Biden's trip to the Middle East, drunkards do not mean to drink.
In my opinion, it is not what it seems, lobbying oil producers to increase oil production and curb inflation in the United States.
Biden is renewing his life for the dollar, and Biden has to eat back grass.
Everyone knows that Saudi Arabia's relationship with the United States is very bad now, and the relationship between Saudi Crown Prince Mohammed and Biden is even more enemous.
Biden
The "Khashoggi incident" shocked the international community.
During bids, Biden used the "Khashoggi incident" to severely criticize Saudi Arabia and Saudi Crown Prince Mohammed.
Calling Saudi Arabia a "villainous state" and a "dalit state", he also said that he would "make Saudi Arabia a dalit in the international community".
After winning the election, Biden officially announced a series of sanctions against Saudi Arabia, freezing the assets of a former Saudi intelligence official and Saudi rapid intervention force, blacklisting 76 Saudis, and so on.
It also halted U.S. support for the multinational coalition's military operations in Yemen on the grounds that it was "not well done."
Biden's actions have completely turned the face of Saudi Crown Prince Mohammed and Biden, and the relationship between the United States and Saudi Arabia has been rifted like never before.
The U.S.-Saudi relationship is very special, and they have achieved mutual success, so every previous U.S. president in office has paid special attention to relations with Saudi Arabia, declaring that the United States and Saudi Arabia have an "extraordinary friendship."
Biden
This friendship comes from the "petrodollar", in which they achieve each other.
On August 15, 1971, then-US President Richard Nixon announced that he had abandoned the gold standard monetary policy, and the US dollar exchange rate that was out of the gold standard was extremely unstable, often fluctuating greatly, and inflation was very serious.
Inflation in the United States began to soar in 1972, and by mid-1974, it had soared to more than 13 percent.
In July 1974, newly appointed U.S. Treasury Secretary William Simon secretly traveled to the Saudi coastal city of Jeddah to negotiate with the Saudi government, demanding that Saudi Arabia use the U.S. dollar as the sole settlement currency for oil trade and buy large amounts of U.S. Treasury bonds.
In exchange, the United States offered generous conditions, one is to give Saudi Arabia a large amount of arms, help Saudi Arabia train its army, and ensure that Israel will not come back to Saudi Trouble; The second is to vigorously support Saudi Arabia economically and politically, give Saudi Arabia a lot of economic assistance and maintain the stability of the saudi royal family's ruling position.
Dollar
Oil-producing countries sell oil only in the U.S. dollar as the settlement currency, while the United States guarantees Saudi Arabia's national security.
Oil-producing countries only accept the dollar, and oil becomes the anchor of the dollar.
If you want to get oil, you must first buy the dollar, the demand for the dollar will come up, and the dollar exchange rate will be stable.
Oil-producing countries make a lot of dollars, and if they are just left at home, these dollars are a pile of waste paper.
At the instigation of the United States, oil-producing countries have poured the money they earn into the financial markets of the United States, especially the purchase of American Treasury bonds.
Thus the circulation of dollars was formed, and the United States had the ability to harvest the whole world.
Without Saudi Arabia, the United States may not have survived the hegemony of the United States and the Soviet Union, let alone the status of the sole superpower today.
With the development of shale oil technology, the United States has changed from an energy consumer to an exporter of energy, and the relationship between the United States and Saudi Arabia has changed, from a cooperative relationship to a competitive relationship.
At this time, the United States has dominated the world, and Saudi Arabia still needs the protection of the United States in terms of security, so this petrodollar relationship is still maintained.
Biden
After Biden took office, he united Europe and encircled China by using the reason of "gas change".
Biden's turn to new energy U.S.-Saudi relations has directly changed from a competitive relationship to a life-and-death hostile relationship.
In order to show his determination to Europe, there was a previous Biden and Saudi Arabia holiday.
In the past, Saudi Arabia sacrificed its own interests for its own security, and it was a last resort.
But now the United States unlimited QE, inflation is high, Saudi Arabia's dollar continues to dilute, according to the current inflation rate of 9%, minus the US Treasury yield of 3%, the United States will lose at least 6%. Lost a few years gone!
Under such circumstances, Saudi Arabia has two choices, one is to reduce production and raise oil prices to earn more dollars, and second, to abandon the dollar as the settlement currency.
First, the risk is the lowest, and there is a good reason, and at first the United States was tacit (you can consume excess dollars), but inflation in the United States is getting worse and worse. At this time, the United States wants to ease inflation by lowering oil prices, and oil-producing countries are of course reluctant to do it. This is equivalent to inflation in the United States being borne by oil-producing countries.
Second, everyone will say that it is impossible. Before the Russian-Ukrainian conflict, there may not have been any ideas. With the success of Russia's ruble settlement order, it is strange that there is no idea.
Dollar
Even India has dared to implement the "rupee settlement order", requiring india to use rupee settlement for imports and exports.
I dare not say whether India will succeed, if India "takes a bad head" approach, the United States and Europe have no punishment, or can not make India bow its head, which means that the Western financial hegemony will accelerate the collapse.
