"The U.S. and Saudi Arabia understood that the future of their relationship was at stake. The U.S. recognized that Saudi Arabia and other oil-producing countries were now major players on the world stage, and the price of oil had quadrupled in the last months of 1973. Saudi Arabia was making a lot of money, and its government needed somewhere safe to invest all those earnings."
"The U.S. and Saudi Arabia agreed on a deal: Saudi Arabia would agree to price its oil exports in U.S. dollars, and in exchange, the U.S. would provide economic and military support. Some historians believe the U.S. even gave the Saudis a discount on purchases of U.S. Treasury bonds."
The petrodollar system, pivotal for U.S. dollar dominance, faces threat from Iran's war, potentially weakening global economic stability. In 1973, the Yom Kippur War led to an oil embargo by Arab countries, quadrupling oil prices and causing Saudi Arabia to seek a safe place to invest its earnings. The U.S. and Saudi Arabia agreed on a deal: Saudi Arabia would price oil in U.S. dollars, and the U.S. would provide economic and military support. This arrangement has since been a cornerstone of the U.S. dollar's global status, but the Iran war threatens this system's stability.
Read at www.npr.org
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