No, Iran just showed that the US offers zero security and never did.
Have you noticed that Iran can destroy the economies of every nation in the Gulf any time it chooses and there is nothing the US could do about it.? Have you noticed Iran's destruction of US bases throughout the Gulf? Have you noticed that the US is afraid to bring its warships closer than a thousand miles? Have you heard about US depletion if its defensive and stand off munitions? Have you read about how the expensive, fragile weapons systems upon which the US relies have proven to be nearly useless in an actual war?
Since 1974 the US has offered the ILLUSION of security to the gulf states. That illusion has now been shattered.
Thank you, Ray. Part of your challenge is fair, and I wrote it into the essay: the region absorbed real damage, and the UAE took the largest share of what Iran fired at the Gulf. If the essay claimed American protection is perfect, your point would land; it claims something narrower. Some of your other particulars outrun the record I can verify, so I will stay with what is documented.
The narrower claim is behavioral. The Gulf's security purchases ran straight through the war and continued after it: a written American guarantee for Qatar, major-non-NATO-ally status and F-35s for Riyadh, and, after the ceasefire, a civil-nuclear framework signed in July. Nothing was cancelled and nothing moved to another patron — no one took a Chinese umbrella, because none was on offer. The customers absorbed the salvos and kept buying. That behavior is the evidence.
And there is an irony in your version: it strengthens the thesis. If the umbrella is an illusion, the fear underneath it is real, and a frightened client pays more for reassurance, not less. Real or illusory, the premium gets priced in Washington — and my argument is that it will increasingly be paid in duration.
The U.S. bases that have offered protection in the gulf since gulf war 1 have been shown to just be targets. This is causing a huge change in perception in the gulf. The Turkish KSA Pakistan deal is a reaction to that.
Thank you — perception is the right word, and the reports of frustration are real. Where I would refine it: hedging is not replacement. The arrangements you point to add suppliers; they have not yet replaced what the Gulf, on the record of signed deals, still buys from Washington — the guarantees, the platforms, and the compute. In my essay's terms, new security partners raise the price of the American product without removing the buyer, which is one more reason the next arrangement, if it comes, will be better paid than 1974's. The thing to watch is whether the hedges ever turn into replacements. So far, they have not.
I'm inclined to agree with you. And yes, there is a 'but' :) IF ME countries would like to extricate themselves from the long-standing agreement, how to do it without causing 'chaos'? A gradual weaning off US paper and weapons? Putting aside 100s of years of inter-Islamic fighting? A unification around an anti-Isreali policy? I don't see any ME country wanting a 'shock'. China plays the long game (and seems to be doing quite well from it) . Russia, somewhat long. ME countries, somewhat long (depending on the various countries). Does/did the US ever have a long game, or just constantly try to bull its way through what ever arises? I 'think' ME countries will slowly wean themselves off the US, slowly mend bridges with each other, and perhaps even take a more sympathetic stance to Palestine. But slowly.
Thank you, Puddicus — a generous comment, and the right "but." My answer is that there is no clean exit, only repricing. Nobody weans off a reserve system by announcement; visible selling punishes the seller before it frees him. The realistic version of your gradual path is what the record already shows: let the share drift while the stock stays, keep the liquid book in dollars, and build equity and domestic assets alongside. Diversification without divorce. The March selling was a liquidity draw, not a departure. And both things now happen at once — the slow drift you describe, measured in decades, and a near-term ask for committed duration, negotiated deal by deal.
On China's long game, I wrote it in the essay: the courtship is real, and the settlement still lags it. On whether Washington ever had one: the 1974 channel ran quietly for forty-one years, through administrations of every temperament. My conclusion from watching it is that the American state is impatient, but the American plumbing is patient. The plumbing is the long game.
Questions like yours are the reason I started writing. I suspect the answers to most of them will arrive the way you predict: slowly.
Maybe the Saudis agree to buy Ts, but they require the US to drop the Abraham Accord requirement in order for the Saudis to get the nuclear enrichment deal completed. That’s how few cards the US has.
