Saudi Walks Away
Since the Second World War Saudi Arabia has been an ally of the United States. There have been highs and lows in the relationship, but the connection has remained strong nonetheless, and particularly since the fall of the Shah in 1979, Saudi Arabia has been part of America’s efforts to stabilize the volatile and dangerous Middle East.
Perhaps no more.
Multiple press outlets have reported recently that the leader of Saudi Arabia Muhammed bin Salman has refused to take calls from Biden. Salman has stated publicly that he is completely unconcerned about his relationship with Biden or Biden’s opinion of him. For the ruler of a nation which so highly values preserving face and outward appearances to engage in such open disrespect of an American President is literally unprecedented. These are public demonstrations of a serious rupture in relations.
Saudi Arabia’s actions on the world stage show just how seriously we should look at the current situation.
Saudi Arabia and China are in talks intended to launch yuan-denominated oil contracts. The entire basis of the current U.S.- centric world economic order is built on the foundation of the use of the American dollar as the world’s reserve currency. Contracts are written and bills are paid in “greenbacks.” We can ship our factories overseas and gut our industrial base and somehow stay on top because, in the end, everyone needs our currency. Oil contracts have been priced exclusively in dollars since 1974 when the Nixon administration struck a deal with the Saudis.
The U.S. dollar is used in about 40% of global trade and nearly 80% of all global cross-border transactions. Most commodities and other goods are traded in U.S. dollars. Investors need to hold dollars to trade in goods and services.
When that changes everything changes and not for the better from our standpoint. A world without the petrodollar would tank demand for US treasuries, which given the rate at which the Fed has been buying them up over the last few years, could be catastrophic. The U.S. government runs on credit. We don’t come close to actually balancing the budget and have not for many years. When no one needs our Treasury bonds anymore, and we actually have to pay our bills the party is over.
Even if the U.S. government can still borrow money when the dollar loses its status as the world’s reserve currency the cost of borrowing money will go through the roof. That means less borrowing, which brings us back to the same place. The government has less money. Bills come due. Programs can’t be funded. The Air Force can’t fly its jets. The Navy can’t replace its ships. The Department of State can’t fund programs abroad.
Americans will be impoverished. The United States will be weaker.
Even as Saudi Arabia takes the first tentative steps toward ending the dollar’s run as the world’s reserve currency, the Kingdom is branching out in another unwelcome direction. Saudi Arabia recently confirmed the establishment of a nuclear energy holding company that will aid in the development of nuclear facilities in the Kingdom. Publicly the Saudi government maintains that the purpose of this company will be to develop the country’s atomic energy industry. The company will also apparently develop Saudi talent in the field of atomic energy, according to a statement made to the IAEA.
Unless you have been in a coma for your entire life you are probably aware that Saudi Arabia is effectively awash in oil and natural gas. In fact, contrary to the endless predictions of “peak oil” by energy alarmists, Saudi Arabia actually discovers even greater reserves of fossil fuels all the time.
It is pretty clear then that Saudi Arabia has no real need to develop nuclear energy. Pouring vast sums of money into building reactors, when you literally cannot drill wells fast enough to access all the oil and gas you are already standing on would be a massive waste of time and investment. The claim that this new company will focus on the peaceful uses of nuclear technology is a cover story. Saudi Arabia is setting up an entity which will allow it to begin to develop a nuclear weapons capability.
The Iranians have played this game for decades. They have claimed that all of their work on nuclear weapons has really been related to nuclear energy and medical isotopes. That most of the things the Iranians have been caught doing have no application whatsoever to peaceful uses of nuclear technology has not mattered. Much of the world has bought the lie and entertained the fiction.
The Saudis have seen the handwriting on the wall. They know Joe Biden is about to end sanctions on Iran and allow the mad ayatollahs in Tehran to continue their quest for an atomic bomb. The Saudi government will not allow itself to exist in a world where the Shia in Iran have the bomb and the Kingdom does not. The Saudis are taking matters into their own hands.
Many in America work overtime every day to deny the magnitude of the damage Biden is doing to American national security. They pretend it is not happening. They rationalize even the most catastrophic decisions.
The rest of the world is not fooled. Our allies see what is happening. They are watching Joe and his mandarins take a wrecking ball to the very foundations of our power and our security.
The Saudis have absorbed all this. They are not going to tie their national security to that of a nation whose chief executive appears determined to destroy the nation he is supposed to govern.
It is every man for himself, and the Saudis are doing what they must. They are walking away.