Saudia Arabia

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Is the Collapse of the Petrodollar Imminent? Here’s How It Could Impact the World’s Reserve Currency | International Man

By Nick Giambruno

It’s been rightly said that “he who holds the gold makes the rules.”

After World War 2, the US had the largest gold reserves in the world, by far. Along with winning the war, this let the US reconstruct the global monetary system around the dollar.

The new system, created at the Bretton Woods Conference in 1944, tied the currencies of virtually every country in the world to the US dollar through a fixed exchange rate. It also tied the US dollar to gold at a fixed rate of $35 per ounce.

The dollar was said to be “as good as gold.”

The Bretton Woods system made the US dollar the world’s premier reserve currency. It compelled other countries to store dollars for international trade or to exchange them with the US government for gold at the promised price.

However, it was doomed to fail.

Runaway spending on warfare and welfare caused the US government to print more dollars than it could back with gold at the promised price.

By 1967, the number of dollars circulating had drastically increased relative to the amount of gold backing them. This encouraged foreign countries to exchange their dollars for gold, draining the US gold supply at an alarming rate and collapsing the London Gold Pool. At this point, it was clear this system was breaking down.

On Sunday night, August 15, 1971, President Nixon interrupted the scheduled TV programs and made a surprise announcement to the nation—and the world. He announced the unilateral end of the Bretton Woods system and severed the dollar’s last tie to gold.

The end of the dollar’s gold backing had profound geopolitical consequences.

Most critically, it eliminated the main reason foreign countries stored large amounts of US dollars and used the US dollar for international trade. As a result, oil-producing countries began to demand payment in gold instead of rapidly depreciating dollars.

It was clear the US would have to create a new monetary system to stabilize the dollar. So it concocted a new scheme… and chose Saudi Arabia as its accomplice. This agreement came to be known as the “petrodollar system.”

The US handpicked Saudi Arabia because of its vast petroleum reserves and dominant position in the global oil market.

In essence, the petrodollar system was an agreement that the US would guarantee the House of Saud’s survival. In exchange, Saudi Arabia would do three things.

First, it would use its dominant position in OPEC to ensure that all oil transactions would only happen in US dollars.

Second, it would recycle hundreds of billions of US dollars from annual oil revenue into US Treasuries. This lets the US issue more debt and finance previously unimaginable budget deficits.

Third, it would guarantee the price of oil within limits acceptable to the US and prevent another oil embargo.

The petrodollar system gave foreign countries another compelling reason to hold and use the dollar. And it preserved the dollar’s unique status as the world’s top reserve currency.

But… why oil?

Oil is the largest and most strategic commodity market in the world.

As you can see in the chart below, it dwarfs all other major commodity markets combined. The annual production value of the oil market is ten times bigger than the gold market, for example.

2023-01-petrodollar-TFU.png (898×557)

Every country needs oil. And if foreign countries need US dollars to buy oil, they have a compelling reason to hold US dollars even if they are not backed by a promise to redeem them in gold.

Think about it… If France wants to buy oil from Saudi Arabia, it must purchase US dollars on the foreign exchange market to pay for the oil first.

This creates a huge artificial market for US dollars and differentiates the US dollar from a purely local currency, like the Mexican peso.

The dollar is just a middleman. It’s used in countless transactions, amounting to trillions of dollars that have nothing to do with US products or services.

Since the oil market is enormous, it acts as a benchmark for international trade. If foreign countries are already using dollars for oil, it’s easier to use the dollar for other international trade.

In addition to nearly all oil sales, the US dollar is used for about 80% of all international transactions.

Ultimately, the petrodollar boosts the US dollar’s purchasing power by enticing foreigners to soak up dollars.

The petrodollar system has helped create a deeper, more liquid market for the dollar and US Treasuries. It has also helped the US keep interest rates lower than they would otherwise be, allowing the US government to finance enormous deficits it otherwise would be unable to.

Multi-trillion deficits would otherwise be impossible without destroying the currency through money printing.

It’s hard to overstate how much the petrodollar system benefits the US. It’s the bedrock of the US financial system and has underpinned the dollar’s role as the world’s reserve currency since the 1970s.