Thank you — and you have put your finger on the mechanism: it is one table, and everything on it trades against everything else. Chips, security, nuclear, investment pledges — and, I argue, duration. Which political conditions get traded against which, I leave to the diplomats. On the cards, though, I would adjust slightly: fewer than 1974, but not few. The nuclear framework moved in July, and the chip licences are a card Washington plays case by case. When one side needs financing and the other needs technology and protection, the bundle gets bigger, not smaller. That is where the bond leg hides.
The Abraham Accord’s deal requirement is a deal breaker to KSA. It smells of a last minute demand from Netanyahu, and a way to kill the deal. It also reduces trust in Trump keeping his word.
Thank you, Ray. On who demanded what and why, I have no documents, so I will hold my tongue where the record is silent. What the record does show is instructive: the other legs of the bundle kept moving while normalization waited — ally status and the F-35 decision in November, the defense agreement the next day, the nuclear framework in July. Conditions like the one you describe tend to get resequenced rather than resolved; when one term threatens the whole trade, the trade is restructured around it. Whether that happens here is one for the diplomats. My interest stays with the leg nobody announces: the financing.
- China has been building an infrastructure outside of Swift and U.S. control with Cips that has had huge growth.
- U.S. seizing of Russian foreign reserves sent a message the western financial system can’t be trusted. This was a step not even done in the world wars. Seizures of Iranian cryptocurrency.
- U.S. sanctions are another threat. There were threats to sanction countries even over environmental issues, such as Brazil and Indonesia. About 1/3rd of all countries have done type of U.S. sanctions on them. Culture issues are other potential sanction issues. The U.S. has heavily exported norms / ideas other countries don’t agree with, an example was flying a rainbow flag at the U.S. embassy in Kabul, Afghanistan. This is causing an increase in central banks buying gold, and transferring it home. The seizure of Venezuela and Afghanistan gold was noticed. And threats of secondary sanctions. China is retaliating with its own restrictions on rare earths.
- seizure of Russian shadow fleet vessels under dubious international law sends another message. Russia Has labeled it piracy.
- worried that U.S. may allow huge inflation since it can’t increase interest rates. This devaluing of the U.S. dollar is a threat to the petrodollar and U.S. reserve currency status.
Thank you for the link, Nicholas — I went through it. On the war assessments themselves I will hold to what I told Ray above: some of those particulars outrun what I can verify, and I write from documents. But one item in there is a real signal — the reported frustration in Gulf capitals, and the talk of reviewing basing arrangements. I am adding it to the watch-list I published. If that frustration hardens into fewer purchases and thinner ties, my thesis fails in public; I listed the falsifiers on purpose. So far the signed record runs the other way. I take the point, and I will keep watching that line.
And what about inflation if the gulf doesn't sell bonds and is just given swap lines? What if the gulf is rearranged again like in the 1920's? Who in their right mind is going invest in the gulf states when the security blanket is full of holes?
Good questions — three of them in one, so let me take them in order. On swap lines: they are liquidity against collateral, not a substitute for buyers. The Fed's facility lets official holders borrow dollars against Treasuries they already own; it keeps holders from selling, it does not replace the buying. Any inflation consequence runs through the Fed's balance sheet, and avoiding that spectacle is precisely why a quiet committed buyer is worth so much to Washington. On who invests in the Gulf when the blanket has holes: the buildout ran through the war and continued after it — the pledges and the data centers did not stop. Investors do not require perfect protection; they require priced protection. On the map being redrawn: I write only where the documents reach, and they do not reach there.
A fair challenge — thank you. Two answers. A country that borrows in its own currency does not go bankrupt the way a household does; it pays you back in dollars worth less, which is why my essay is about the price of the paper rather than its repayment. And on why anyone buys: because the buyers I write about are not paid only in yield. They are paid in chips, treaties, and protection. That is the whole argument.
Washington may have been selling security to dictatorships and cults, but that's changed, and the moment that change breaks through the inertia, the 'global economic meltdown' becomes the minor economic correction
Thank you for reading. The essay predicts no meltdown — it asks a narrower question, who buys the paper and at what price, and it states what would prove it wrong. Whichever way the change you describe goes, the auctions will tell us first.
Nazem Bhai, loved your thoughts. Ironically, I am working on writing about Bretton Woods, Eurodollar and ofcourse the myth of "Petrodollar". I don't quite buy spiro's argument, but go by what David Mulford wrote. He spent six years at SAMA from 1973 on and built it initially. There were no grand bargains or agreements, but more practical understandings that just flowed into the existing Eurodollar system. Petrodollar was a myth that refuses to die.
You views on what might be coming are interesting. Look forward to more on this. You spend three decades in those environs and younknow it better
Thank you, my friend — and good luck with the Bretton Woods and Eurodollar piece; that is exactly the right ground, and I'll read it when it comes.
On Spiro versus Mulford, I'm closer to you than you might expect. I wrote deliberately that no opened document records a bargain, and I don't claim one. Mulford was in the building, and his account of practical understandings deserves the weight you give it. My addition comes from the documents themselves: the December 1974 cable is titled "SAMA agrees to purchase Treasury issues," and the arrangement it describes was confidential at the Saudi side's insistence, routed through the Fed, outside the published auctions. Practical understandings between states are the statecraft. That was really my whole point: not a grand bargain, an unwritten option. And you are right that most of the recycling flowed through the Eurodollar system — the add-on channel was a tributary, not the river.
Where I would push back a little: if the petrodollar was a myth, it was a myth with a custody account. The real question now is whether the practical understandings come back at five percent. I suspect we will both be writing about that.
The cable itself: https://wikileaks.org/plusd/cables/1974JIDDA07310_b.html — if that mirror isn't reachable where you are, the record is NARA, RG 59, Central Foreign Policy Files, telegram 1974JIDDA07310, December 12, 1974, declassified 2005. The full verbatim text follows below, for your files.
THE DOCUMENT — verbatim. Page headers consolidated for reading; the teletype's own typographical errors preserved.
C O N F I D E N T I A L — JIDDA 7310 — EXDIS
O R 121145Z DEC 74. FM AMEMBASSY JIDDA. TO SECSTATE WASHDC IMMEDIATE 9559. AMCONSUL DHAHRAN. E.O. 11652: GDS. TAGS: EFIN, SA, US.
SUBJECT: SAMA AGREES TO PURCHASE TREASURY ISSUES. REF: JIDDA 7130.
SUMMARY: SAMA GOVERNOR AL QURAYSHI HAS AGREED TO EXPERIMENTAL PURCHASE THROUGH FEDERAL RESERVE OF SUBSTANTIAL ADDITIONAL PORTION OF DECEMBER TREASURY ISSUE. CONTINUOUS RELATIONSHIP ENVISAGED FOR LONGER TERM ISSUED. END SUMMARY.
1. UNDER SECRETARY BENNETT IN TWO LONG SESSIONS DEC 11 AND 12 WITH SAUDI ARABIAN MONETARY AGENCY GOVERNOR ABD AL AZIZ QURAYSHI REACHED AGREEMENT FOR AN INITIAL SAUDI PURCHASE OF LONGER TERM ISSUES LATER THIS MONTH. THE GOVERNOR REQUESTED THAT THE ARRANGEMENT WORKED OUT IN PRINCIPLE WITH TREASURY WHOULD BE IMPLEMENTED BY THE FEDERAL RESERVE BANK OF NEW YORK.
2. THE SAUDI GOVERNOR ACCEPTED THE PROPOSAL TO HAVE A NEW CONFIDENTIAL RELATIONSHIP THROUGH THE FEDERAL RESERVE WITH THE TREASURY BORROWING OPERATION. WHEN ANNOUNCEMENT OF AN ISSUED IS MADE, SAMA WILL BE QUERIED AS TO ITS INTEREST IN PURCHASING ADDITIONAL AMOUNTS OF THE SAME ISSUE AT THE AVERAGE PRICE OF THE AUCTION. CERTIFICATES FOR THESE ADDITIONAL AMOUNTS WILL BE ISSUED AND PROBABLY DEPOSITED IN ONE OF THE BANKS ON DEPOSIT FOR SAMA. IN THE EVENT THAT SAMA WISHES TO DISPOSE OF THESE ISSUES AHEAD OF THEIR DATE OF MATURITY FOR ANY REASON, NOTIFICATION WILL BE GIVEN TREASURY AT LEAST TWO DAYS AHEAD SO THAT MARKET FORCES CAN BE EVALUATED AND AN OFFER MADE TO SAMA IF JUDGED NECESSARY TO PREVENT DISRUPTION OF THE ORDINARY MARKET IN SUCH ISSUES.
3. INITIALLY GOVERNOR WAS DEFINITE THAT SHORT-TERM INVESTMENTS WERE NOT NEEDED. THESE WOULD BE DONE THROUGH REGULAR CHANNELS. HOWEVER, DEPUTY GOVERNOR ASKED PROBING QUESTIONS ABOUT POSSIBLE TEMPORARY DEPOSITS OF CERTAIN FUNDS OR PURCHASE OF VERY SHORT-TERM CERTIFICATES. UNDER SECRETARY INDICATED THAT PERHAPS SOME ARRANGEMENTS COOULD BE MADE PROVIDED CASE-BY-CASE NEGOTIATIIONS COULD BE AVOIDED AS TO RATE.
4. SAMA GOVERNOR, WHO CONSULTED WITH RIYADH BY TELEPHONE BEFORE MAKING THE DECISION, SAID THEY WISHED TO HAVE A SPECIAL ARRANGEMENT FOR PURCHASE OF ORDINARY ISSUES INSTEAD OF PURCHASING SPECIAL ISSUES AS HAD BEEN PROPOSED. EMPHASIS WAS STRONG ON NECESSITY OF CONFIDENTIALITY.
5. ONLY OTHER SAUDI OFFICIAL PRESENT AT THE DISCUSSIONS WAS DEPUTY GOVERNOR KHALID AL GHOSAYBI WHO TOOK AN ACTIVE PART AND ASKED ABOUT THE POSSIBILITY OF NEGOTIATING A SOMEWHAT SIMILAR RELATIONSHIP FOR PURCHASE OF ISSUES OF THE INDEPENDENT FEDERAL FINANCIAL AGENCIES. UNDER SECRETARY SAID THAT SUCH NEGOTIATIONS COULD BE APPROVED BUT ONLY IF THEY WERE DIRECE AND DID NOT INVOLVE USE OF ANY OTHER GROUP OR AGENT. AMBASSADOR AND ECONOMIC COUNSELOR PRESENT DURING TALKS WHICH WERE MOST RELAXED.
6. REGARDING YESTERDAY'S (DEC 11) SURPRISE DECISION TO REQUIRE SALES OF OIL ONLY IN DOLLARS, THE GOVERNOR SAID ONLY THAT IT HAD BEEN UNFORTUNATE THAT THE DECISION HAD BECOME KNOWN WHILE CHANCELLOR OF EXCHEQUER WAS ON VISIT TO KINGDOM (HE DEPARTS THIS MORNING - DEC 12). NO FURTHER EXPLANATION GIVEN OF SAUDI DECISION TO LEAVE STERLING.
7. DETAILS FOLLOW BY AIRGRAM. AKINS
[Declassified and released, US Department of State systematic review, 30 June 2005. NARA RG 59, Central Foreign Policy Files, 1974 Electronic Telegrams, film D740361-0075. Public domain as a work of the US government.]
"Washington sells security."
No, Iran just showed that the US offers zero security and never did.
Have you noticed that Iran can destroy the economies of every nation in the Gulf any time it chooses and there is nothing the US could do about it.? Have you noticed Iran's destruction of US bases throughout the Gulf? Have you noticed that the US is afraid to bring its warships closer than a thousand miles? Have you heard about US depletion if its defensive and stand off munitions? Have you read about how the expensive, fragile weapons systems upon which the US relies have proven to be nearly useless in an actual war?
Since 1974 the US has offered the ILLUSION of security to the gulf states. That illusion has now been shattered.
You have it backwards.
Thank you, Ray. Part of your challenge is fair, and I wrote it into the essay: the region absorbed real damage, and the UAE took the largest share of what Iran fired at the Gulf. If the essay claimed American protection is perfect, your point would land; it claims something narrower. Some of your other particulars outrun the record I can verify, so I will stay with what is documented.
The narrower claim is behavioral. The Gulf's security purchases ran straight through the war and continued after it: a written American guarantee for Qatar, major-non-NATO-ally status and F-35s for Riyadh, and, after the ceasefire, a civil-nuclear framework signed in July. Nothing was cancelled and nothing moved to another patron — no one took a Chinese umbrella, because none was on offer. The customers absorbed the salvos and kept buying. That behavior is the evidence.
And there is an irony in your version: it strengthens the thesis. If the umbrella is an illusion, the fear underneath it is real, and a frightened client pays more for reassurance, not less. Real or illusory, the premium gets priced in Washington — and my argument is that it will increasingly be paid in duration.
The U.S. bases that have offered protection in the gulf since gulf war 1 have been shown to just be targets. This is causing a huge change in perception in the gulf. The Turkish KSA Pakistan deal is a reaction to that.
Thank you — perception is the right word, and the reports of frustration are real. Where I would refine it: hedging is not replacement. The arrangements you point to add suppliers; they have not yet replaced what the Gulf, on the record of signed deals, still buys from Washington — the guarantees, the platforms, and the compute. In my essay's terms, new security partners raise the price of the American product without removing the buyer, which is one more reason the next arrangement, if it comes, will be better paid than 1974's. The thing to watch is whether the hedges ever turn into replacements. So far, they have not.
Did you expect the Enterprise to send their force field?
I'm inclined to agree with you. And yes, there is a 'but' :) IF ME countries would like to extricate themselves from the long-standing agreement, how to do it without causing 'chaos'? A gradual weaning off US paper and weapons? Putting aside 100s of years of inter-Islamic fighting? A unification around an anti-Isreali policy? I don't see any ME country wanting a 'shock'. China plays the long game (and seems to be doing quite well from it) . Russia, somewhat long. ME countries, somewhat long (depending on the various countries). Does/did the US ever have a long game, or just constantly try to bull its way through what ever arises? I 'think' ME countries will slowly wean themselves off the US, slowly mend bridges with each other, and perhaps even take a more sympathetic stance to Palestine. But slowly.
Thank you, Puddicus — a generous comment, and the right "but." My answer is that there is no clean exit, only repricing. Nobody weans off a reserve system by announcement; visible selling punishes the seller before it frees him. The realistic version of your gradual path is what the record already shows: let the share drift while the stock stays, keep the liquid book in dollars, and build equity and domestic assets alongside. Diversification without divorce. The March selling was a liquidity draw, not a departure. And both things now happen at once — the slow drift you describe, measured in decades, and a near-term ask for committed duration, negotiated deal by deal.
On China's long game, I wrote it in the essay: the courtship is real, and the settlement still lags it. On whether Washington ever had one: the 1974 channel ran quietly for forty-one years, through administrations of every temperament. My conclusion from watching it is that the American state is impatient, but the American plumbing is patient. The plumbing is the long game.
Questions like yours are the reason I started writing. I suspect the answers to most of them will arrive the way you predict: slowly.
Maybe the Saudis agree to buy Ts, but they require the US to drop the Abraham Accord requirement in order for the Saudis to get the nuclear enrichment deal completed. That’s how few cards the US has.
