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The frightened White House attacks its Saudi barriers: Save the dollar

 



Here's the bottom line: Biden absolutely wants Riyadh to own Treasuries and keep buying them.

Last Friday, Biden said a “normalization” deal with Saudi Arabia could be in sight: “A reconciliation may be in progressBiden told campaign contributors at an event in Maine.

Veteran American columnist Tom Friedman wrote, following his direct meeting with Biden, that the latter was indeed working on a “mutual security pact” between the United States and Saudi Arabia, which could lead to a “ normalization" of ties between Saudi Arabia and Israel.

The outline of the supposed agreement is as follows:

«One: a mutual security treaty at the NATO level that would enjoin the United States to come to the defense of Saudi Arabia if it were attacked (most likely by Iran), two: a civilian nuclear program, controlled by the United States, and three: the ability to purchase … the Terminal High Altitude Area Defense anti-ballistic missile system».

According to Friedman, this normalization would, however, be conditional on the absence of "annexation" of the West Bank and the fact that "Israel makes concessions to the Palestinians that would preserve the possibility of a two-state solution". Friedman formulates it as a "ultimatumhypothetical for Netanyahu:

"You can annex the West Bank or make peace with Saudi Arabia and the whole Muslim world, but you can't have both." Wouldn't that be an interesting discussion in Netanyahu's cabinet?

At first sight, there is nothing revolutionary about it (even if Friedman presents it as such): Security for Saudi Arabia in exchange for "renouncing" the ongoing seizure of Palestinian Arab lands in the West Bank and " preservation of the prospect of a two-state solution”. After all, it was the basis of the 2002 Arab Peace Initiative, which has still not been implemented (relaunched by MBS at the last Arab League meeting), as well as the normalization of the United Arab Emirates, which saw Israel revert to its Palestinian counterpart.

So what's going on? Why are all the hands (Jake Sullivan, Brett McGurk and Antony Blinken) suddenly rushing to Jeddah? Why this sudden burst of activity? Do they really believe that this old "duck" of Saudi standardization "would force Netanyahu to abandon extremists in his cabinet and make common cause with Israel's center-left and center-right"The"Cherry on the cakeof the Biden plan, as Friedman suggests?

Put plainly, Biden is proposing that Netanyahu betray his government — and most likely go to jail (when he steps down as prime minister). Who, or what, would stop the settlers then? They have their “shed blood”. They are not only "in" the Netanyahu government, but in a way they "are" the duly elected government. Does the White House imagine that they would capitulate obediently, cap in hand, to Biden's injunction?

And Mohammad bin Salman (MbS)? He has already secured security guarantees for the Kingdom – negotiated directly with Iran, with China as a guarantor. It is on the verge of obtaining a nuclear program (in alliance with Iran and China) and playing a leading role in regional affairs as a member of the OCS-BRICS bloc. 

The defining element of MbS's reaction to the proposal, of course, is probably the perennial obstacle to reaching agreements: For more than twenty years, the United States has insisted on an end to Jewish settlement in the West Bank. It never happened. Why would MbS give a gift to Biden, whom he dislikes, knowing the settlements won't end, even under a center-left Israeli government?

What exactly is hiding “under the table”? Friedman actually reveals it:

"... reducing relations between Saudi Arabia and China – would be a game-changer for the Middle East, more important than the Camp David peace treaty between Egypt and Israel».

He pursues :

«The United States was not amused by reports last year that Saudi Arabia was considering accepting the Chinese renminbi to price some oil sales to China instead of the US dollar. Ultimately, given the economic power of China and Saudi Arabia, this could have a very negative impact on the dollar as the most important currency in the world. That decision should therefore be annulled. The United States also wants the Saudis to cut relations with Chinese tech giants such as Huawei.».

Ahh – here we get to the heart of the matter. Secretary of State Yellen recently made a two-day visit to Beijing, which inexplicably stretched out to four days. The Western press has said little about the details of these talks. Unusually little has been reported in China either. Reports, however, suggest that his main goal was to persuade the Chinese to resume buying US Treasuries. During the impasse over the debt limit in the US Congress, Treasury liquidity fell to near zero; it has to sell 1100 trillion dollars worth of treasury bills to someone… urgently!

It seems that Yellen received no promises from China. There is no chance that China will buy Treasuries: it sold another $20 billion of Treasuries it held in May (released details of US Treasury holdings are deliberately delayed by authorities ).

This is the crux of the matter: Biden absolutely wants Riyadh to own treasury bonds – and to keep buying them. The team's visit to Jeddah is effectively a replay of Kissinger's negotiations in the 1970s, which gave birth to the petrodollar and forced the Kingdom to buy and hold Treasury debt securities.

Today, the situation of the dollar is much more delicate. Inflation and interest rates are up and bond values ​​are down. US debt has exploded and interest payments on that debt alone are expected to reach a trillion dollars a year. More importantly, whole swathes of the world are beginning to trade in currencies other than the dollar.

The Saudi renminbi oil trade is therefore a flashing “red light”, among many other such warning lights around the world. They all signal a desire to “decouple” from both the Bretton Woods institutions and its colonial financial system.

Riyadh is currently fighting – in coordination with Moscow – to break down one aspect of the “system”: the West's grip on the pricing of raw materials, notably the price of oil. If that is MbS's goal – and he achieves this to some extent by pricing the marginal barrel – why on earth would he again throw himself into global dollar hegemony and also sever his good relations with the China?

It's worrying. The whole of this diagram testifies to a White House cut off from reality and desperate. (If so, what about his future handling of Ukraine and the US handling of its relationship with Russia).

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