That’s why the US government protects it so fiercely. It needs the system to survive.

World leaders who have challenged the petrodollar have ended up dead.

Take Saddam Hussein and Muammar Gaddafi, for example. Each led a large oil-producing country—Iraq and Libya, respectively. And both tried to sell their oil for something other than US dollars before US military interventions led to their deaths.

Of course, there were other reasons the US toppled Saddam and Gaddafi. But protecting the petrodollar was a serious consideration, at the very least.

When countries like Iraq and Libya challenge the petrodollar system, it’s one thing. The US military can dispatch them with ease.

However, it’s a whole other dynamic when China (and Russia) undermine the petrodollar system… which is happening in a big way right now.

China and Russia are the only countries with sophisticated enough nuclear arsenals to go toe-to-toe with the US up to the top of the military escalation ladder.

In other words, the US military can’t attack Russia and China with impunity because they can match each move up to all-out nuclear war—the very top of the military escalation ladder.

For this reason, the US is deterred from entering a direct military conflict with China and Russia—even though they are about to strike a fatal blow to the petrodollar system.

US Sanctions Accelerate Demise of Petrodollar

In the wake of Russia’s invasion of Ukraine, the US government launched its most aggressive sanctions campaign ever.

Exceeding even Iran and North Korea, Russia is now the most sanctioned nation in the world.

“This is financial nuclear war and the largest sanctions event in history,” said a former US Treasury Department official.

He said, “Russia went from being part of the global economy to the single largest target of global sanctions and a financial pariah in less than two weeks.”

As part of this, the US government seized the US dollar reserves of the Russian central bank—the accumulated savings of the nation. (Washington did the same to Afghanistan’s dollar reserves after the Taliban took Kabul.)

It was a stunning illustration of the dollar’s political risk. The US government can seize another sovereign country’s dollar reserves at the flip of a switch.

The Wall Street Journal, in an article titled “If Russian Currency Reserves Aren’t Really Money, the World Is in for a Shock,” noted:

“Sanctions have shown that currency reserves accumulated by central banks can be taken away. With China taking note, this may reshape geopolitics, economic management and even the international role of the U.S. dollar.”

The head of the Russian Parliament recently called the US dollar a “candy wrapper” but not the candy itself. In other words, the dollar has the outward appearance of money but is not real money.

It’s important to remember some simple facts.

#1: Russia is the world’s largest energy producer.

#2: China is the world’s largest energy importer.

#3: Russia is China’s largest oil supplier.

And now that the US has banned Russia from the dollar system, there is an urgent need for a credible system capable of handling hundreds of billions worth of oil sales outside the US dollar and financial system.

The Shanghai International Energy Exchange (INE) is that system. The maturation of China’s alternative to the petrodollar is a big reason why the massive amount of energy trade between Russia and China occurs in yuan, not US dollars.

Further, Washington has threatened to sanction China similarly for years.

These threats against China may be a bluff, but if the US government carried them out—as it recently did against Russia—it would be like dropping a financial nuclear bomb on Beijing. Without access to dollars, China would have previously struggled to import oil and engage in international trade. As a result, its economy would come to a grinding halt, an intolerable threat to the stability of the Chinese government.

China would rather not depend on an adversary like this. It’s one of the main reasons it created an alternative to the petrodollar system. The INE allows oil producers to sell their products for yuan (and gold indirectly) while bypassing the US dollar, sanctions, and financial system.

Other countries on Washington’s sanctions list are enthusiastically signing up.

According to Credit Suisse, Russia, Iran, and Venezuela own 40% of the proven oil reserves of OPEC+ members. These countries are under strict US sanctions, which makes accepting US dollars and transacting globally challenging. So it’s no surprise that these sanctioned oil producers are happy to accept yuan as payment and support the petroyuan system.

But it’s not just sanctioned oil producers that benefit from the petroyuan…

Think about it. Any oil-producing country has two choices:

Option #1 – The Petrodollar

The dismal financial situation of the US guarantees the dollar will lose significant purchasing power.