Thank you — and you have put your finger on the mechanism: it is one table, and everything on it trades against everything else. Chips, security, nuclear, investment pledges — and, I argue, duration. Which political conditions get traded against which, I leave to the diplomats. On the cards, though, I would adjust slightly: fewer than 1974, but not few. The nuclear framework moved in July, and the chip licences are a card Washington plays case by case. When one side needs financing and the other needs technology and protection, the bundle gets bigger, not smaller. That is where the bond leg hides.
The Abraham Accord’s deal requirement is a deal breaker to KSA. It smells of a last minute demand from Netanyahu, and a way to kill the deal. It also reduces trust in Trump keeping his word.
Thank you, Ray. On who demanded what and why, I have no documents, so I will hold my tongue where the record is silent. What the record does show is instructive: the other legs of the bundle kept moving while normalization waited — ally status and the F-35 decision in November, the defense agreement the next day, the nuclear framework in July. Conditions like the one you describe tend to get resequenced rather than resolved; when one term threatens the whole trade, the trade is restructured around it. Whether that happens here is one for the diplomats. My interest stays with the leg nobody announces: the financing.
You are welcome.
On the finance side:
- China has been building an infrastructure outside of Swift and U.S. control with Cips that has had huge growth.
- U.S. seizing of Russian foreign reserves sent a message the western financial system can’t be trusted. This was a step not even done in the world wars. Seizures of Iranian cryptocurrency.
- U.S. sanctions are another threat. There were threats to sanction countries even over environmental issues, such as Brazil and Indonesia. About 1/3rd of all countries have done type of U.S. sanctions on them. Culture issues are other potential sanction issues. The U.S. has heavily exported norms / ideas other countries don’t agree with, an example was flying a rainbow flag at the U.S. embassy in Kabul, Afghanistan. This is causing an increase in central banks buying gold, and transferring it home. The seizure of Venezuela and Afghanistan gold was noticed. And threats of secondary sanctions. China is retaliating with its own restrictions on rare earths.
- seizure of Russian shadow fleet vessels under dubious international law sends another message. Russia Has labeled it piracy.
- worried that U.S. may allow huge inflation since it can’t increase interest rates. This devaluing of the U.S. dollar is a threat to the petrodollar and U.S. reserve currency status.
Countries or tribes?
This is why I read Substack. Bravo!
Notes like this keep a new writer going — thank you. More coming.
https://simplicius76.substack.com/p/irans-strategy-vindicated-as-uss?utm_source=share&utm_medium=android&r=dhhne
Thank you for the link, Nicholas — I went through it. On the war assessments themselves I will hold to what I told Ray above: some of those particulars outrun what I can verify, and I write from documents. But one item in there is a real signal — the reported frustration in Gulf capitals, and the talk of reviewing basing arrangements. I am adding it to the watch-list I published. If that frustration hardens into fewer purchases and thinner ties, my thesis fails in public; I listed the falsifiers on purpose. So far the signed record runs the other way. I take the point, and I will keep watching that line.
And what about inflation if the gulf doesn't sell bonds and is just given swap lines? What if the gulf is rearranged again like in the 1920's? Who in their right mind is going invest in the gulf states when the security blanket is full of holes?
Good questions — three of them in one, so let me take them in order. On swap lines: they are liquidity against collateral, not a substitute for buyers. The Fed's facility lets official holders borrow dollars against Treasuries they already own; it keeps holders from selling, it does not replace the buying. Any inflation consequence runs through the Fed's balance sheet, and avoiding that spectacle is precisely why a quiet committed buyer is worth so much to Washington. On who invests in the Gulf when the blanket has holes: the buildout ran through the war and continued after it — the pledges and the data centers did not stop. Investors do not require perfect protection; they require priced protection. On the map being redrawn: I write only where the documents reach, and they do not reach there.
Why would country buy American bonds especially 10. The country is bankrupt and you will never get your money back
A fair challenge — thank you. Two answers. A country that borrows in its own currency does not go bankrupt the way a household does; it pays you back in dollars worth less, which is why my essay is about the price of the paper rather than its repayment. And on why anyone buys: because the buyers I write about are not paid only in yield. They are paid in chips, treaties, and protection. That is the whole argument.
Washington may have been selling security to dictatorships and cults, but that's changed, and the moment that change breaks through the inertia, the 'global economic meltdown' becomes the minor economic correction
Thank you for reading. The essay predicts no meltdown — it asks a narrower question, who buys the paper and at what price, and it states what would prove it wrong. Whichever way the change you describe goes, the auctions will tell us first.
great sharing, great stories. thank you!
Thank you, Kevin — glad the stories landed. There are more where those came from.
Nazem Bhai, loved your thoughts. Ironically, I am working on writing about Bretton Woods, Eurodollar and ofcourse the myth of "Petrodollar". I don't quite buy spiro's argument, but go by what David Mulford wrote. He spent six years at SAMA from 1973 on and built it initially. There were no grand bargains or agreements, but more practical understandings that just flowed into the existing Eurodollar system. Petrodollar was a myth that refuses to die.
You views on what might be coming are interesting. Look forward to more on this. You spend three decades in those environs and younknow it better
Thank you, my friend — and good luck with the Bretton Woods and Eurodollar piece; that is exactly the right ground, and I'll read it when it comes.
On Spiro versus Mulford, I'm closer to you than you might expect. I wrote deliberately that no opened document records a bargain, and I don't claim one. Mulford was in the building, and his account of practical understandings deserves the weight you give it. My addition comes from the documents themselves: the December 1974 cable is titled "SAMA agrees to purchase Treasury issues," and the arrangement it describes was confidential at the Saudi side's insistence, routed through the Fed, outside the published auctions. Practical understandings between states are the statecraft. That was really my whole point: not a grand bargain, an unwritten option. And you are right that most of the recycling flowed through the Eurodollar system — the add-on channel was a tributary, not the river.
Where I would push back a little: if the petrodollar was a myth, it was a myth with a custody account. The real question now is whether the practical understandings come back at five percent. I suspect we will both be writing about that.
The cable itself: https://wikileaks.org/plusd/cables/1974JIDDA07310_b.html — if that mirror isn't reachable where you are, the record is NARA, RG 59, Central Foreign Policy Files, telegram 1974JIDDA07310, December 12, 1974, declassified 2005. The full verbatim text follows below, for your files.
THE DOCUMENT — verbatim. Page headers consolidated for reading; the teletype's own typographical errors preserved.
C O N F I D E N T I A L — JIDDA 7310 — EXDIS
O R 121145Z DEC 74. FM AMEMBASSY JIDDA. TO SECSTATE WASHDC IMMEDIATE 9559. AMCONSUL DHAHRAN. E.O. 11652: GDS. TAGS: EFIN, SA, US.
SUBJECT: SAMA AGREES TO PURCHASE TREASURY ISSUES. REF: JIDDA 7130.
SUMMARY: SAMA GOVERNOR AL QURAYSHI HAS AGREED TO EXPERIMENTAL PURCHASE THROUGH FEDERAL RESERVE OF SUBSTANTIAL ADDITIONAL PORTION OF DECEMBER TREASURY ISSUE. CONTINUOUS RELATIONSHIP ENVISAGED FOR LONGER TERM ISSUED. END SUMMARY.
1. UNDER SECRETARY BENNETT IN TWO LONG SESSIONS DEC 11 AND 12 WITH SAUDI ARABIAN MONETARY AGENCY GOVERNOR ABD AL AZIZ QURAYSHI REACHED AGREEMENT FOR AN INITIAL SAUDI PURCHASE OF LONGER TERM ISSUES LATER THIS MONTH. THE GOVERNOR REQUESTED THAT THE ARRANGEMENT WORKED OUT IN PRINCIPLE WITH TREASURY WHOULD BE IMPLEMENTED BY THE FEDERAL RESERVE BANK OF NEW YORK.
