The Saudis, and the historical partnerships that have defined the era of the petrodollar, is it all coming apart for the US-Saudi oil/security/dollar/debt relationship? The New York Post reports that Saudi officials have warned US lawmakers that the kingdom will sell billions in US assets if Congress passes a bill making it legal for the survivors of terrorism to sue foreign governments.
The bill, currently being considered by the Senate Armed Services Committee, is directly related to 28 pages missing from the 9/11 Commission report. Those familiar with the “redacted” 28 pages say they should be declassified and, controversially, that the Saudi royal family may have provided direct financial support to the 9/11 hijackers.
The missing section of the report was about whether or not foreign governments were connected to the attacks. I hesitate to write anything about 9/11 or terrorism and state-backing because it brings out a lot of non-financial related commentary. And all I want to focus on here is that tensions between the US and Saudi Arabia are so frayed that the Saudis, if reports are to believed, have threatened a kind of financial warfare against the US if the Senate bill is passed.
What do you think? The oil producers (mostly Saudi Arabia) are the third-largest holders of US government bonds. China has $1.2 trillion in Treasuries. Japan has $1.1 trillion. And the oil producers have $281 billion.
Would the Saudis try and crash the US bond market to punish the US Congress? Or do they think the threat alone is enough to prevent the bill from being passed and the redacted 28 pages from being declassified?
All we know for sure is the two fast friends are no longer so friendly. Do you think this would be the case if oil was still at $100/barrel? The Saudis would be making a mint and recycling the petrodollars back into US bonds and American military hardware. But that whole mutually beneficial relationship between Saudi Aramco and the US military-industrial complex seems to be over.
You know the old saying right? Sunlight is the best disinfectant.
Category: Economics