Plus, there’s enormous political risk. Oil producers are exposed to the whims of the US government, which can confiscate their money whenever it wants, as it recently did to Russia.

Option #2 – Shanghai International Energy Exchange

Here, an oil producer can participate in the world’s largest market and try to capture more market share.

It can also easily convert and repatriate its proceeds into physical gold, an international form of money with no political or counterparty risk.

From the perspective of an oil producer, the choice is a no-brainer.

Even though most people have not realized it yet, we are at the end of the petrodollar system and on the cusp of a new monetary era.

There’s an excellent chance more financial turmoil is coming soon.

Are you ready for it?

Source: International Man

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Soleimani is no anti-imperialist hero | Al Jazeera

Johnny Liberty, Editor’s Note:Middle Eastern politics is extremely complicated, a tapestry of hatred, vengeance, and generally unneighborly violence that has been perpetuated for centuries. These young protesters with manufactured signs seem clueless as to what they’re protesting. ‘Tis a great party though. This article may shed some light and give the reader an interesting perspective.

By Malak Chabkoun

Immediately after news broke of the assassination of Iranian General Qassem Soleimani and Iraqi militia commander Abu Mahdi al-Muhandis, some left-wing circles in the West proclaimed with great confidence – yet again – that World War III was around the corner. Previously, these same warnings of global doom were evoked when US President Donald Trump ordered rather toothless strikes on empty military targets in Syria and escalated his rhetoric against North Korea’s Kim Jong Un.

And just as a world war did not break out on these previous occasions, it will not break out now either.

Much of the left in the West (the same ones who describe themselves as progressives) also viciously attacked people in the Middle East who celebrated the deaths of Soleimani and al-Muhandis. While it is wrong to praise Trump’s decision to assassinate the two commanders as a “noble deed”, framing what happened within the old, tired left-wing narrative of US imperialism erases the regional context and the suffering of millions of people in the Middle East at the hands of other powers.

Indeed, it is important to expose Trump’s recklessness and political opportunism, but it is inexcusable to ignore the crimes of Soleimani and al-Muhandis and those whom they served.  

Trump’s motives

With an upcoming impeachment trial in the Senate, more Americans disapproving than approving of his presidency, and an election coming up, Trump is trying to cement his position in US politics and play to his base. His term has been marked by no clear domestic or foreign policy agendas, frequent golfing trips that prompt ethical questions about how federal dollars are being spent, and Twitter meltdowns that often do not have anything to do with reality. In short, when Trump ordered the assassinations, his presidency would not necessarily be described as successful.

While it is clear the US president was motivated by domestic considerations, in the aftermath of the attack, he claimed that he ordered it in the name of fighting global “terrorism” and that Soleimani’s assassination meant his reign of “terror” was over.

This rhetoric might help him improve his ratings in advance of his re-election bid in November, but it is simply a lie that Soleimani’s assassination will make the world a safer place. In fact, none of Trump’s interventions in the Middle East has been of any consequence to the security of the region, contrary to what many on the right have claimed.

People in Yemen, Iraq, Syria, Lebanon and elsewhere where Soleimani’s Quds Force has been active will continue to suffer the consequences of Iran’s foreign interference. Al-Muhandis’ death and the limited attacks the United States has carried out on the Popular Mobilisation Forces (PMFs) will not disband the militia, which is heavily entrenched in Iraq.

Similarly, the killing of Abu Bakr al-Baghdadi, the leader of the ISIL (ISIS) group did not make the region any safer from “terrorism”. ISIL attacks have continued, and Russia and the Syrian regime have also continued to use the excuse of “anti-terror operations” to step up their military campaigns against civilians opposed to Bashar al-Assad’s rule, killing hundreds and displacing hundreds of thousands.

Trump’s 2017 and 2018 air raids on Syrian regime targets did nothing to prevent the sustained campaign of extermination Damascus has led against its own population. They also did not result in World War III or war with Russia that some left-wing pundits were predicting on social media.

In fact, throughout his term, Trump has been playing both camps – the right-wing hawks and the left-wing “anti-war” crusaders – with his constant shift of rhetoric between withdrawal and disengagement from the Middle East and aggressive action.

