“She [Saudi Arabia] has Uncle Sugar’s nuts in a vice; the petro dollar..!”
Exactly. The US has this little arrangement with Saudi Arabia - we take care of their military/geographical interests and they write their oil contracts with other countries in dollars. So all the countries that buy oil from Saudi Arabia have to stack up on dollars so as to pay off on their contracts. This makes other trade transactions easier to do in dollar denominations and helps make the dollar the dominant international currency.
Transactions done in dollars have to pass through some facet of the US financial system - so if the US wants to punish a country, by denying it access to the US financial system (which has become internationalized), it can do so to great effect.
So - supposed the US decides to pull out of the Middle East. And the Saudi’s decide it would be wise to hedge their bets - by writing lots of contracts in yuans (the petro/yuan), giving China much more financial clout? What then?
The petro-dollar (for those not in the know) was conceived
by Nixon and Kissinger.