Many people blame the main reason for inflation in the West on too much water release and supply chain problems, which may seem like this on the surface, but over time, the problem is not so simple.
In my opinion, inflation in the United States and Europe is now because people do not believe in the euro and the dollar. Otherwise, in the turbulent times, everyone rushed to ask for dollars, just like when the epidemic in the United States first broke out, how many dollars were released was not enough, there was a serious "dollar panic", and now the international environment is far worse than then, and the dollar is rotten in the Bank of the United States and rotten in the Fed account.
On July 16, the Fed's overnight reverse repurchase hit a new high of $2.207 trillion.
With so many dollars flowing back to the Fed's account, is the interest rate given by the Fed high? Of course not, it's that people don't want to hold dollars anymore. In the past, everyone rushed to ask for dollars, how could this happen?
Everyone wants to hedge, before the dollar was a hedging tool, now the dollar is a hot potato.
Biden
According to a statement from BHP Billiton, the Victoria cargo ship carrying iron ore from the port of Helan in Western Australia recently arrived at Rizhao Port, China's main iron ore trading port, two weeks after departing. It is worth mentioning that this is also the first batch of iron ore settled in RMB.
To hedge, India can do this, and Australian businesses can do the same! Don't oil-producing countries have ideas?
The flight of other countries from the dollar is nothing more than a flesh wound for the United States, and if the oil-producing countries flee the dollar, it means that the dollar circulation that has been running for half a century will collapse, and the dollar hegemony will come to an abrupt end.
A single oil producer does not dare to challenge the United States directly, but if the oil-producing alliance stands up together to launch the currency of the oil-producing alliance, the United States will be powerless.
So Biden's trip to the Middle East is not about increasing oil production to curb inflation, but to address possible de-dollarization.
Crown Prince of Saudi Arabia, Mohammed bin Salman
There are two paths for the United States:
First, to continue to maintain good relations with oil-producing countries, they need to continue to maintain the petrodollar.
Second, if there is no way to establish good relations, we cannot let the oil-producing countries unite and provoke confrontation and conflict.
The first time Biden went to the Middle East, he spoke harshly to Iran, saying that he would not rule out the use of force against Iran, which was obviously provoking regional tensions, did not help regional stability, and did not help to curb oil prices.
Judging by what Biden has said, it is clear that the United States is on both sides.
For the United States, the minimum goal is to ensure the disunity of the oil-producing alliance, followed by good relations.
Biden has paid a lot in order to stabilize Saudi Arabia, ignoring the previous ugly things, personally visiting the door, and the face is enough for Saudi Arabia.
The face between countries is important, more important is the interest, the United States this time gave up, gave Saudi Arabia a big gift package.
On July 15, local time, the US White House issued a statement saying that US peacekeepers would withdraw from the Red Sea Tiran Island, paving the way for Saudi Arabia to control and develop the island.
The most rare thing is that Israel is not opposed.
Agence France-Presse quoted Israeli officials as saying on the 15th that Israel "has no objection" to the transfer of this island to Saudi Arabia. At the same time, Saudi Arabia announced the opening of Saudi airspace to Israeli commercial flights, and the interaction between the two sides has heated up significantly, which is regarded as an important step in promoting the normalization of "Israel-Saudi Arabia" relations.
The islands of Red Sea Tiran and Senafir are located at the junction of the Gulf of Aqaba and the Red Sea in western Saudi Arabia and eastern Egypt
- The islands of Red Sea Tiran and Senafir are located at the junction of the Gulf of Aqaba and the Red Sea in western Saudi Arabia and eastern Egypt, and their strategic location is very important, which is of great economic and strategic significance to egypt, Saudi Arabia, Israel and Jordan in the region.
The Saudis also gave Biden some rewards:
According to the Saudi News Agency (SPA), during US President Joe Biden's visit to Saudi Arabia, the two countries signed 18 cooperation agreements and memorandums, covering energy, investment and aerospace.
Crown Prince of Saudi Arabia, Mohammed bin Salman
— Saudi Arabia's Crown Prince Mohammed bin Salman said at the opening of a summit between the Persian Gulf states and the United States on Saturday that Saudi Arabia could increase oil production from the current 10 million barrels per day to 13 million barrels, after which the country's ability to increase oil production will be exhausted.
From the current point of view, Biden can be regarded as stabilizing Saudi Arabia, at least to maintain the current state, to preserve the petrodollar.
But Saudi Arabia has not shown a one-sided intention of turning to the United States.
On the 15th, a reporter from the US Consumer News and Business Channel interviewed Saudi Foreign Minister Adel al-Jubeir. The US media reporter also mentioned Biden's previous remarks, and Jubail responded that Saudi Arabia's policy is to establish communication bridges and deal with various countries, China is an important trading partner, energy market and investors of Saudi Arabia, and the United States is also Saudi Arabia's number one partner in many aspects. He stressed that between China and the United States, Saudi Arabia does not believe that one country is mutually exclusive with another.
Judging from Biden's smile, this trip to the Middle East is quite satisfied, and the ultimate goal of holding the bottom of the line is completed.