TheAltWorld A spooked White House rushes its Saudi fences: ‘Saving the dollar’!
This is the crux: Biden is desperate to have Riyadh buy Treasuries and to keep buying them.
Last Friday Biden said a ‘normalization’ deal with Saudi Arabia could be in prospect: “There’s a rapprochement maybe underway,” Biden told election contributors at an event in Maine.
Veteran US columnist, Tom Friedman, wrote following his direct meeting with Biden that the latter was indeed working on a US-Saudi “mutual security pact,” which could culminate with Saudi Arabia ‘normalizing’ ties with “Israel”.
The bones of the putative deal are these:
“One: a NATO-level, mutual security treaty that would enjoin the US to come to Saudi Arabia’s defense if it is attacked (most likely by Iran), two: a civilian nuclear program, monitored by the US, and three, the ability to purchase … the Terminal High Altitude Area Defence anti-ballistic missile system.”
This normalization, according to Friedman, however, would be contingent on no “annexation” of the West Bank and “Israel making concessions to the Palestinians that would preserve the possibility of a two-state solution” (emphasis added). Friedman formulates it as a hypothetical “ultimatum” for Netanyahu:
“You can annex the West Bank, or you can have peace with Saudi Arabia and the whole Muslim world – but you can’t have both, so which will it be? Now wouldn’t that make an interesting discussion around Netanyahu’s cabinet table?”
Well, on the face of it, it is nothing revolutionary (even if Friedman dresses it up as such): Security for Saudi Arabia in return for “forgoing” the ongoing seizure of Palestinian Arab lands in the West Bank and “preserving the prospect of a two-state solution.” This was, after all, the basis of the still unimplemented 2002 Arab Peace Initiative (re-launched by MBS at the last Arab League meeting) — and also the UAE normalization initiative which saw “Israel” reneging on its Palestinian quid pro quo.
So what is going on? Why are all hands (Jake Sullivan, Brett McGurk, and Antony Blinken) suddenly rushed to Jeddah? Why the sudden explosion of activity? Do they really believe that this old Saudi normalization “canard” would “force Netanyahu to abandon the extremists in his cabinet and make common cause with the Israeli Centre-Left and center-right;” the “Cherry on Top” to the Biden plan, as Friedman suggests?
Put plainly, Biden is proposing that Netanyahu betrays his government — and most likely goes to prison (when he ceases to be PM). Who, or what, would then stop the settlers? They have their “blood up”. They are not just ‘in’ the Netanyahu government, but in a real way, they ‘are’ the duly elected government. Does the White House imagine they would meekly capitulate, cap in hand, to Biden’s injunction?
And Mohammad bin Salman (MBS)? He has already obtained security guarantees for the Kingdom — negotiated directly with Iran, with China as guarantor. He is set to obtain a nuclear program (in alliance with Iran and China) and is about to play a leading role in regional affairs as part of the SCO-BRICS bloc.
The clincher to MBS’ reaction to the proposal, of course, is likely the perennial deal-buster: For more than two decades, the US has insisted on a halt to Jewish settlements in the West Bank. It has never happened. Why would MBS offer a gift to Biden whom he dislikes, knowing that the settlements would not stop — even under Leftist-Centre Israeli government?
So what is it precisely that hides “under the table”? Friedman actually gives it away:
“ … curtailing Saudi-China relations — would be a game changer for the Middle East, bigger than the Camp David peace treaty between Egypt and Israel.”
He continues:
“The US was not amused by reports last year that Saudi Arabia was considering accepting Chinese renminbi to price some oil sales to China instead of the US dollar. Over time, given the economic clout of China and Saudi Arabia, that could have a very negative impact on the dollar as the world’s most important currency. That would have to be cancelled. The US also wants the Saudis to curtail their dealings with Chinese tech giants like Huawei.”
Ahh – here we get to the core. Secretary Yellen recently made a two-day visit to Beijing that unaccountably extended to four days. There was little said about the detail of these talks in the Western press. Unusually, little was reported in China either. Reports, however, suggest that her primary objective was to persuade the Chinese to resume their buying of US Treasuries. During the Debt-Limit stand-off in the US Congress, Treasury cash holdings dwindled to near zero; she needs to sell $1.1 trillion Treasuries to somebody … urgently!
It seems that Yellen didn’t get any promises from China. There is no chance that China will buy treasuries: they sold another $20 billion of Treasuries they held in May, (the published details on US Treasury holdings are deliberately lagged by the authorities).
This is the crux: Biden is desperate to have Riyadh buy Treasuries — and to keep buying them. The team’s visit to Jeddah effectively is a reprise of the Kissinger 1970s negotiation that gave birth to the petrodollar and which obliged the Kingdom to buy and hold Treasury debt instruments.
Today, the dollar situation is much more fraught. Inflation and interest rates are up and bond values correspondingly are down. US debt has exploded and the interest payments alone on that debt are set to reach one trillion dollars a year. More significantly, swaths of the world are switching to trading in currencies other than the dollar.
Saudi trading oil in renminbi, therefore, is a flashing “red light” — among many such warning lights are flashing around the globe. They all signal the wish to ‘de-couple’ from both Bretton Woods institutions and its colonial financial system.
Riyadh presently is fighting — in coordination with Moscow — to break one aspect of “the system”: the West’s hold over the pricing of commodities, including the price of oil. If that is MBS’ aim — in which he is having some success in setting the price of the marginal barrel — why on earth would he throw himself back into the dollar global hegemony and sever his good relations with China too?
It is worrying. The whole schema speaks to a White House severed from reality — and desperate. (If so, what would this say about its prospective handling of Ukraine and US management of its relations with Russia).
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