The Petrodollar Pact: How Dollar Hegemony, Not Democracy or Oil, Drives America’s Unconditional Protection of Saudi Arabia

Abstract

The United States has, for decades, extended extraordinary military and diplomatic protection to the Kingdom of Saudi Arabia, deploying its forces in the kingdom’s defence, sustaining arms transfers during the Yemen crisis, and withholding sanctions following the September 11 attacks despite the Saudi nationality of 15 of the 19 hijackers. Mainstream international relations scholarship attributes this relationship to oil dependency and regional stability imperatives. This article challenges that explanation as analytically insufficient. Drawing on structural analysis, Kautilyan statecraft theory, and monetary economics, it argues that the true and primary driver of American protection is the petrodollar architecture, a financial arrangement born from the collapse of the Bretton Woods system in 1971 and formalised through Nixon-era diplomacy with Riyadh, which requires global oil trade to be conducted exclusively in U.S. dollars, thereby sustaining American monetary hegemony. Through structured comparative analysis of U.S. responses to Saudi Arabia, Iran, Venezuela, Russia, and the European Union, the article demonstrates that American foreign policy in the Gulf is best explained not by liberal or realist IR theories alone, but by structural analysis of monetary power. The article further considers whether accelerating BRICS de-dollarisation and yuan-denominated oil trades signal the beginning of the petrodollar’s end and what that portends for U.S. global primacy and India’s strategic positioning.