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Persian Gulf. This was taken by Saudi Arabia as a stab in the back.
The Saudi-US relationship goes back to the late 1940s.
But in particular, in the mid-1970s, there was a very famous
deal, if you will, struck between Henry Kissinger — who was
President Nixon, and later, President Ford’s leading national
security adviser and Secretary of State — and the Saudi King.
In this deal they said that Saudis agreed to price oil in dollars.
They didn’t have to do that. They could have said, “We’ll take gold.”
There were other currencies at that time like the Deutschemark,
French francs and Japanese Yen. But they said, “We will only take
dollars for oil.” That put a prop under the dollar.
The United States agreed a guarantee on their national
security to protect them. We made good on that guarantee in
1991 when Saddam Hussein invaded Kuwait and threatened
Saudi Arabia — the U.S. did respond to that forcefully.
That deal was in place for over 40 years. That was torn up
in December of 2013. Again, the Saudis took it as a stab in the
back. Here’s the United States saying to Iran, “Not only are you
the regional power, but we’re going to let you continue on your
path to nuclear weapons.” Imagine what that feels like from
the perspective of Saudi Arabia.
They haven’t done anything drastic yet but they are reevalu-
ating this “petrodollar” relationship. If the Saudis decide, “Okay,
if you don’t have our back, if you’re not protecting our national
security why should we support your currency and not decide to
start pricing oil in, either Euros or perhaps Yuan or other curren-
cies to the parties who are actually buying the Saudi oil?” That
removes a very significant prop under the U.S. dollar.
This financial warfare, as I say, is more and more pervasive.
Of course, the last event I want to call attention to what’s going
on in Ukraine.
Russia has taken over Crimea. I think that’s a fait accompli,
they’re not leaving anytime soon. No one in the United States,
left to right or center, thinks that the United States should have