United States on verge
of destroying petrodollar
with their own hands

Written by The Frontier Post

David Narmania

The US Senate Jud-iciary Committee approved the NO-PEC bill. Those who were told by this abbreviation (No OPEC) that it was directed against oil exp-orting countries understood everything correctly: the document will allow the US Department of Justice to sue OPEC members for violations of antitrust laws.
In Russia, they like to remember with longing the fat 2000s, when oil cost more than $100 per barrel, but they forget that half a century ago it cost only three dollars. Therefore, let’s start with a short historical digression – not for the sake of the moralizing call “appreciate what you have”, but for the sake of the lessons that Biden, being at that time still a fairly young man, apparently skipped.
In October 1973, war broke out between the Arab states and Israel . It lasted only 17 days, but its consequences affected the whole world when oil-exporting countries in the Middle East announced that they would not sell fuel to anyone who supported Tel Aviv – the US, the UK, Canada and many others. This embargo lasted only until March 1974, but it provoked great problems not only for the states named above, but also changed the whole world, giving oil a special role forever and changing its price: in a year it quadrupled and reached 12 dollars per barrel.
Of course, now the expectations of a quadruple jump in fuel prices look naive, but fifty years ago, no one could have predicted how events would develop. And individual details and coincidences look like a crisis of the historical comedy genre.
In November 1973, US President Richard Nixon, in a message to Congress, stated: “In the near future we will be forced to use less energy (thermal, electric, gasoline), but in the long term we will have to develop new sources of energy that will allow us to satisfy our needs outside dependence on other states. In the same speech, he urged Americans to use cars less often, or at least drive more slowly to use less gasoline.
Forty-nine years later, Joe Biden echoes his call in a very similar manner, urging Americans to switch to electric cars, while his European colleagues advise their fellow citizens to save on much more familiar and necessary things, such as showering and personal hygiene. But the document has not yet been signed, and Washington and Brussels continue to disentangle the consequences of anti-Russian sanctions due to a special operation in Ukraine .
Why does the 1973 oil embargo analogy come to mind? Yes, because Biden, fighting to lower fuel prices by such methods, risks achieving the opposite result.
Actually, the NOPEC initiative itself is not new – in the USA they have been trying to push it through for two decades. The closest we got to the cherished goal was in 2007, when the document was dragged through the two houses of Congress, but it was vetoed by the current President George W. Bush .
How exactly the American courts, by decision of the US Department of Justice, will judge other countries, is still unclear. Possible sanctions remain vague. Perhaps the most drastic of these could be the asset freeze that Russia has recently faced.
However, such a move is unlikely to come as a surprise to any member of OPEC+. The whole world is well aware of the cartel nature of the organization, so Washington’s pompous cries that oil exporters are hindering the development of capitalism can only surprise you with their inappropriateness: they say, well, yes, they agree, because the oil market is in their hands and they do not want to sell it at $20 per barrel when they can sell for 70, 80 or even 100.
The US is the only major oil producer not included in the OPEC+ deal. At the same time, after the shale revolution, America gradually came out on top in terms of production, but in the ranking of exporters it occupies only a modest 12th line, more than six times behind Saudi Arabia .and almost five times – Russia. The fact is that the cost of shale fuel is much higher than conventional oil. Therefore, major American oil companies are not enthusiastic about the possible adoption of the law – the Biden administration will drive itself into zugzwang with this step: a rise in the price of black gold can lead to another global energy crisis, while a decrease in its cost will harm domestic producers. And the energy of the marches of eco-activists who vehemently criticize shale mining will not get you far. It seems that the White House wants to test this statement in practice.
Obviously, one of the first victims of the bill, if it is passed, is in danger of becoming Saudi Arabia. Riyadh also understands this, so when a similar document was discussed in 2019, they said that if the document is adopted, they are ready to abandon the use of the dollar in oil contracts. In this regard, media reports in March that China and Saudi Arabia are discussing the possibility of paying for fuel in yuan are now playing with completely new colors.
At the same time, the split along the line between the Middle East and the global West is becoming more and more clear-cut. US policy against the backdrop of the conflict in Yemen and the scandal over the murder of Jamal Khashoggi made contacts between Joe Biden and Muhammad bin Salman – the de facto leader of Saudi Arabia – impossible. The patriarch of American politics, who is living out his autumn in November, is not eager to give up the image of the defender of everything bright, at least in the face of fighters for social justice. And the young ambitious Middle Eastern prince understands that global changes will take place during his reign. In such a situation, it is very important to be in the camp of those who will emerge victorious from the big confrontation.
In this regard, of interest is a symptomatic article in The Telegraph, in the title of which Saudi Arabia is referred to as “Putin’s poodle”. In most cases, this should be translated as “Putin’s lackey”, but it seems that in relation to the Arab country, the play on words with the possible translation of “Putin’s poodle” is not accidental: the dog is still not the most revered animal in Islam.
Such petty silliness is understandable. The prospect of Saudi Arabia moving away from dollar settlements, along with the Kremlin’s already adopted decision to pay for gas in rubles, pours water on one mill: depriving the dollar of its reserve currency status. This step will significantly limit the sanctions instruments of the United States, and (which is much more painful for Washington) will deprive it of the opportunity to solve its internal economic problems with a banal emission, for which the whole world paid. Moreover, those who are in no hurry to accept the new tangible realities risk remaining under the rubble of the greatness of the American economy.

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