Is an Israeli-Saudi peace deal just a Middle East mirage?
Saudi Arabia will not normalize relations with Israel without a major upgrade in US security guarantees, access to military equipment it doesn’t currently have, and assistance in building a peaceful nuclear energy program. After President Biden’s July 2022 visit to the desert kingdom to meet with Saudi Crown Prince Mohammed bin Salman (MBS), the Saudis realized the US was dragging its feet, so the Saudis pivoted to China.
China can’t fulfill the Saudis’ wish list, but they performed a diplomatic feat the US couldn’t, brokering a Saudi rapprochement with Iran in March 2023, buying the Saudis a respite from ongoing Iranian threats. China’s diplomatic triumph provided one more glaring example of its ascending global power and America’s declining prestige. The Biden administration got the message, and within a month, dispatched four top officials to Riyadh, including National Security Advisor Jake Sullivan and CIA director William Burns. In that sense, China’s diplomatic foray with the Saudis provided the US with keener insights into Saudi Arabia’s needs and goals and how Israel fits into that picture.
The US dollar cemented its role as the world’s “reserve currency” (or fallback currency) in 1974–75, after the fallout from the Arab oil embargo, which OPEC nations levied as payback for American military support to Israel in the 1973 Yom Kippur War. To end the standoff, the US agreed to up its economic and military aid to the Saudis, and Saudi Arabia reciprocated by agreeing to price all of its international oil sales in US dollars.
That’s the history, and that’s when the term “petrodollar” came into vogue. The petrodollar system has been undermined in recent years, with the BRICS nations of Brazil, Russia, India, China, and South Africa leading an international drive for a new global currency to challenge the dollar’s hegemony. Some of those nations are tired of the US weaponizing the dollar to level sanctions against them, but for India and China, it’s a way to assert their newfound economic might. A new US-Saudi deal could shore up the dollar and slow the global trend toward de-dollarization.
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