Our readers will be aware of the 1973 agreement negotiated between the Nixon administration and Saudi King Fahd’s court that provided U.S. security guarantees to the House of Saud in return for their support that global oil sales be transacted in U.S. dollars. The oil-backed “petrodollar” has been the anchor of support to the dollar’s position as the world’s reserve currency despite defaulting on convertibility to gold in 1971. You should keep that 44-year petrodollar agreement in mind as you read about this trip to Moscow.
In addition to more than 15 cooperation agreements that were signed, some of the most telling involved agreements between the Saudi Arabian Military Industries (SAMI) and the Russian state-owned arms exporter Rosoboronexport. The startling Saudi decision to buy the Russian S-400 surface-to-air missile system will be greeted with great dismay by U.S. policy planners who can no longer assume Saudi will be a welcoming air hub for U.S. or coalition air forces in future regional conflicts.
The decision will have a major negative impact on the Royal Saudi Air Forces themselves, so this should be viewed as a major political signal that the House of Saud is still feeling betrayed by the Obama administration’s nuclear rapprochement with Iran.
With this Moscow visit and Russian arms agreement, the Saudis are reminding the U.S. that their support for our 1973 petrodollar should not be taken for granted. Click here for more details on this significant visit.