Oil Money: Middle East Petrodollars and the Transformation of U.S. Empire, 1967–1988

Abstract

In the 1970s, high oil prices brought a surge of revenues to a handful of countries in the Middle East and North Africa. U.S. leaders worried about the “petrodollar problem”: Could the global financial system handle the strain? And as oil producers became stronger, would the United States lose its influence in the Middle East and its privileged position in the world economy? David M. Wight argues that the petrodollar boom only reinforced American power. The United States enjoyed close ties with the main oil exporters, especially Iran and Saudi Arabia. Together, they created what Wight, following Paul A. Kramer, calls an American-led “international empire” in the Middle East (p. 4). The wealthy Persian Gulf states spent billions of dollars on American goods, especially weapons, and invested billions more in U.S. financial markets. Other regimes such as Ba'athist Iraq, less friendly to Washington, still did business with the United States. The appeal of U.S. technology and financial markets often proved stronger than disputes over Israel and imperialism. As a result, Wight concludes that “the United States was the biggest winner to come out of the petrodollar economy” (p. 277). The petrodollar boom also served American political goals. It strengthened U.S. partners at the expense of oil-poor Soviet clients, while Saudi financial aid helped recruit other Arab states such as Egypt into the American sphere of influence.