From the Monopoly Men to the PetroDollar Recycling System
"In May 1973, with the dramatic fall of the dollar still vivid, a group of 84 of the world?s top financial and political insiders met at Saltsjobaden, Sweden, the secluded island resort of the Swedish Wallenberg banking family. This gathering of [the] Bilderberg group heard an American participant, Walter Levy, outline a "scenario" for an imminent 400 percent increase in OPEC petroleum revenues. The purpose of the secret Saltsjobaden meeting was not to prevent the expected oil price shock, but rather to plan how to manage the about-to-be-created flood of oil dollars, a process U.S. Secretary of State Kissinger later called 'recycling the petrodollar flows.'"
- F. William Engdahl, A Century of War (2004) 
According to research outlined in Dr. David Spiro's book, The Hidden Hand of American Hegemony (1999), it was during this time (May 1973 during the first ever Bilderberg Meeting) that OPEC began discussions on the viability of pricing oil trades in several currencies. This unpublished proposal involved a "basket of currencies" from the Group of Ten nations, or "G-10". These 10 members of the Bank of International Settlements (plus Austria and Switzerland) included the major European countries and their currencies such as Germany (Mark), France (Franc), and the U.K. (Sterling), as well other industrialized nations such as Japan (yen), Canada (Canadian dollar), and of course the Unites States (U.S. dollar).  It should be noted the powerful G-10/BIS Group of Ten also has one unofficial member, the governor of the Saudi Arabian Monetary Authority, or SAMA.
In order to prevent this monetary transition to a basket of currencies, the Nixon administration began high-level talks with Saudi Arabia to unilaterally price international oil sales in dollars only - despite U.S. assurances to its European and Japanese allies that such a unique monetary/geopolitical arrangement would not transpire. In 1974 an agreement was reached with New York and London banking interests which established what became known as "petrodollar recycling."
That year the Saudi government secretly purchased $2.5 billion in U.S. Treasury bills with their oil surplus funds, and a few years later Treasury Secretary Michael Blumenthal cut a secret deal with the Saudis to ensure that OPEC would continue to price oil in dollars only. 
In typical understatement Dr. Spiro noted, "clearly something more than the laws of supply and demand resulted in 70 percent of all Saudi assets in the United States being held in a New York Fed account."  Naturally, this arrangement with the Saudi government prevented a market-based adjustment, and was the basis for the second phase of the American Century, the Petrodollar phase. What follows is the extraordinary history in which petrodollar recycling was vigorously implemented during the 1970s.
Beginning in the mid-1970's the American Century system of global economic dominance underwent a dramatic change. The oil price shocks of 1973-1974 and 1979 suddenly created enormous demand for the floating dollar. Oil importing countries from Germany to Argentina to Japan, all were faced with how to acquire export-based dollars to pay their expensive new oil import bills. The rise in the price of oil flooded OPEC with dollars that far exceeded domestic investment needs, and were therefore categorized as "surplus petrodollars." A major share of these oil dollars came to London and New York banks where the new process of monetary petrodollar recycling was initiated.
Engdahl's remarkable book, A Century of War (2004), chronicles how certain geopolitical events mirrored a "scenario" discussed during a May 1973 Bilderberg meeting. Apparently powerful banking interests sought to "manage" the monetary dollar flows that were premised upon what the group envisioned as "huge increases" in the price of oil from the Middle East. The minutes of this Bilderberg meeting included projections regarding the price of "OPEC oil of some 400 per cent." 
In 1974 U.S Assistant Treasury Secretary Jack F. Bennett and David Mulford of the London-based Eurobond firm of White Weld & Co set about the mechanism to handle the surplus OPEC petrodollars. 40 Kissinger, Bennett and Mulford helped orchestrate the secret financial arrangement with the Saudi Arabia Monetary Agency (SAMA) that creatively transformed the high oil prices of 1973-1974 to the direct benefit of the U.S. Federal Reserve banks and the Bank of England.
Despite the financial windfall enjoyed by the U.S./U.K banking and petroleum conglomerates who "managed the recycling of petrodollar flows," most Americans regard the 1973-74 oil shocks as a particularly painful time period of high inflation and long lines at every gas station. In the Third World these high oil prices created huge loans from the International Monetary Fund debts to be re-paid entirely in dollars.
...now let's fastforward to more recent events...