He “pulled out” of Syria, but sent back troops to “guard the oil”. He promised tough action on Iran after attacks in the Gulf but did not retaliate the way his allies wanted.

It is about time that both sides admit Trump makes domestic and foreign policy decisions based on his ego and what suits him, not based on standing up for “our people” or some diabolic imperialistic plot.

Regional reactions in context

The assassinations of Soleimani and al-Muhandis gave some Middle East residents a sense of relief that they have finally been rid of two militia commanders who have brought much suffering to their communities.

But when Syrians, Iraqis, Yemenis and other Arabs posted celebratory comments on the assassinations of two commanders they perceive as war criminals, Iran’s defenders immediately criticised these people, resorting to insisting they didn’t know anything about their own countries, claiming they are pro-imperialism.

In so doing, these self-identified leftists and “anti-war” activists once again downplayed the deaths of hundreds of thousands of people in the region. For them, the only civilian deaths that can be acknowledged are those caused by the military intervention of the US, Israel or their allies.

However, it is hard to cover up the crimes Iran and its regional proxies have committed over the past 10 years. Iran has backed and even advised on the brutal crackdown by the Syrian regime on opposition protests and later the mass killing of civilians through areal bombardment and merciless sieges; it has also sent Afghan refugee children to fight on its behalf in Syria. It has sent military equipment and personnel to the Houthis in Yemen, who just like their enemies, the Saudis and the Emiratis, have been accused of committing war crimes in the Yemeni conflict. In Iraq, they have supported and directed militias which have committed various crimes against Iraqi civilians.

In this sense, it is hardly surprising that Syrians who have gone through the trauma of losing friends and family in the siege of Aleppo and the insult of seeing images of Soleimani marching through their city (which they may never be able to return to) are celebrating his demise. It is also hardly surprising that Iraqi protesters, who have had to drag the bodies of friends shot in the head with Iranian military-grade gas grenades during attacks by Iranian-backed militias on their demonstrations, would now be cheering the demise of al-Muhandis who had been accused of directing the crackdown.

These same left-wing people who proclaim concern about foreign intervention, refuse to acknowledge the Iranian intervention in Syria, Yemen and Iraq when the people of those countries rebelled against authoritarianism, corruption, sectarianism, and socioeconomic collapse. When protests broke out in 2018 and 2019 in Iran against the Iranian authorities, they once again framed them in the foreign-sponsored regime-change narrative.

The constant need to defend the Iranian government, even against the protests of Iranian people who have suffered under this government, is an exercise in mental gymnastics. This is the same left-wing segment that equates criticism of Iran with being an ally of Israel, which is highly problematic given Iran and Israel are committing the same crimes in the Middle East.

Only US imperialism exists?

There has been much noise about US’s breach of Iraqi sovereignty, but there has been little said of Iranian and Russian actions violating sovereignty in the region. The constant presence of Soleimani in Iraq to issue orders to Iraqi officials and forces is just one of many signs of Iran’s lack of respect for Iraq’s sovereignty. By the admission of these same leftists, Soleimani was intervening in Iraq to “fight” US intervention.

In Syria, what these self-proclaimed anti-war activists see as Iranian and Russian deployment at the invitation of a legitimate president, Syrians see as an occupation allowed by a dictator who they never elected in free and fair elections.

The debate around Soleimani and al-Muhandis’ assassinations has served to illustrate, once again, the inconsistent perception by a segment of the “progressive” left of what constitutes “imperialism”. They readily brand US and Israeli actions as imperialist; yet aggression by others – whether Russia, China, Iran or their allies – which causes equal damage and civilian deaths, is ignored, downplayed, or wrapped in “anti-terror” narratives (rather similar to the ones the US and Israel use).

Thus, US and Israeli attacks on the Iranian forces or the Assad regime have been decried as acts of imperialism while the mass killings of Syrian civilians by occupying powers Iran and Russia have been ignored, questioned or presented as “terrorist” deaths.