2. THE SAUDI GOVERNOR ACCEPTED THE PROPOSAL TO HAVE A NEW CONFIDENTIAL RELATIONSHIP THROUGH THE FEDERAL RESERVE WITH THE TREASURY BORROWING OPERATION. WHEN ANNOUNCEMENT OF AN ISSUED IS MADE, SAMA WILL BE QUERIED AS TO ITS INTEREST IN PURCHASING ADDITIONAL AMOUNTS OF THE SAME ISSUE AT THE AVERAGE PRICE OF THE AUCTION. CERTIFICATES FOR THESE ADDITIONAL AMOUNTS WILL BE ISSUED AND PROBABLY DEPOSITED IN ONE OF THE BANKS ON DEPOSIT FOR SAMA. IN THE EVENT THAT SAMA WISHES TO DISPOSE OF THESE ISSUES AHEAD OF THEIR DATE OF MATURITY FOR ANY REASON, NOTIFICATION WILL BE GIVEN TREASURY AT LEAST TWO DAYS AHEAD SO THAT MARKET FORCES CAN BE EVALUATED AND AN OFFER MADE TO SAMA IF JUDGED NECESSARY TO PREVENT DISRUPTION OF THE ORDINARY MARKET IN SUCH ISSUES.
3. INITIALLY GOVERNOR WAS DEFINITE THAT SHORT-TERM INVESTMENTS WERE NOT NEEDED. THESE WOULD BE DONE THROUGH REGULAR CHANNELS. HOWEVER, DEPUTY GOVERNOR ASKED PROBING QUESTIONS ABOUT POSSIBLE TEMPORARY DEPOSITS OF CERTAIN FUNDS OR PURCHASE OF VERY SHORT-TERM CERTIFICATES. UNDER SECRETARY INDICATED THAT PERHAPS SOME ARRANGEMENTS COOULD BE MADE PROVIDED CASE-BY-CASE NEGOTIATIIONS COULD BE AVOIDED AS TO RATE.
4. SAMA GOVERNOR, WHO CONSULTED WITH RIYADH BY TELEPHONE BEFORE MAKING THE DECISION, SAID THEY WISHED TO HAVE A SPECIAL ARRANGEMENT FOR PURCHASE OF ORDINARY ISSUES INSTEAD OF PURCHASING SPECIAL ISSUES AS HAD BEEN PROPOSED. EMPHASIS WAS STRONG ON NECESSITY OF CONFIDENTIALITY.
5. ONLY OTHER SAUDI OFFICIAL PRESENT AT THE DISCUSSIONS WAS DEPUTY GOVERNOR KHALID AL GHOSAYBI WHO TOOK AN ACTIVE PART AND ASKED ABOUT THE POSSIBILITY OF NEGOTIATING A SOMEWHAT SIMILAR RELATIONSHIP FOR PURCHASE OF ISSUES OF THE INDEPENDENT FEDERAL FINANCIAL AGENCIES. UNDER SECRETARY SAID THAT SUCH NEGOTIATIONS COULD BE APPROVED BUT ONLY IF THEY WERE DIRECE AND DID NOT INVOLVE USE OF ANY OTHER GROUP OR AGENT. AMBASSADOR AND ECONOMIC COUNSELOR PRESENT DURING TALKS WHICH WERE MOST RELAXED.
6. REGARDING YESTERDAY'S (DEC 11) SURPRISE DECISION TO REQUIRE SALES OF OIL ONLY IN DOLLARS, THE GOVERNOR SAID ONLY THAT IT HAD BEEN UNFORTUNATE THAT THE DECISION HAD BECOME KNOWN WHILE CHANCELLOR OF EXCHEQUER WAS ON VISIT TO KINGDOM (HE DEPARTS THIS MORNING - DEC 12). NO FURTHER EXPLANATION GIVEN OF SAUDI DECISION TO LEAVE STERLING.
7. DETAILS FOLLOW BY AIRGRAM. AKINS
[Declassified and released, US Department of State systematic review, 30 June 2005. NARA RG 59, Central Foreign Policy Files, 1974 Electronic Telegrams, film D740361-0075. Public domain as a work of the US government.]