WINDS OF CHANGE ARE BLOWING ACROSS THE WORLD.
IS THE DEMISE OF PETRO DOLLAR HERE?
Reports are emerging that an agreement signed between Saudi Arabia and the US in 1974, termed as the ‘Petro Dollar’ deal was not renewed and it expired on June 9, 2024. In short, the US-Saudi Arabia petrol dollar deal, a pivotal arrangement in global finance has ended after 50 years. This deal facilitated the exchange of US dollars for crude oil exports, there by bolstering the dominance of dollars.
Who signed the Petro dollar agreement?
In the 1967, Israel was forced to fight a war against Egypt, Syria and Jordan. After six days of this war Israel defeated the Arab coalition.
On October 6, 1973, Egypt & Syria launched a coordinated surprise attack again on Israeli forces in the Sinai and the Golan Heights. Israel was taken totally by surprise, but ultimately repelled the attack and regained lost ground. This was possible, only after the United States made the decision to support and supply the Israeli military.
At this point of time’ Saudi Arabia was producing the highest quantum of crude oil in the world. The petrol and oil prices were not regulated hence the oil producing countries were not really making much profit. It was then that the OPEC (Organisation of the Petrol Exporting Countries) took a joint decision to regulate &reduce the production of oil, thereby forcing the petroleum prices to rise up. At this time, America, who noticed Saudi Arabia growing exponentially economically, after this move, slowly convinced the second deputy prime minister by making him an offer he could not refuse. He offered Saudi Arabia, sufficient weapons and military hardware to protect itself from Israel and other countries around it. America also offered it, protection from any Israeli attacks in the future. America also offered to buy most of its oil with Dollars. And since it was going to be a huge amount of money, offered to secure it with American Bonds. In return, he convinced him to sell his oil only against American dollars and no other country’s currency. It was formally established on June 8, 1974, by a joint statement issued and signed by Henry Kissinger, the U.S. secretary of state at the time, and Prince Fahd, the second deputy prime minister (and later king and prime minister) of Saudi Arabia, according to a report found in the archives. This is how the concept of Petrol Dollars was born. And since American dollar had proved to be a strong currency at the time, most countries resorted to buying American dollars to buy oil from OPEC countries. This helped American Dollar to gain strength in the next five decades.
However all this changed after the Russia Ukraine war. A number of countries like China and India, struck private deals with Russia and other oil producing countries to buy oil directly in their country’s currencies or by barter. This started weakening the hold of American dollars on the middle eastern oil producing countries. Now, we read that Saudi Arabia is refusing to sign on any such agreement, (presuming it exists). This will ensure that many of the global South’s developing countries will be free of American pressure. They will find respite from the strangle hold America exerts over their economies. Hopefully, this will again lead to world currencies being secured by ‘gold bullions and not American state bonds, which after all, are only scraps of American Paper. So much about the future of the Great American Dollars.
PUTIN VISITED NORTH KOREA AND VIETNAM LAST WEEK
As we saw last week, President of Ukraine was invited to G7 summit in Italy and told by American President that Ukraine would be supported by USA and its allies “until they prevail” in the war against Russia. He said Washington would send more air defence systems to Kyiv after signing a 10-year defence pact with Volodymyr Zelensky.
In view of the above, it is also essential, that we see, what Russian President did last week. He not only positioned Russia’s most advanced nuclear-powered submarine ‘Kazan’, near Cuba. Though the Submarine is not carrying any nuclear war heads, but it is no secret, that it has the capability of firing nuclear war heads. It is also accompanied by frigate Admiral Gorshkov, as well as an oil tanker and a salvage tug, with sufficient supplies to stay there for a long time.
Putin, the Russian President also visited, North Korea nearly 24 years after he visited it last time. He met Kim Jong-un, the President of North Korea and had very cordial interaction with him. There he said the two countries would want to cooperate closely to overcome US-led sanctions in the face of intensifying confrontation with Washington. What it all means in plain language is, “We are both united in this war against America. If America hits North Korea through South Korea or Japan, Russia would support North Korea. And if America hits Russia or its allies, then North Korea would support Russia.”
Next, Putin visited North Vietnam, a communist country, that had fought a bitter war against the US army and South Vietnam for decades. The visit and the talks were also to remind Vietnam, that during its worst days during war, Russia had stood ‘rock like’ by its side, in support. During this visit Russia and Vietnam, have pledged to strengthen their ties. How ever at the moment Vietnam’s trade in goods and services with the US is totaled at $142.1 billion (figures of 2022). Presently it is worth more than $ 100 billion annually. Naturally, Russia would have discussed, how it proposes to do business, on similar terms with Vietnam, in view of the sanctions that the US has slapped against Russia and its allies. The visit might also have been, to show the US, that Russia still has allies in crucial areas, that can strike at America in case of a war.
Presently the US and Russia stand opposing each other, threatening the world of a bitter confrontation, in the days to come. If such a confrontation happens, China is expected to side with Russia. India, in all probability, will remain neutral, although, it will not abide by any sanctions against Russia and continue to do business with both sides. North Korea will stand by Russia. Iran with all its allies against Israel will stand solidly behind Russia. Cuba is already standing with Russia against the US.
Europe, which is faced with an unprecedented financial crunch, and rising oil prices that have crippled its industries, will now be standing with Ukraine& USA. However the strikes and demonstrations that they are facing daily from the African and Arabian refugees, they accommodated in the last decade,are dealing them a blow that they have to try and sustain. So, if this Ukraine war continues, years on end, I really wonder, how many of them will really remain loyal to the US& Ukraine.
Why Europe is suffering from unprecedented high, Oil & Gas prices?
The Nord Stream is a network of offshore natural gas pipelines, which run under the Baltic Sea, from Russia to Germany, to provide Western Europe with cheap natural gas. When the US declared innumerable sanctions against Russia, one of them was against purchase of gas and oil from Russia. The four Nord Stream pipelines, were still supplying cheap Russian gas and oil to Western Europe. This stopped after three of these pipelines were destroyed by timed explosions. Hence, it is not difficult guess, as to who might have destroyed these pipe lines running deep under the Baltic Sea. Incidentally, it was soon after the US Navy divers, had completed their exercise with NATO teams, in the Baltic Sea.
All the best Russia and America. We only hope, you will not force another global catastrophe, in your quest to be the super power. We have only just recovered, from the blow of Covid that was probably man made and served on the world, in 2019.