Criticising the US and Israel while ignoring the crimes of others, however, does no good for the people on the ground bearing the brunt of geopolitical battles between these global and regional powers. Crying “World War III is coming” every time the US engages in aggression also ignores the fact that millions of people in the Middle East and elsewhere, where US, Israeli and also Iranian, Russian and Chinese intervention have stirred conflict, are already living the realities of such a war.

Being truly anti-war would mean opposing aggression by all and condemning all those accused of war crimes – whether Qassem Soleimani or Eddie Gallagher.

Source: Al Jazeera

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Study touts planting 1 trillion trees as most effective climate change solution | The Hill

Healthy green trees in a forest of old spruce, fir and pine trees in wilderness of a national park. Sustainable industry, ecosystem and healthy environment concepts and background.

The cheapest way to halt the effects of climate change could be planting 1 trillion trees, according to a new study.

The study in the journal Science, first reported by The Associated Press, found that planting trees could be the most effective way to remove carbon from the atmosphere, but cautioned that it would have little effect without a reduction of emissions around the globe.

“This is by far — by thousands of times — the cheapest climate change solution” study co-author Thomas Crowther, an ecologist at the Swiss Federal Institute of Technology, said.

“It’s certainly a monumental challenge, which is exactly the scale of the problem of climate change,” he added.

Though, Crowther cautioned, “None of this works without emissions cuts.”

Scientists with the United Nations have called for a major reduction in carbon emissions over the next decade to stave off the worst effects of climate change, including rising sea levels and dangerous weather phenomena.

Lawmakers around the world have debated on how to address the issue, and in 2017 the U.S. withdrew from a major accord meant to battle climate change due to President Trump‘s opposition to the pact.

Democratic candidates for president, including former Vice President Joe Biden, have called for the U.S. to rejoin the agreement. Progressives are pushing an ambitious plan to cut U.S. carbon emissions, the Green New Deal, introduced earlier this year by Sen. Ed Markey (D-Mass.) and Rep. Alexandria Ocasio-Cortez (D-N.Y.).

If enacted, the Green New Deal calls for the transition of America’s energy grid away from fossil fuels to renewable energy.

Source: The Hill

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Assange released 500,000 diplomatic cables which reveals how the CIA created ISIS | AWD News

assange

The founder of the transparency organization WikiLeaks released a statement on 1 December upon the release of over 500,000 diplomatic cables dating back to 1979, which succinctly reveals how the CIA was essentially responsible for creating the Islamic State (ISIS) terror group.

The timing of the release coincided with the sixth anniversary of WikiLeaks “Cablegate” release, which exposed the machinations of the underbelly of the U.S. empire. The latest release, known as the “Carter Cables,” adds 531,525 new diplomatic cables to the WikiLeaks’ already voluminous Public Library of U.S. Diplomacy (PLUSD).

In a statement released in concert with the release of the “Carter Cables,” Julian Assange mapped out how the events of 1979 began a series of events that have ultimately culminated in the rise of ISIS.

“If any year could be said to be the “year zero” of our modern era, 1979 is it,” said Assange.

Assange lays bare the reality that the roots of modern Islamist terrorism began through a joint venture by the CIA and Saudi Arabian government, to the tune of billions of dollars, to create a “Mujahideen” force to fight against the Soviet Union in Afghanistan – which ultimately led to the creation of al-Qaeda.

Assange is not alone in his claims either. According to a poll by the Express, the overwhelming majority of people understand that US foreign policy created ISIS.
Assange goes on to note that the subsequent attacks of 9/11, and invasion of Afghanistan and Iraq, directly led to the rise of ISIS.

“In the Middle East, the Iranian revolution, the Saudi Islamic uprising and the Egypt-Israel Camp David Accords led not only to the present regional power dynamic but decisively changed the relationship between oil, militant Islam and the world.
“The uprising at Mecca permanently shifted Saudi Arabia towards Wahhabism, leading to the transnational spread of Islamic fundamentalism and the US-Saudi destabilisation of Afghanistan,” said Assange.

The narrative laid out by Assange exposes exactly how militant Islam was nurtured by the CIA and Saudi government as a mean of usurping the communist Afghani government, which had asked for Soviet assistance in combatting Islamic terrorism.

