Bloomberg to find out why the US ‘41 conceal the amount of duty to the Saudis

Agency Bloomberg unveiled details of the agreement between Washington and Riyadh, to keep secret of 41 years.

In July 1974, the global oil crisis hit the US economy. In addition, OPEC imposed an embargo against the United States due to the fact that Washington has provided military assistance to Israel during the “Yom Kippur War”. Against the background of these circumstances in the United States collapsed the stock market and inflation soared, the economy condition was deplorable. In this regard, the then US Treasury Secretary William Simon, together with the Deputy Jerry Parsky, the source agency, went on a tour of the Middle East and Europe.

Officially, the minister told the trip as an ordinary round of “economic diplomacy” - a series of protocol meetings and banquets, but behind all this hidden intention to visit only one city - Jeddah in Saudi Arabia. Setting the then US President Richard Nixon to keep this information secret.

US Treasury in the 70th William Simon

The visit to the kingdom was the neutralization of oil as an economic weapon. In addition, Nixon set a task to find a way to convince hostile to the US Saudis to invest in US debt. The then President has made it clear that Simon could not return from Jeddah with empty hands - failure of the talks would undermine America’s financial health and would allow the Soviet Union to strengthen its positions in the Arab world.

The basic framework of the scenario chosen by William Simon, was quite simple: the United States buy from Saudi oil, have her military assistance and help with logistical support, in return for billions of Saudi petrodollars into the coffers.

In order to settle all the details of the agreement, the two sides held a series of meetings behind closed doors. After long months of negotiations remained the only point on which urged Saudi King Faisal of Saudi Arabia (the third king of Saudi Arabia) - the fact of purchase Riyadh Treasuries should remain “strictly secret”, by Bloomberg says, citing diplomatic cables obtained Agency of the US national database archives.

Third Saudi King Faisal and b Abdul-Aziz Al Saud

Information remained a mystery 41 years, data on the amount of debt the US Treasury to Saudi Arabia were opened only in May of this year - $ 117 billion.

However, these data have generated more questions than answers. A former employee of the Ministry of Finance of the United States, who wished to remain anonymous, told the agency that the official statistics do not take into account the investment Riyadh to US government debt - in fact, the Saudis invested at least twice.

The declared volume of Saudi investments is only 20% of the foreign currency reserves of the kingdom, which is lower than normal amounts of assets that central banks around the store in dollars. Many analysts believe that Saudi Arabia hides the number of US bonds by buying them through offshore centers, which are counted in the statistics of other countries already.

“Buying bonds was a strategy aimed at the return of petrodollars in the US” - leads the agency words of David Ottaway of the International Scientific Center of Woodrow Wilson. In political terms, the agreement Riyadh and Washington have been very difficult and ambiguous. For the money the Saudis were fighting, and Japan, and France, and the United Kingdom - all allies of the US, but Washington managed to get ahead of them all.

The talks took place just ten months after the end of the Arab-Israeli “Yom Kippur War”, and King Faisal was most afraid that the Saudi money, “directly or indirectly” would be in the hands of the enemy of Saudi Arabia - Israel - it would harm the kingdom’s reputation, if information became known. In Israel, the money could come in the form of military assistance provided by the Israelis the Americans.

US Treasury officials found a way out: in one of the many special agreements Washington has allowed Riyadh to buy Treasury securities without holding the usual in such cases the auction. After such “amendments” to track the presence of Saudi Arabia to the US bond market was virtually impossible.

The US Treasury has done for the kingdom has one exception - in the monthly reports on the structure of US government debt with a list of holders of bonds of countries 14 countries, including Saudi Arabia, Kuwait, UAE and Nigeria, combined in one box “oil exporters”. This practice continued for 41 years.

31 May 2016

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