For decades the US and Saudi Arabia have shared a peculiar relationship: the Saudis sell relatively cheap oil to the United States for which they accept our fiat currency. They then recycle those paper dollars into the US military-industrial complex through the purchase of billions of dollars worth of military equipment, and the US guarantees the security of the Saudi monarchy
By accepting only dollars for the sale of its oil, the Saudis help the dollar remain the world's reserve currency. This has meant that we can export inflation, finance the warfare/welfare state, and delay our day of financial reckoning.
But it seems this longstanding entangling alliance is coming apart.
First, the US nuclear deal with Iran has infuriated the Saudis. They view Iran as bitter rivals and spared no expense in Washington to derail the deal. They were not successful – at least not yet. They have also been frustrated that the US has not devoted more of its resources to the Saudi "regime change" project in Syria, seen as a way to reduce Iranian influence in the Middle East.
But it is the potential release of the secret 28 pages of the 9/11 Report that purportedly show Saudi government involvement in the attacks on New York and Washington that threatens to really blow up US/Saudi relations. The relatives of the victims are demanding the right to hold the Saudi government legally accountable if it is shown to have had a role in the attacks, and the Senate's "Justice Against Sponsors of Terrorism Act" would lift Saudi sovereign immunity and allow lawsuits to go forward. The Saudis threaten to dump three-quarters of a trillion dollars in US assets if the bill becomes law – a move that could rock world markets and even the shaky Saudi economy.
President Obama's disastrous visit to the Saudi capital last week may have been seen as the last straw. Billed in Washington as a trip to shore up relations, President Obama got the cold shoulder as the Saudi monarch sent a low-level functionary to meet the US president's plane while he met an incoming delegation from the Gulf Cooperation Council. The message was pretty clear.