Bloomberg revealed details of a secret agreement between Washington and Riyadh, signed after the oil crisis of 1974. According to this deal, the fact of purchase by Saudi Arabia of us Treasury bonds was supposed to be a “strict secret”.
In July 1974, when the world oil crisis hit the U.S. economy, the then US Treasury Secretary William Simon, together with his Deputy, Jerry Parsky went for talks in Jeddah city in Saudi Arabia. Information about this trip was kept secret.
The purpose of the visit to the Kingdom was the neutralization of oil as an economic weapon. In addition, U.S. President Richard Nixon set the goal to find a way to convince Washington is hostile to the Saudis to invest in us government debt, RIA Novosti reported with reference to Bloomberg.
The scenario was this: the US buys Saudi Arabia’s oil, providing it with military aid and help with logistical support, in return for the billions of Saudi petrodollars into the coffers.
The talks took place just ten months after the end of the Arab-Israeli “Yom Kippur War”. Saudi king Faisal bin Abdul-Aziz al Saud feared that his money “directly or indirectly” will be in the hands of Israel, the main enemy of the Kingdom (e.g., in the form of military assistance provided to the Israelis by the Americans).
Washington found a way out of the situation, allowing Riyadh to buy papers without the usual for such cases the auction. Then track the presence of Saudi Arabia on the US debt market was virtually impossible.
In addition, the U.S. Treasury has done for the Kingdom of another exception. Monthly reports on the structure of public debt the Americans agreed not to specify the share of Saudi Arabia, by combining it with other countries, mostly OPEC. This practice continued for 41 years.
Data about the amount of debt the U.S. Treasury before Saudi Arabia were uncovered only in may this year. It is about $ 117 billion. The former employee of the Ministry of Finance of the USA, wished to remain anonymous, told the Agency that in fact the Saudis have invested in American Treasury paper at least twice.Related posts: