From Petrodollar to Petrobitcoin

Saudi Arabia would end the petrodollar system, we can read everywhere on X. What exactly is this?

The Quincy Pact

Saudi Arabia would not recover “his 50-year petrodollar deal with the United States”. The contract, which expired on Sunday, June 9, 2024, can be read here and there.

If the existence of the half-century-long agreement can be doubted, it was in 1974 that the petrodollar appeared. A short three 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. After returning from the Yalta Conference, President Roosevelt made a stopover along the Suez Canal without the knowledge of the British. He met with King Abdelaziz Al Saud aboard the cruiser USS Quincy, hence the term “Quincy Pact”.

This diplomatic entrenchment went so well that Roosevelt offered his wheelchair to the Saudi king, also infirm. Despite this good understanding, the king refused to allow Jews to settle in Palestine. However, the American president secured the essentials by dismissing 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, would be a fierce supporter of the establishment of Israel. The Jewish state will recognize 11 minutes after Israelis declared themselves a nation against the advice of their foreign minister.

Henry Kissinger’s masterstroke

It was in 1974 that the second historic meeting between the Saudis and the US government took place. Henry Kissinger has been Secretary of State for a year. His mission? Force the dollar on the non-lovers of the old continent who dare ask for gold.

His strategy began with intervention on behalf of Israel in the Yom Kippur War.

(For further context, note that Henry Kissinger is Jewish. He fled Nazi Germany at the age of 15 and returned 5 years later in uniform to fight in France and Germany.)

In retaliation, Arab countries stop oil exports, especially to European countries. The United States, on the other hand, is self-sufficient. Since 1974, the price of a barrel has quadrupled, from $3 to $12.

Imports of oil from Saudi Arabia to the US began in 1971, the year of the peak of US oil. pic.twitter.com/pHjC6ySXE0

— Nicolas Teterel (@NTeterel) June 11, 2024

Applying this oil embargo is all the easier because the United States has been promoting the emancipation of Iraq, Iran, Kuwait, the United Arab Emirates, Qatar and Libya against European companies (British Petroleum, Royal Dutch -Shell and the French oil company, ex-Total) for years.

Kissinger wanted the price of oil to explode to weaken the old continent. It knows full well that the US military will have the final say if the tone is raised, allowing it to assert itself at the center of international relations. International disagreements came to a head when President Gerald Ford recognized Jerusalem as the capital of the Jewish state.

Petrodollar

In response, Saudi Arabia continues to raise the price of a barrel, not knowing that it is playing into the hands of Henry Kissinger, who simply ends up threatening to use force to correct what he calls. “strangling the industrialized world”. The London Sunday Times revealed the existence of the plan in February 1975. “Dhahran option four” who planned to invade Saudi Arabia to seize its oil wells.

King Faisal will hear these drum rolls very clearly. In late 1974, he finally caved to the demands of Henry Kissinger, who promised him unlimited arms sales, concessions on Jerusalem, and Israel’s return to its 1948 borders (plus countless technologies).

In exchange, Saudi Arabia had to commit to:

1. Sell your oil exclusively in dollars.
2. Invest your surplus dollars in US debt (It was impossible for a kingdom of 10 million people to spend trillions of petrodollars anyway).

Since 1975, all OPEC countries have agreed to denominate their oil in dollars. This, in a broader sense, is the genesis of the petrodollar. The king would be assassinated on March 25, 1975, Mawlid, the anniversary of the Prophet Muhammad’s birth. After that, Israel will never return to its 1948 borders.

Petrobitcoin

Fifty years later, Saudi Finance Minister Mohammed Al-Jadaan said at WEF 2023 “that there is no problem discussing how we settle our trade deals, whether in US dollars, euros or Saudi riyals.”

And this just weeks after Xi Jinping called from Riyadh for the kingdom to accept the yuan. Another sure sign is that Saudi Arabia has significantly reduced its dollar reserves.

In conclusion, let us recall that the Saudis joined the BRICS club at the beginning of the year and that this alliance openly promotes de-dollarization.

That being said, it won’t be easy to completely replace the dollar. A new pivot currency (standard) is necessary. What will it be? Gold? We all know how the gold standard ended…

But the barbaric relic still seems to appeal to Vladimir Putin, who said at a St. Petersburg economic forum last week:

“US authorities break their ‘tools of greatness’. The dollar is one of the few instruments that gives strength to the United States. (…) Naturally, new instruments appear, such as the financial instruments of the central bank that we are talking about in the framework of BRICS. However, these instruments must provide guarantees. What is the best asset to guarantee this but gold? »

As for a hypothetical currency unit composed of a basket of BRICS currencies, the Russian president has jumped on the bandwagon, suggesting that the project is in trouble.

Whatever happens, the West will have to be on board, which is far from won. The solution is therefore to be found in a currency that eludes nations, a stateless currency and an apolitical currency.

This currency must be an absolute store of value as well as an international payment system from which no state can be banned. We are talking about Bitcoin and its decentralized architecture.

Don’t miss our article: Bitcoin, the new Bretton Woods.