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osu.edu | The Yom Kippur War and the OPEC Oil Embargo
Operation Nickel Grass
history.state.gov | Oil Embargo, 1973-1974
Project Independence
Initially, Secretary of Defense James Schlesinger suggested to Kissinger that the USA invade Saudi Arabia and another Arab countries and seize their oil fields. Kissinger stated in a private state department meeting that it's "ridiculous that the civilized world is held up by 8 million savages... Can't we overthrow one of the sheikhs just to show that we can do it?" They formed a plan to invade Abu Dhabi, Kuwait, and Saudi Arabia. Kissinger publicly threatened "countermeasures" in a Nov 21st, 1973 press conference if the embargo was not lifted, and the Saudis responded with threatening further oil cuts and to burn their oil fields if the US military invaded. After the CIA confirmed these threats, Kissinger gave up military intervention and decided that dealing with Israel's troop withdrawals and settled on diplomatic solutions to the oil embargo.
state.gov | Second Arab Oil Embargo, 1973-1974he United States announced Project Independence to promote domestic energy independence. It also engaged in intensive diplomatic efforts among its allies, promoting a consumers' union that would provide strategic depth and a consumers' cartel to control oil pricing. Both of these efforts were only partially successful. The Nixon Administration also began a parallel set of negotiations with Arab oil producers to end the embargo, and with Egypt, Syria, and Israel to arrange an Israeli pull back from the Sinai and the Golan Heights.
On November 7, 1973, Kissinger flew to Riyadh to meet King Faisal and ask him to end the oil embargo in exchange for promising to be "evenhanded" with the Arab-Israeli dispute.
energyhistory.eu | Oil, dollars, and US power in the 1970s
The US government played its cards skillfully: on 8 June, at a ceremony in Washington DC, Secretary of State Henry Kissinger and Crown Prince Fahd signed before cameras a framework agreement for the creation of two joint US-Saudi commissions (an economic one, and a military one), aimed at the promotion of Saudi investments in the US in exchange for US cooperation in technology and in the modernization of Saudi Arabia's armed forces.41
41. "'Milestone' pact is signed by US and Saudi Arabia", New York Times, 9.6.1974. The importance of Saudi investments in the US was repeatedly stressed in the correspondence between the two sides throughout 1975: USNA, RG 56, Chronological files of Gerald Parsky, 1975-1976, FRC 1.
Only on March 18, 1974 did the king end the oil embargo after Sadat, whom he trusted, reported to him that the United States was being more "evenhanded" and after Kissinger had promised to sell Saudi Arabia weapons that it had previously denied under the grounds that they might be used against Israel. More important, Saudi Arabia had billions of dollars invested in western banks, and the massive bout of inflation set off by the oil embargo was a threat to this fortune as inflation eroded the value of the money, giving Faisal a vested interest in helping to contain the damage he himself inflicted on the economies of the West.
history.state.gov | Shuttle Diplomacy and the Arab-Israeli Dispute*, 1974-1975
...With Jordan no longer in a position to press the United States for a negotiation with Israel, and Israel unwilling to talk with the PLO, Sadat convinced President Ford and Kissinger that they should spend 1975 pushing for a second agreement between Israel and Egypt over the Sinai. Unlike Sinai I, however, negotiations for this second agreement proved far more challenging and lasted several months....
"Democracy Shield"
Reports of the petrodollar system's demise are 'fake news'—here's why, 15 June
[1] Almost immediately, Google searches for the term "petrodollar" spiked to the highest level on record dating back to 2004 < wipes tears > according to Google Trends data.

[2] According to UBS Global Wealth Management chief economist Paul Donovan a formal agreement demanding that Saudi Arabia price its crude oil in dollars never existed. Rather, Saudi Arabia continued accepting other currencies—most notably the British pound for its oil even after the 1974 agreement on joint economic cooperation was struck. It wasn't until later that year that the Kingdom stopped accepting the pound as payment.

[3] Perhaps the closest thing to a petrodollar deal was a secret agreement between the U.S. and Saudi Arabia reached in late 1974, which promised military aid and equipment in exchange for the Kingdom investing billions of dollars of its oil-sales proceeds in U.S. Treasurys, Donovan said. The existence of this agreement < wipes tears > wasn't revealed until 2016, when Bloomberg News filed a Freedom of Information Act request with the National Archives.

[4] "The evidence for any kind of conspiracy is thin to nonexistent," Eurasia Group analyst Gregory Brew told MarketWatch in an interview on Friday. "There is a very clear record of both the Americans and the Saudis being concerned in the aftermath of the global oil shock of what Saudi surpluses would do to the global economy."

by Cat on Sat Jun 15th, 2024 at 02:04:59 PM EST
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