The Petrodollar system explained in 5 steps:
1. In 1974, the US struck a deal with Saudi Arabia: the Saudis would price all oil exports in US dollars, and the US would provide military protection.
2. Since every country needs oil, every country needs dollars. This creates a permanent global demand floor for the USD.
3. Countries accumulate dollar reserves to buy oil. They park those reserves in US Treasury bonds.
4. This allows the US to run massive trade deficits and fund government spending at artificially low interest rates — because the world is forced to buy your debt.
5. Any country that threatens to price oil in a different currency faces severe consequences. Iraq (2000, switched to euros — invaded 2003). Libya (2011, proposed gold dinar — Gaddafi killed). Venezuela (2018, launched Petro — sanctioned, 2026 Maduro captured).
The pattern is not subtle. The petrodollar is not an economic arrangement. It is a military arrangement with economic consequences.
Understanding this changes how you read every geopolitical conflict involving oil-producing nations.
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