American-Saudi break-up on the horizon

Published 07.10.2016 23:49

Friends and foes in world politics will change in the near future after the end of the years-long give-and-take relations between the U.S. and Saudi Arabia

The Jolie-Pitt breakup may have shaken the world but there is another partnership that has not seen a happy ending and will surely have a profound effect on world politics and the current world order.

In 1945, former U.S. President Franklin D. Roosevelt and Saudi Arabia King Abdul Aziz Ibn Saud met on a U.S. warship anchored in the Suez Canal and formed a partnership that began as World War II was coming to an end - a partnership that made the Kingdom the world's biggest oil exporter and gave the U.S. the right to open military bases for U.S. troops on Saudi soil.

But by the time that Faisal Ibn Abdul Aziz ascended the throne in 1964, the honeymoon phase of the U.S.-Saudi partnership was over. Nearly a decade after ascending the throne, the Saudi king announced that OPEC would cut oil exports to the U.S. and Western countries in retaliation for their support for Israel during the Yom Kippur War of 1973, undoubtedly making himself a hero in the eyes of the Arab people. What ensued was a series of meetings between Saudi royals and the Nixon administration, represented by then-U.S. Secretary of State Henry Kissinger, which resulted in the formation of a game-changing agreement that ushered in the petrodollar recycling system.

When the Yom Kippur War ended in October 1973, Saudi kept sanctions on oil until March 1974 and the lifting of sanctions was soon followed by the signing of the U.S.-Saudi Arabia Petrodollar Agreement by King Faisal in June of that year.

This was the consummation of the American-Saudi marriage. The U.S. vowed to protect the House of Saud and, in exchange, the Saudis would only accept U.S. currency in oil trade in an agreement that was fully operational by 1974. The Saudis had harmoniously agreed to invest profits gained from an oil production surplus to U.S. government debt securities and, in 1975, Saudi Arabia made OPEC countries agree to conduct oil trade in U.S. currency and allocate all profits from oil production surplus to securing the U.S. national debt. In a tragic twist of fate or simple irony, King Faisal was assassinated that same year in his palace while under U.S. protection.

The agreement was a bargain for the Saudis: The U.S. didn't want oil profits or the liquid gold itself. They merely wanted to be able to tell the Saudis how to price their oil in return for military support, weapons and guaranteed protection of the Saudi dynasty.

It was a clever plan devised by mastermind Kissinger that successfully closed the gap between the failed Bretton Woods arrangement and the petrodollar system: The U.S. was going to continue to rule the world.

But even roses have thorns and all that glitters is not gold.

The rest of the world was left making a mad dash for U.S. dollars - especially oil-importing countries -scrambling to produce exports for the American market that would bring profits in the form of dollar bills. From 1973 to 1977, when the petrodollar agreement was in the honeymoon phase, the foreign debts of developing countries increased by 150 percent and the IMF and World Bank threw a wrench in the plans of the two love birds.

What had appeared to be wedded bliss between the U.S. and the Kingdom was actually turning out to be a burning inferno not unlike the pits of Hell.

U.S.-Saudi relations had their ups and downs but the relationship was not nearly as tumultuous as what we are seeing today. The recent passing of the "Justice against Sponsors of Terrorism Act" (JUSTA) in the U.S. Senate points to the possibility that the U.S.-Saudi love boat is chartering troubled waters. The bill, which allows U.S. citizens - namely, the families of the victims of 9/11 - to sue Saudi Arabia or other states which support terrorism.

President Obama vetoed JASTA but Congress overrode his veto for the first time since Obama took office. And this week, the first lawsuit has been filed against Saudi Arabia for allegedly providing support to terrorist hijackers by a woman whose husband was a victim of 9/11. And this is just the tip of the iceberg.

The 9/11 attacks were a hurdle for U.S.-Saudi Arabia relations. The fact that 11 of the 19 hijackers were Saudi Arabian citizens and the wealthy Bin Laden family had done business with George W. Bush, the U.S. government feigned ignorance in the matter and Riyadh pledged his full cooperation in America's "war on terror."

The Kingdom did not support the war in Iraq and the foundations of the couple's marriage were quickly deteriorating. Saudi Arabia turned to countries like China and Russia and signed military, economic and trade agreements while the U.S. violated the sanctity of their union with the Saudis and ran to the Iranians as we all know. The JASTA bill was the straw that broke the proverbial camel's back. With a U.S.-Saudi estrangement on the horizon, one has to wonder if the petrodollar agreement will also become history. While it seems ideal for an agreement which has been making the lives of developing countries a complete hell ever since 1973 to finally dissolve, we must ask ourselves what would be the U.S.'s next move?

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