Ext: Relz key to dollar heg

Ext: Relz key to dollar heg

'At various points in time since the early 1970s, oil producers have discussed this, especially in periods when the dollar has been weak. Opinions have tended to be wide-ranging, depending on the strategic and trade alliances certain members have with particular trade blocs,' said Yarjani. That was an elliptical reference to the overwhelming influence of Saudi Arabia, whose government is the staunchest ally of the US within Opec. 'The Saudis are holding the line on oil prices in Opec and should they, for example, go along with the rest of the Opec people in demanding that oil be priced in euros, that would deal a very heavy blow to the American economy,' Youssef Ibrahim, of the influential US Council on Foreign Relations, told CNN. Last year the former US Ambassador to Saudi Arabia told a committee of the US Congress: 'One of the major things the Saudis have historically done, in part out of friendship with the United States, is to insist that oil continues to be priced in dollars. Therefore, the US Treasury can print money and buy oil, which is an advantage no other country has. With the emergence of other currencies and with strains in the relationship, I wonder whether there will not again be, as there have been in the past, people in Saudi Arabia who raise the question of why they should be so kind to the United States.'

The Saudis get little credit in American public opinion for their energy policies. First, they almost always take initiatives quietly. They did not publicize their increased production either after 9/11 or in the lead-up to the recent war. The markets took immediate notice, but there was very little recognition outside of specialist circles. Second, there is a widespread cynicism in the United States about Saudi oil policy, which is seen as serving Saudi interests. This may be so, but the question remains whether the Saudis define their interests in ways compatible with American interests. Generally, the Saudi government pursues policies that aim at stability in price and supply. This emphasis corresponds with the stated policy goals of successive American administrations. A different government in Saudi Arabia might take a very different stance. It would certainly have to sell oil, but would it have to sell as much? Would it carry the costs of maintaining excess production capacity, so as to be able to bring oil immediately to the market in times of supply disruption? Would it continue to denominate oil transactions in U.S. dollars, thus shielding the United States from the effects of dollar fluctuation on energy prices? All these issues would be on the table if relations broke down or if a new government took power in Saudi Arabia.

At various points in time since the early 1970s, oil producers have discussed this, especially in periods when the dollar has been weak. Opinions have tended to be wide-ranging, depending on the strategic and trade alliances certain members have with particular trade blocs,' said Yarjani. That was an elliptical reference to the overwhelming influence of Saudi Arabia, whose government is the staunchest ally of the US within Opec. 'The Saudis are holding the line on oil prices in Opec and should they, for example, go along with the rest of the Opec people in demanding that oil be priced in euros, that would deal a very heavy blow to the American economy,' Youssef Ibrahim, of the influential US Council on Foreign Relations, told CNN. Last year the former US Ambassador to Saudi Arabia told a committee of the US Congress: 'One of the major things the Saudis have historically done, in part out of friendship with the United States, is to insist that oil continues to be priced in dollars. Therefore, the US Treasury can print money and buy oil, which is an advantage no other country has. With the emergence of other currencies and with strains in the relationship, I wonder whether there will not again be, as there have been in the past, people in Saudi Arabia who raise the question of why they should be so kind to the United States.'

EXT – Oil Security

Pushing for political reform threatens the US-Saudi alliance - causes oil market instability that threatens economic recovery

Herald, 2011 (International Herald Tribune, 3-19, "For Obama, Bahrain is Mideast's hottest spot; Region in Revolt" LEXIS, SRM)

''In terms of concrete American national security interests, Bahrain-Saudi Arabia is the place,'' said Robert Malley, the Middle East and North Africa program director with the International Crisis Group. Saudi Arabia is the second largest foreign supplier of oil to the United States, and Bahrain is home to the U.S. Navy's Fifth Fleet. Even if the United States could wean itself from dependency on Saudi oil, the kingdom, home to the world's largest petroleum reserves, still can rock global markets and slow economic recovery in the United States and around the world. Beyond that, the United States has long viewed Saudi Arabia as a last bulwark against an ascendant Iran in a crucial region, and it does not want Tehran stepping in to back Shiites in Bahrain or Saudi Arabia. But where the United States and the Saudis split is over how to prevent Iran from gaining traction. While U.S. officials say the Saudi and Bahraini governments can head off trouble by making political reforms, the Saudis believe that political reforms would only open the door to greater instability.

Download 196.65 Kb.

Share with your friends: