Transcription
Let me ask you something that almost nobody is asking out loud. Why is the Middle East on fire again right now at this exact moment in history? Not 10 years ago, not 20 years from now, right now. Is it religious extremism, ancient tribal hatreds, the ambitions of rogue states, or is it something hiding in plain sight? Something so enormous, so staggeringly obvious once you see it, that it almost feels embarrassing that it took this long to notice.
I want to show you a number. 37 trillion dollars. That is the size of the United States national debt as of right now. 37 trillion. To put that into perspective, if you started counting $1 per second the moment Jesus of Nazareth was born, you still would not have reached 37 trillion by today. You would not even be halfway there. It would take you over a million years. 37 trillion. And I am going to argue carefully, step by step, that this number, this obscene accumulation of borrowed money, is one of the most important keys to understanding what is happening in the Middle East. Not the only key, but one of the most important ones that almost nobody is talking about. Stick with me because I promise you, by the end of this, the Middle East is going to look very different to you than it does right now.
Let us start at the beginning, and I mean the real beginning. Not 2001, not 1948, not even 1916. Let us start with a simple question that economists ask. What happens when a country spends more than it earns for a very, very long time? The answer is it borrows. And when it borrows enough, something strange happens. The debt stops being just a financial problem. It becomes a geopolitical problem because debt at scale changes what a country can afford to do, and more importantly, what it cannot afford to stop doing.
Here's what I mean. The United States dollar is the world's reserve currency. That is the technical phrase. What it means in plain language is this. Almost every country on Earth holds American dollars as a foundation of their financial system. When Japan buys oil from Saudi Arabia, they pay in dollars. When Brazil trades with South Korea, the transaction is settled in dollars. The dollar is the blood of the global economy.
Now, why does this matter for American debt? Because as long as the world needs dollars, as long as every country on Earth is compelled to hold and use American dollars, there will always be demand for American debt. Countries buy American Treasury bonds. Pension funds around the world buy American Treasury bonds. Central banks from Beijing to Berlin to Brasilia buy American Treasury bonds. And as long as they keep buying, the United States can keep borrowing. And as long as the United States can keep borrowing, it can keep spending on its military, on its allies, on its interventions, on its wars.
This arrangement has a name. The economist Michael Hudson called it super imperialism. Others call it dollar hegemony. Whatever you want to call it, the mechanism is the same. America's ability to borrow endlessly is inseparable from the world's obligation to use the dollar. And the world's obligation to use the dollar is inseparable from one thing above all else, oil.
In 1974, the Nixon administration, reeling from the collapse of the Bretton Woods gold standard, staring into the abyss of a dollar that was rapidly losing credibility, struck one of the most consequential secret deals in modern history. Secretary of State Henry Kissinger flew to Riyadh and made an arrangement with the Saudi royal family. The terms roughly were these: The United States would guarantee the security of the Saudi regime, American arms, American military protection, American diplomatic cover. In exchange, Saudi Arabia would do two things. First, price all of its oil sales exclusively in US dollars. Second, invest its surplus oil revenues, the so-called petrodollars, back into American Treasury bonds.
The petrodollar system was born, and with it the dollar was saved, not by gold, not by American productivity or American exports, but by oil, by Saudi oil specifically, by the guarantee that if you wanted to buy energy, the lifeblood of every modern economy, you would first have to acquire US dollars, which meant you would have to do business with America, hold American financial instruments, support the American financial system. The dollar became backed not by gold, but by oil and by the military power of the United States to keep that oil flowing and that arrangement intact.
Do you see it now? Do you see why the Middle East matters so much? It is not just about the oil itself. It is about what the oil does to the dollar and what the dollar does for American debt and what American debt enables America to do. The Middle East is not a peripheral concern for Washington. It is the engine room of American financial power.
Now, let us fast forward because here is where the story gets truly interesting and genuinely frightening. Over the past two decades, the United States national debt has exploded. In 2000, the national debt was roughly 5.7 trillion dollars. Today, it is 37 trillion. That is a more than sixfold increase in roughly 25 years and the trajectory is not flattening. The Congressional Budget Office projects that within the next decade, interest payments alone on the American national debt will exceed what the United States spends on its entire military. Let that sink in. More money going to interest payments than to the Army, Navy, Air Force, Marines, Space Force, Nuclear Arsenal, and all intelligence agencies combined. That is not a financial footnote. That is an existential pressure and existential pressure, as any historian will tell you, produces desperate and sometimes reckless behavior from even the most powerful states.
So, what does a country do when its debt is this large? When the entire architecture of its financial power depends on the world continuing to use its currency, and when that currency's credibility depends on oil being priced in dollars, it does everything, everything in its power to control the geography of oil, to ensure that no rival power, no alternative currency, no competing financial system is allowed to gain a foothold in the region where most of the world's accessible oil reserves sit. This is not a conspiracy theory. I want to be very clear about that. This is structural analysis. This is what states do. This is what great powers have always done. The British did it in the 19th century. The Dutch did it before that. What is unique about the American situation is the sheer scale, the 37 trillion scale of what is now at stake.
Let me give you a specific example that illustrates this dynamic with remarkable clarity, Saddam Hussein. In 2000, Saddam Hussein announced that Iraq would begin pricing its oil in euros rather than dollars. He actually made the switch. Iraqi oil was being sold in euros. At the time, many economists dismissed this as posturing, a political gesture by a weakened dictator with no real financial clout. But watch what happened next. In 2003, the United States invaded Iraq. The official justifications were weapons of mass destruction, which as the world now knows did not exist, and links to Al-Qaeda, which were at best tenuous. But within weeks of the invasion and the fall of Baghdad, one of the first acts of the Coalition Provisional Authority was to switch Iraqi oil sales back to US dollars. I'm not saying that the petrodollar was the only reason for the Iraq war. History is never that simple. But I am saying when you look at the timing, when you look at what changed immediately after the invasion, when you consider the financial stakes involved, it would be almost willfully naive to pretend that the dollar played no role.
Now consider Muammar Gaddafi. In the years before his overthrow in 2011, Gaddafi was actively lobbying African nations to create a pan-African currency, the gold dinar, that would be used to price African oil and other commodities. A currency backed by gold, independent of the dollar, independent of the euro, controlled by African states for African benefit. Western governments dismissed this publicly. Privately, according to documents later released from Hillary Clinton's email server, documents that her advisers described as some of the most important intelligence on the Libya situation, French intelligence considered the gold dinar one of the primary motivating factors behind the push for regime change in Libya. Gaddafi was overthrown. The gold dinar never happened. Libyan oil continues to be sold in dollars.
I want to pause here and make sure I am being precise. I am not arguing that American foreign policy in the Middle East is nothing but a cynical scheme to protect the petrodollar. American policy makers are human beings with genuine beliefs, genuine fears, genuine strategic concerns about terrorism, about nuclear proliferation, about human rights, about regional stability. Those concerns are real, but they exist alongside structural economic pressures that are also real. Pressures that have only intensified as the national debt has grown. The $37 trillion is not the whole story, but it is a large and largely invisible part of the story.
Now let us talk about what is happening today, because the situation has become dramatically more complex and dramatically more urgent in ways that directly connect to the debt question. The most significant geopolitical development of the past five years, one that has received far less attention than it deserves is what analysts are calling dedollarization, the gradual, incremental, but accelerating effort by a growing number of countries to conduct more of their trade, especially their energy trade, outside the US dollar system. China and Russia began trading oil and gas in yuan and rubles. Saudi Arabia started discussions with China about accepting yuan for oil. Brazil and China signed a trade deal to transact in their own currencies. The BRICS nations, Brazil, Russia, India, China, South Africa, now joined by several others, have made the creation of an alternative reserve currency a formal political priority.
None of this has dethroned the dollar, not yet. The dollar remains overwhelmingly dominant in global trade. But here is the thing about reserve currency status. It does not collapse suddenly. It erodes slowly, then all at once. Like Hemingway's famous line about going bankrupt, gradually, then suddenly. And every percentage point of dedollarization is a percentage point of pressure on America's ability to finance its debt at low cost. Because the less the world needs dollars, the less the world needs to hold American Treasury bonds. And the less demand there is for Treasury bonds, the higher the interest rates America must pay to attract buyers. And at 37 trillion in debt, even a modest rise in interest rates translates into hundreds of billions of additional dollars in annual interest payments. This is the mechanism. This is the pressure cooker, and the Middle East sits right at the valve.
Think about what has happened in the region in just the past few years through this lens. Saudi Arabia, the linchpin of the petrodollar system, the country whose oil deal with Kissinger created the entire architecture, has been visibly hedging. Crown Prince Mohammed bin Salman has cultivated relationships with Beijing, with Moscow, with New Delhi. Saudi Arabia joined the Shanghai Cooperation Organization as a dialogue partner. Saudi Aramco signed massive deals with Chinese refiners. The kingdom that was once America's most reliable Arab partner has been sending increasingly clear signals that it is open to a world beyond dollar dominance. Why? In part because the Saudis have read the trajectory of American debt and concluded, not unreasonably, that a country with 37 trillion in debt, with rising interest payments, with a domestic political system that appears increasingly dysfunctional, may not be the unshakable guarantor it once was. They are diversifying, hedging the way any rational actor would when the foundation beneath them begins to feel less solid.
Then there is Iran. Iran has been largely excluded from the dollar system for decades, thanks to sanctions. And so, Iran has been forced by necessity to develop alternative financial arrangements, to trade in local currencies, to build relationships with countries that are themselves skeptical of dollar dominance. Russia, China, Venezuela, Belarus. Iran's exclusion from the dollar system has paradoxically made it an early pioneer of de-dollarization and has made Iran a natural partner for every country that wants to reduce its dependence on the American financial system. When you understand this dynamic, the alignment of interest between Iran and China, between Iran and Russia, becomes much clearer. It is not primarily about ideology. It is not primarily about anti-American sentiment. It is about the structural fact that these countries share a material interest in loosening the dollar's grip on global trade. And Iran, strategically located, militarily capable, ideologically motivated, is a useful partner in that project.
Now, I want to raise a possibility that I find genuinely unsettling. And I want to be clear that I am speculating here, carefully, analytically, but still speculating. What if the instability we are seeing in the Middle East today is not simply the result of old hatreds or failed states or religious extremism? What if some of it is not orchestrated exactly, but shaped by the financial pressures I have been describing? Here is what I mean. When the petrodollar system is under stress, the United States has historically responded in one of two ways. It can negotiate find new arrangements, adapt, share power, or it can destabilize. Keep the region in enough turmoil that no coherent alternative power structure can emerge. Keep the Gulf monarchies dependent on American security guarantees. Keep the oil flowing, keep it priced in dollars, and keep any rival arrangement from gaining the stability it would need to challenge dollar dominance. I am not saying this is a conscious strategy articulated in some secret memo in the basement of the State Department. I am saying that systems produce outcomes, and the outcome of a system in which the financial integrity of the world's largest debtor depends on Middle Eastern oil being priced in its currency is a system with enormous structural incentives toward Middle Eastern instability, because instability breeds dependency. The Gulf monarchies need American protection not primarily because of Iran per se. They need it because the chaos around them makes the American security umbrella seem indispensable. And as long as it seems indispensable, the financial arrangement that accompanies it, the petrodollar, remains in place.
But here is where I want to push back on my own argument because intellectual honesty demands it. The United States is not the only actor in this story. And the debt story, while important, does not explain everything. Russia has its own interests in the Middle East, interests that predate the dollar by centuries, rooted in access to warm water ports, historical influence in the Orthodox Christian communities of the Levant, and the straightforward desire of a great power to be present wherever global decisions are being made. China has interests that are more about energy security and trade routes than about currency competition, though the currency dimension is increasingly important for Beijing. Iran has interests rooted in its own vision of regional leadership, in Shia political theology, in its revolutionary identity, and the very rational desire of a sanctioned state to break the siege that surrounds it. Turkey has its own agenda, Israel has its own agenda. The Gulf states, Saudi Arabia, the UAE, Qatar, each have their own distinct and often competing agendas. The Middle East is not a chessboard on which great powers simply move pieces. It is a region of proud, ancient civilizations with their own histories, their own ambitions, their own grievances. Any analysis that reduces the Middle East to nothing but a dollar story is as incomplete as any analysis that ignores the dollar entirely. What I am arguing is not reductionism. I am arguing for addition. I am asking you to add one more layer to your understanding, a layer that is frequently missing from the mainstream conversation precisely because it implicates the financial architecture on which so many wealthy and powerful interests depend.
There is one more piece of this puzzle I want to place on the table before we draw this together, and it concerns the future. The 37 trillion debt is not going away. In fact, by virtually every credible projection, it is going to grow. The political will to genuinely reduce it, to run sustained surpluses, to make the kinds of structural changes to entitlements and military spending and taxation that would actually put the debt on a downward trajectory does not currently exist in Washington. Both parties, for different reasons, have essentially accepted that the debt will continue to grow. The argument is only about how fast. This means the structural pressure I have been describing, the dependence on petrodollar recycling, the incentive to maintain dollar hegemony, the geopolitical consequences of any serious challenge to that hegemony, is not going to diminish. It is going to intensify.
At the same time, the forces of de-dollarization are also not going away. They, too, are going to intensify. More countries will sign bilateral currency agreements. More oil will be priced in yuan, in rubles, in rupees. More central banks will diversify away from Treasury bonds, slowly, then potentially suddenly. The collision between these two trajectories, a United States that needs the petrodollar more than ever, and a world that is gradually but unmistakably reducing its dependence on the dollar, is going to play out somewhere. And that somewhere is most likely to be the Middle East. Not because the Middle East is uniquely cursed, not because its people are uniquely prone to violence, but because the Middle East is where the energy is, and the energy is where the money is, and the money, 37 trillion worth of it, is where the desperation is.
So, where does this leave us? I have argued today that the American national debt, 37 trillion dollars and growing, is one of the most important and least discussed keys to understanding the Middle East. That the petrodollar system, born in the wreckage of the Bretton Woods collapse in the early 1970s, created a structural alignment between American financial power and Middle Eastern oil. That this alignment, this dependence, has grown more intense, not less, as the debt has grown. That the rise of de-dollarization is creating pressure on this system that will ultimately have to be resolved one way or another. And that some of the instability we are seeing in the Middle East today must be understood, at least in part, through this lens. I am not asking you to adopt this as a complete explanation. I am asking you to hold it alongside the other explanations you already have. The religious, the ethnic, the tribal, the ideological. Hold them all together because the world does not have simple causes. It has layered ones. But I will say this, if you want to understand why the Middle East seems to matter so disproportionately to Washington, why American presidents who promised to pivot away from the region always find them selves dragged back, the 37 trillion on the ledger is a very good place to start looking. The debt is not just a number on a spreadsheet. It is a pressure. It is a weight that shapes decisions, distorts incentives, and bends the behavior of the most powerful country in human history toward patterns that might otherwise seem irrational. And the Middle East, the Middle East is where that weight comes to rest. That is what I wanted to show you today. And I hope truly that it changes how you look at the news tomorrow.