It was 1974, a year after the third Arab-Israel war when the Arabs had weaponised their oil resources and announced an oil embargo. To hedge against this weaponisation of the future’s ‘black gold’, in June 1974, the US and Saudi Arabia set up a joint commission for economic cooperation. The commission was authorised to facilitate Saudi spending on US dollars. Both sides concluded a pact, whereby the pricing of crude became pegged to the US dollar. This strengthened the dollar, giving it heft and an edge over all other currencies in the world, something that still underpins the existing global economic order. The Saudis also committed to investing surplus funds into US bonds in exchange for military support.
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