On September 24, 2000 Saddam Hussein emerged from a meeting of his government and proclaimed that Iraq would soon transition its oil export transactions to the euro currency.  Saddam referred to the U.S. dollar as currency of the "enemy state." Why would Saddam's currency switch be such a strategic threat to the bankers in London and New York? Why would the United States President risk fifty years of carefully crafted global alliances with various European allies, and advocate a military attack whose justification could not be proved to the world community?
The answer is simple - the dollar's unique role of a petrodollar has been the foundation of the dollar hegemony since the mid 1970's. The process of petrodollar recycling underpins American economic hegemony, which funds American military supremacy.
Dollar/petrodollar supremacy allows the U.S. a unique ability to sustain yearly current account deficits; pass huge tax cuts, build a massive military Empire of Bases around the globe, and still have others accept our currency as medium of exchange for their imported good and services. The origins of this history are not found in textbooks on International Economics, but rather in the minutes of meetings held by various banking and petroleum elites who have quietly sought unhindered power.
U.S. Dollar: Fiat Currency or Oil-Backed Currency?
"What the powerful men grouped around the Bilderberg had evidently decided that May <1973> was to launch a colossal assault against industrial growth in the world, in order to tilt the balance of power back to the advantage of Anglo-American financial interests and the dollar. In order to do this, they determined to use their most prized weapon for control of the world's oil flows. Bilderberg policy was to trigger a global oil embargo in order to force a dramatic increase in world oil prices. Since 1945, world oil had by international custom been priced in dollars. A sudden sharp increase in the world price of oil, therefore, meant an equally dramatic increase in world demand for U.S. dollars to pay for that necessary oil.
Never in history had such a small circle of interests, centered in London and New York, controlled so much of the entire world's economic destiny. The Anglo-American financial establishment had resolved to use their oil power in a manner no one could have imagined possible. The very outrageousness of their scheme was to their advantage, they clearly reckoned."
- F. William Engdahl, A Century of War (2004)
At this point he makes an extraordinary claim: "I am 100 per cent sure that the Americans were behind the increase in the price of oil. The oil companies were in real trouble at that time, they had borrowed a lot of money and they needed a high oil price to save them."
'He says he was convinced of this by the attitude of the Shah of Iran, who in one crucial day in 1974 moved from the Saudi view' 'to advocating higher prices.'
'King Faisal sent me to the Shah of Iran, who said: Why are you against the increase in the price of oil? That is what they want! Ask Henry Kissinger - he is the one who wants a higher price.'
Yamani contends that proof of his long-held belief has recently emerged in the minutes of a secret meeting on a Swedish island, where UK and US officials determined to orchestrate a 400 per cent increase in the oil price.
- UK Observer interview with Sheikh Yaki Yamani (Saudi Arabian Oil Minister from 1962-1986) at the Royal Institute of International Affairs, January 14, 2001 54
As previously noted, the crucial shift to an oil-backed currency took place in the early 1970s when President Nixon closed the so-called 'gold window' at the Federal Treasury. This removed the dollar's redemption value from a fixed amount of gold to a fiat currency that floated against other currencies. This was done so the Federal Government would have no restraints on printing new dollars, thereby able to pursue undisciplined fiscal policies to maintain the U.S.'s Superpower status. The only limit was how many dollars the rest of the world would be willing to accept on the "full faith and credit" of the U.S. government. The result was rapid inflation and a falling dollar.
Although rarely discussed outside arcane discussions of the 'global political economy,' it is easy to grasp that if oil can be purchased on the international markets only with U.S. dollars, the demand and liquidity value will be solidified given that oil is the essential natural resources required for every industrialized nation. Oil trades are the basic enablers for a manufacturing infrastructure, the basis of global transportation, and the primary energy source for 40% of the industrial economy.
During the 1970s a two-pronged strategy was pursued by the U.S./U.K. banking elites to exploit the unique role of oil in an effort to maintain dollar hegemony. One component was the requirement that OPEC agree to price and conduct all of its oil transactions in the dollar only, and two was to use these surplus petrodollars as the instrument to dramatically reverse the dollar's falling liquidity value via high oil prices. The net effect solidified industrialized and developing nations under the sphere of the dollar. No longer backed by gold, the dollar became backed by black gold.
This brilliant if somewhat nefarious act of monetary jujitsu enormously benefited not only the U.S./U.K. banking interests, but also the "Seven Sisters" of the U.S./U.K. petroleum conglomerate (Exxon, Texaco, Mobil, Chevron, Gulf, British Petroleum, and Royal Dutch/Shell). These major oil interests had incurred tremendous debts from the capital requirements in their large new oil platforms in the inhospitable areas of the North Sea and in Prudhoe Bay, Alaska.
