31 MAY 2016 AT 10:49 ET
Saudi Arabia agreed to prop up American debt and spending in exchange for military aid and equipment as part of a secret agreement dictated by former President Richard Nixon.
The diplomatic and economic agreement was reached in July 1974, at the height of the oil crisis, on the condition of secrecy — but newly revealed documents show how the kingdom entangled its fortune with the economic survival of the U.S., reported Bloomberg News.
Nixon insisted on the deal to neutralize crude oil as an economic weapon and to prevent the Soviet Union from establishing a foothold in the Arab world, and the former president also hoped the kingdom would finance the growing U.S. deficit with its new oil wealth, the website reported.
But the recent collapse of oil prices has stoked fears that Saudi Arabia might sell off those Treasury assets to raise money, and some economists and other observers fear the kingdom could use its U.S. debt holdings as a political weapon.
Saudi Arabia warned in April that it would sell up to $750 billion in Treasury securities and other assets if the U.S. Congress passed a bill that would allow the kingdom to be held liable in court for the Sept. 11, 2001, terrorist attacks.
That threat comes during a bipartisan push by presidential candidates and lawmakers to declassify a 28-page section of the 9/11 investigation report that is believed to detail Saudi ties to the terrorist attacks.
The bill passed the Senate on May 17 and is now under consideration by the House of Representatives.
The U.S. hitched its economy to Saudi Arabia’s oil wealth nearly 42 years ago following high-level meetings between Nixon’s treasury secretary, William Simon, and Saudi royalty — who insisted that details about the arrangements and negotiations remain secret.