“The invasion of Afghanistan by the USSR would see Saudi Arabia and the CIA push billions of dollars to Mujahideen fighters as part of Operation Cyclone, fomenting the rise of al-Qaeda and the eventual collapse of the Soviet Union.

“The 1979 current of Islamification spread to Pakistan where the US embassy was burned to the ground and Pakistan Prime Minister Zulfikar Ali Bhutto was executed.
“The Iranian hostage crisis would go on to fatally undermine Jimmy Carter’s presidency and see the election of Ronald Reagan.

“The rise of al-Qaeda eventually bore the September 11, 2001 attacks in the United States, enabling the US invasion of Afghanistan and Iraq and over a decade of war, leaving, at its end, the ideological, financial and geographic basis for ISIS,” said Assange.

In addition to the rise of global militant Islam, the latest release also includes cables regarding the election of Margaret Thatcher as British Prime Minister. Three Mile Island nuclear incident is also covered as well as cables highlighting Henry Kissinger secretly working with David Rockefeller to find a place for the deposed Shah of Iran to hide.

“In 1979 it seemed as if the blood would never stop,” noted Assange. “Dozens of countries saw assassinations, coups, revolts, bombings, political kidnappings and wars of liberation.”

With the release of the “Carter Cables,” WikiLeaks’ has now published a total of 3.3 million U.S. diplomatic cables. Staying true to their motto – WikiLeaks continues to open up governments.

Below is a video interview with Assange where he highlights an email from the Podesta leak, which exposed that the governments of Saudi Arabia and Qatar are directly funding ISIS. In that email, sent on August 17, 2014, Hillary Clinton asked John Podesta to help put “pressure” on the Qatari and Saudi Arabian governments over their support of ISIS. State sponsorship of ISIS, by what is generally considered a close ally of the United States, is something that U.S. officials continue to refuse to acknowledge publicly.

Hillary Clinton’s email to Podesta reveals clearly the reality of the situation.
“We need to use our diplomatic and more traditional intelligence assets to bring pressure on the governments of Qatar and Saudi Arabia, which are providing clandestine financial and logistic support to ISIL and other radical Sunni groups in the region,” Clinton wrote in the email.

Source: Wikileaks

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U.S. Military Intervention in Egypt: A Chapter in America’s Saudi Arabian End-Game | Collapse.net

By Dale G. Sinner

US military intervention in Egypt is prompting speculation over motives. Extraction of American citizens is the stated objective, but does evacuating the American expat community in Egypt warrant the flotilla of US warships recently positioned in the Suez Canal?  Does evacuating this expat community warrant the helicopters, Special Forces squads, and 2,200 Marines aboard those ships?  Here in the land of endless budget cuts, the obvious answer is “doubtful”.

While protests flare across North Africa, why would the US stir up already seething anti-American sentiment in the region with such a move?  Could today’s intervention lead to a long-term, “stabilizing” US presence in Egypt? Or could these events presage something far greater?  What of Egypt’s neighbor to the East – Saudi Arabia – home to a quarter of world oil reserves?

Egyptian President Hosni Mubarak is clearly defying US pressure to step down from an office he’s held for nearly 30 years.  Continued port strikes and unrest threaten vital ship traffic along the Suez Canal, and the likelihood of imminent military extraction of American citizens may present a tantalizing opportunity for oil elites to close the circle around the Arabian peninsula and place a major US force presence in Egypt – a presence with a potentially ominous goal: the eventual destabilization and Balkanization of the Arabian peninsula.

The Saudi royals are clearly opposed to US intervention in Egypt.  See here, here, and here.  This opinion regarding US meddling is understandable, as even the slightest provocation could spark similar civilian revolt on the Saudi side of the Red Sea.

US forces were evicted from Saudi Arabia in mid-2003 and relocated to neighboring Qatar, but material and troop strength in US CENTCOM’s theatre of operations – including the permanent US “mega bases” in Iraq, might suggest a more lucrative alternative to Iran as the central target of US military strategic planning (see map below). Read more...