However, following the 1974 oil price shocks, their profitability was secure. Engdahl candidly noted "while Kissinger's 1973 oil shock had a devastating impact on world industrial growth, it had an enormous benefit for certain established interests - the major New York and London banks, and the Seven Sisters oil multinational of the United States and Britain." 
The unique monetary arrangement was formalized in June 1974 by Secretary of State Henry Kissinger, establishing the U.S.-Saudi Arabian Joint Commission on Economic Cooperation. The U.S. Treasury and the New York Federal Reserve would "allow" the Saudi central bank to buy U.S. Treasury bonds with Saudi petrodollars. 
Likewise, London banks would handle eurozone-based international oil transactions, loan these revenue via ?Eurobonds? to oil importing countries. The debt and interest from these loans would then flow to the dollar denominated payments to the International Monetary Fund (IMF), thereby completing the recycling of surplus petrodollars back to the Federal Reserve.
..as for Saddam's switch that led to "regime change"...
Although this little-noted Iraq move to defy the dollar in favor of the euro in itself did not have a huge impact, the ramifications regarding further OPEC momentum towards a petroeuro are quite profound. If invoicing oil in euros were to spread, especially against an already weak dollar, it could create a panic sell-off of dollars by foreign central banks and OPEC oil producers. In the months before the latest Iraq war, hints in this direction were heard from Russia, Iran, Indonesia and even Venezuela. There are indicators that the Iraq war was a forceful way to deliver a message to OPEC and others oil producers, "Do not transition from the petrodollar to a petroeuro system." Engdahl's conversation with a forthright London-based banker is rather enlightening:
Informed banking circles in the City of London and elsewhere in Europe privately confirm the significance of that little-noted Iraq move from petrodollar to petroeuro. "The Iraq move was a declaration of war against the dollar", one senior London banker told me recently. "As soon as it was clear that Britain and the U.S. had taken Iraq, a great sigh of relief was heard in London City banks. They said privately, "now we don't have to worry about that damn euro threat." 
Petrodollar recycling works quite simply because oil is an essential commodity for every nation, and the petrodollar system demands the buildup of huge trade surpluses in order to accumulate dollar surpluses. This is the case for every country but the United States, which controls the dollar and prints it at will or fiat. Because today the majority of all international trade is done in dollars, other countries must engage in active trade relations with the U.S. to get the means of payment they cannot themselves issue. The entire global trade structure today has formed around this dynamic, from Russia to China, from Brazil to South Korea and Japan. Every nation aims to maximize dollar surpluses from their export trade as almost every nation needs to import oil.
This insures the dollar's liquidity value, and helps explain why almost 70% of world trade is conducted in dollars, even though U.S. exports are about one third of that total. The dollar is the currency which central banks accumulate as reserves, but whether it is China, Japan, Brazil or Russia, they simply do not stack all these dollars in their vaults. Currencies have one advantage over gold. A central bank can use it to buy the state bonds of the issuer, the United States. Most countries around the world are forced to control trade deficits or face currency collapse.
Such is not the case in the United States, whose number one export product is the dollar itself. This unique arrangement is largely due to the dollar's World Reserve currency role, which is underpinned by its petrodollar role. Every nation needs to get dollars to purchase oil, some more than others. This means their trade targets are countries that utilize the dollar, with the U.S. consumer as the main target for export products of the nation seeking to build dollar reserves.
35. David E. Spiro, The Hidden Hand of American Hegemony: Petrodollar Recycling and International Markets, Cornell University Press, (1999) p. 121-123
36. David E. Spiro, ibid, p. x
37. David E. Spiro, ibid, p. 125
38. William Engdahl, A Century of War: Anglo-American Oil Politics and the New World Order,' Pluto Press (2004, 2nd edition), p. 130
39. William Engdahl, A Century of War, pgs. 130-138. Note: Engdahl was able to purchase the secret minutes of a May 1973 Bilderberg meeting from a Paris bookseller. His book contains actual photocopies of the cover page and related text discussed in chapter 1. The cover page is stamped: "SALSJOBADEN CONFERENCE 11-13 May 1973." Also stamped on the cover page are the words:"PERSONAL AND STRICTLY CONFIDENTIAL" and "NOT FOR PUBLICATION EITHER IN WHOLE OR IN PART"
53. William Engdahl, A Century of War, op cited, p. 135