In case you may not know, some background: The USA signed the 50-year Petrodollar pact with Saudi Arabia on June 6, 1974, following the Oil Crisis in 1973. In exchange, for US military support and to further legitimize the monarchy, the Saudis agreed to exclusively use the US Dollar when pricing oil sales.
The consequence of this cannot be underestimated. It allowed the USD to become the de-facto world currency, asserting unmatched control over world markets by proxy, their own economic growth, along with excellent inflation pressure control. It allowed, among many things, to stable their economy by exporting inflation to the rest of the world when printing cash as if it was going out of style. Priming the USD as preferred for general transactions and making it a safer investment for US savings bonds, which the US uses to finance their general expansionism, economic and otherwise. Not to mention, lowering their interest repayment rates, as well.
Well, that came to an end at midnight, June 9th. I was waiting to see if some last-ditch pact would come but it seems it may not. Albeit one can still come but surely by this point, it will cost the US dearly, given the different world today. I do not see the Saudis readily committing to another half a century. As economically speaking, there are more players and the chessboard itself is very different, than how it was in 1974.
The reality too, is the US leadership has weaponized the USD too much, and by extension, also the SWIFT banking system, with a number of countries now formulating ways of getting around these. The world has witnessed this and whether one agrees or not, most countries do not have to play by these rules, and why would they? There is definitely a shift, one the US would surely be willing to go to war over, in time, and if necessary.
Is the USD going to crater tomorrow? Of course not. The wheels here will move slowly but they are moving. Since in world finance, this is a fork on the road the US will not prefer. Apparently, the Saudis are reading the room and seem willing to broaden their trading options. I find it really surprising how Western media –for what I have seen– appears to be underplaying, or not even discussing this much. While non-Western news are reporting on this in a more contextual fashion. Why? Likely because not having a pact fusing the USD to Oil sales will reduce the prominence of the USD in the world, over time. It is fair to say that certain and multiple interests in the West may be highly biased for this to be a non-story that end ups being overshadowed by other news of the day.
Case in point, you want to know something that is very telling? The source used, from Nasdaq itself, for this article was this:
https://www.nasdaq.com/articles/us-saudi-petrodollar-pact-ends-after-50-years
Click on it, please. See where it takes you. However, after published, I noticed that suddenly the link stopped working. Taking you instead to a generic page. Why do you think?
Nevertheless, if you are curious and want to know what took its place, our friends at the Internet Wayback Machine can be of help. Click here:
Feel free to make your own conclusions. But be aware, this type of practice with originally sensitive stories is far, far from new or unique.
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