After about four months of mounting pandemic panic, and a plummeting global oil market. On March 6th 2020, Russia dropped the prices of their oil exports by 10%. Ending the unofficial price management agreement of global oil prices Russia had with OPEC, (Organization of the Petroleum Exporting Countries). About 2 weeks later, starting with California(the U.S biggest domestic oil consumer), the majority of U.S states would begin to issue their first Covid-19 lockdowns.
After almost a year of battling the Covid-19 pandemic, on February 26th 2021, OPEC announced they had reached an, “Declaration of Cooperation”, with the oil producing nations of the globe. About a month and a half later, in April 2021, most U.S states will have begun lifting the majority of their lockdown restrictions.
“At the 26th Meeting of the Joint Ministerial Monitoring Committee (JMMC) held on 3 February 2021, the Chair of the Committee, HRH Prince Abdul Aziz bin Salman, Saudi Arabia’s Minister of Energy, and Co-chair, HE Alexander Novak, Deputy Prime Minister of the Russian Federation, commended the positive efforts of all countries participating in the ‘Declaration of Cooperation’ (DoC) for the monumental strides taken toward attaining full conformity with their voluntary adjustments in output. Participating Countries have been proactive and preemptive in measures taken to mitigate the devastating impact of the COVID-19 pandemic on the oil market.”
The greatest failure of the American news and media apparatus, in my opinion, is that these intersecting events seem meaningless to the average American. Which is because, the average American doesn’t know that the U.S dollar is backed by the world’s number one exporter of oil, Saudi Arabia: Which essentially means the state of the U.S dollar, hinges on the stability of the global oil market, and the stability of relations between the leaders of the U.S and Saudi Arabia. Which is why every single modern President has pictures like this, and this, floating around the internet. If you need me to drill even deeper, let me paint this picture, that means that the global price of oil directly affects the value of the U.S dollar.
In 1971, with inflation on the rise and gold running out, President Nixon found himself with a U.S dollar in stagnation. Organizing a meeting at Camp David, President Nixon met with fifteen high level economic advisers, and created a new economic plan.
On August 15th 1971, Nixon introduced his new economic plan to America, the plan was intended to mitigate inflation and lower the unemployment rate. Central to President Nixon’s new economic plan was to replace the gold backed status of the U.S dollar. Foreign governments could no longer exchange U.S dollars for gold($35 an ounce at the time), essentially turning the U.S dollar monetary system, into a fiat system.
Through bilateral agreements with Saudi Arabia in 1974, the U.S negotiated a deal with OPEC to standardize the sale of oil in U.S dollars. In exchange for standardizing the U.S dollar, Saudi Arabia and other Arab states, secured U.S influence in the Israel-Palestinian conflict. Since oil is the globe’s most sought-after commodity, and essential to transport goods for trade, the agreement would elevate the U.S dollar to the world’s dominant reserve currency,
Being the world's reserve currency provides and burdens, the U.S with unique economic benefits and financial responsibilities. Such as if the U.S dollar drops in value, subsequent U.S bonds and stocks will also drop in worth. Because of the constant demand of oil, the U.S dollar must always be printed at a deficit to fulfill reserve requirements. If the U.S were to stop running deficits, the liquidated assets would result in a global economic slump, and the U.S dollar would lose its status as the global reserve currency.
Beyond the financial consequences, there are also moral consequences to consider, the petrodollar is the most volatile factor driving Middle Eastern conflict. Ever since the fall of the Ottoman empire in 1918, the Middle East has been the most unstable region on the planet. Most of which is the result of foreign intervention, there are many convenient coincidental events that parallel the petrodollar to Middle Eastern conflict.
In late 2000, Saddam Hussein switched Iraq’s oil export currency from the petrodollar to the petroeuro. In March 2003, he would be toppled from power, for “Weapons of Mass Destruction”, which were never found. It’s also notable to consider that the European Union was very split on the U.S invading Iraq in 2003, and didn’t intercede, unlike the Libya civil war were many European countries sent military forces.
In 2009, the leader of Libya Colonel Mummar Gaddafi, then president of the African Union: Suggested to the States of the African continent to get rid of the petrodollar, and to adopt a new currency: the Gold Dinar. The Gold Dinar would divert all Middle Eastern and African oil revenues, towards the regions they were sourced from, basically making the petrodollar obsolete.
In March 2011, in response to a civil war developing in Libya, a U.S led multi-state NATO-led coalition began a military intervention in Libya. The American and British navy’s fired over 110 Tomahawk cruise missiles into Libya, while the French, British and Canadian forces destroyed Libya’s tanks and vehicles. In her book “Hard Choices”, by Hillary Clinton, who was serving as secretary of state for the Obama administration wrote:
“It’s crucial we’re all on the same page on NATO’s responsibility to enforce the no-fly zone and protect civilians in Libya.”
When discussing the reasoning behind NATO’s intervention in Libya.
Colonel Mummar Gaddafi would die of a gunshot wound, on October 20, 2011.
The greatest atrocity linked to the U.S petrodollar, is probably America’s involvement in the Yemen civil war. Ever since September 2014, the northern and southern part of Yemen have been drenched in a bloody civil war, saturated by the agendas of foreign interests. The Yemen Arab Republic (North Yemen: The internationally recognized authoritative government), are at war with the Houthis, (Southern separatists). The Houthis feel as if the Northern Yemen government has been oppressive, ever since the reunification of Northern and Southern Yemen in May 1990.
On 26 March 2015, Saudi Arabia in a coalition with nine other countries Middle Eastern countries, responded to a call for military support from the President of Yemen: Abdrabbuh Mansur Hadi. The Saudi-led coalition deployed ground troops, and initiated a bombing campaign on Southern Yemen. The Saudi Arabian army also installed a naval blockade, restricting sea and air space around Yemen. The blockade resulted in mass starvation, that the U.N considers one of the deadliest famine in decades. Most of the weapons, vehicles, and ammunition, being used by the Saudi-led coalition, are provided by the U.S military industrial complex.
There has been a lot of bloodshed in the name of the petrodollar, it’s probably the single most volatile element still driving Middle Eastern conflict, but right now it might be the only thing that’s keeping the world from collapsing. As that famous saying goes: “Better the devil you know than the devil you don't.” The reality of the situation is that the petrodollar won’t be around forever, but the day that it gets replaced, the world will be a very different place especially America.