974 that the second historic meeting between the Sauds and the US government took place. Henry Kissinger had been Secretary of State for a year. His mission ? Impose the dollar on the ingrates of the old continent who dare to ask for gold.
His strategy began with intervention in favor of Israel in the Yom Kippur War.
[Pour plus de contexte, notez qu’Henry Kissinger est juif. Il fuit l’Allemagne nazie à l’âge de 15 ans et reviendra en uniforme 5 ans plus tard pour se battre en France et en Allemagne.]
In retaliation, Arab countries cease oil exports, mainly to European nations. The United States, for its part, is self-sufficient. From 1974, the price of a barrel worldwide quadrupled, going from 3 to 12 dollars.
This oil embargo is all the easier to implement since the United States had previously ensured that Iraq, Iran, Kuwait, the United Arab Emirates, Qatar and Libya freed themselves from the companies European companies (British Petroleum, Royal Dutch-Shell and the French Petroleum Company, formerly Total).
Kissinger wanted the price of oil to explode to weaken the old continent. He knows well that the American army will have the last word if the tone rises, which allows it to impose itself at the heart of international relations. International discord reached its peak when President Gerald Ford recognized Jerusalem as the capital of the Jewish state.
Petrodollar
In reaction, Saudi Arabia continues to raise the price of a barrel, without knowing that it is playing into the hands of Henry Kissinger who will simply end up threatening to use force to remedy what he calls “strangling the industrialized world”. The London Sunday Times newspaper revealed the existence of the plan in February 1975. “Dhahran Option Four” who planned to invade Saudi Arabia to take possession of its oil wells.
King Faisal will hear these drum rolls very clearly. At the end of 1974, he finally gave in to the demands of Henry Kissinger who promised him unlimited arms sales, a backpedal on the question of Jerusalem and a return of Israel to its 1948 borders (plus a myriad of technologies).
In exchange for which Saudi Arabia had to undertake to:
1. Sell your oil exclusively in dollars.
2. Invest its surplus dollars in American debt (It was impossible for a kingdom of 10 million inhabitants to spend the trillions of petrodollars anyway).
From 1975 onwards, all OPEC countries agreed to denominate their oil in dollars. This is, in broad terms, the genesis of the petrodollar. King Faisal will be assassinated on March 25, 1975, the day of Mawlid, anniversary date of the birth of the prophet Mohamed. Thereafter, Israel will never return to its 1948 borders.
Petrobitcoin
Fifty years later, Saudi Arabia's Finance Minister Mohammed Al-Jadaan said at the 2023 WEF “that there is no problem in discussing how we settle our trade agreements, whether in US dollars, euros or Saudi riyals.”
And this, just a few weeks after Xi Jinping called from Riyadh for the kingdom to accept the yuan. Another unmistakable sign is that Saudi Arabia has significantly reduced its dollar reserves.
Finally, let us remember that the Saudis joined the BRICS club at the beginning of the year and that this alliance openly advocates dedollarization.
The real figure is 48% when gold reserves are taken into account. »
That being said, it will not be easy to completely replace the dollar. A new pivot currency (standard) is essential. What will it be? Gold? We all know how the Gold Standard ended…
The West will also have to accept it, which is far from won. A multipolar world could, on the contrary, lead to a fragmentation of payment systems. The solution is a currency outside the control of governments, a stateless currency.
This currency must be an absolute store of value as well as an international payment system from which no nation could be banned. We are talking about Bitcoin and its decentralized architecture.
Don’t miss our article: Bitcoin, the new Bretton Woods.
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