I saw Constanze Stelzenmüller and Paul Ronzheimer on YouTube this week talking about the Gulf—and if I understood correctly, you were talking about institutions, while he was talking about individuals. Two completely different analytical approaches, and probably not the conversation the two of you actually wanted to have.

Warum Trumps Seeblockade die Welt nervös macht. Ein Interview von Paul Ronzheimer mit Constanze Stelzenmüller – auf YouTube

This is an attempt at the conversation that I think was missing.

Let me start with a mechanism Ms Stelzenmüller know well – and then build toward a fifth dimension that I think transforms convergence into something more serious than most current European strategic thinking is prepared for.

Suez, October 1956. Britain and France were winning militarily. Eisenhower didn’t deploy troops. He found the structural vulnerability and pressed directly on it: a credible threat to sell sterling reserves on the open market, combined with a blocked IMF credit line. The pound collapsed. Eden resigned. Britain withdrew – not from a battlefield, but from the last operating assumption that it remained a first-order sovereign actor.

The British Empire didn’t end in a war. It ended in a currency.

De Gaulle drew his conclusion without hesitation: never again depend on an ally who can reach into your treasury. He built an independent nuclear deterrent and began separating France from NATO command structures accordingly.

Kissinger inverted that logic deliberately. Guarantee the Gulf states. They sell oil in dollars. The world holds dollars because the world needs oil. The American deficit runs – but on borrowed credibility, not borrowed money. The credibility was the product.

That product has just been withdrawn. The Strait of Hormuz has been effectively ceded to Iran’s regime. The Gulf states were not gradually distanced. They were abandoned – on a timeline and in a manner that left them no preparation and no face-saving alternative.

They are drawing conclusions. Rational institutional actors always do.

I want to lay out five converging effects – and then ask something that I think only someone at Ms Stelzenmüller`s particular intersection can answer.

Effect One: Sovereign credibility and Treasury yields

Ten-year US Treasuries currently yield around 4.5%. That number still reflects one core assumption: that the United States remains institutionally predictable, strategically coherent, and capable of honoring its implicit guarantees to creditors and allies.

That assumption is now the variable. Not the yield.

The transmission doesn’t require a coordinated attack. It requires a quiet, rational, parallel reassessment by sovereign reserve managers – European central banks, Gulf sovereign wealth funds, Asian reserve holders – who begin reducing Treasury exposure not out of hostility, but out of De Gaulle’s logic: when the guarantor becomes structurally unpredictable, you reduce your dependence on the guarantee.

No trigger event needed. Just an accumulation of signals crossing an institutional threshold.

Reduced demand pushes yields toward 5.5% and beyond. At $36 trillion in outstanding debt, the compounding effect on annual financing costs is not marginal. And it arrives simultaneously with the second effect.

Effect Two: Hormuz, Asian production costs, and imported inflation

Iran’s regime – not the population, which is a distinct analytical category – now exercises effective structural leverage over the Strait of Hormuz. Rising energy costs compress margins across the Asian manufacturing base: China, Vietnam, Bangladesh, Indonesia, India – the production infrastructure that supplies the American consumer market.

Those margin compressions don’t stay in Asia. They are passed forward into export prices and arrive at the American import level as inflation. Imported inflation constrains the Federal Reserve’s rate path. It holds rates higher for longer, or forces them higher still. That feeds directly back into the financing cost of that $36 trillion debt load.

Two effects, independent in origin, convergent in impact: the real cost of American sovereign debt pressed from above by institutional distrust, pressed from below by imported inflation.

Effect Three: The petrodollar mechanism itself

Bretton Woods collapsed in 1971. What replaced the gold anchor was negotiated, not organic. Kissinger reached an explicit arrangement with Saudi Arabia in 1974: American security guarantees in exchange for dollar-denominated oil sales and petrodollar surpluses recycled into US Treasury securities. The dollar’s post-Bretton Woods dominance was a political construction built on a specific security promise.

That promise has just been broken.

The Gulf states are not ideological actors. They are among the most sophisticated sovereign wealth managers in the world. Saudi Arabia’s yuan-denominated oil sales to China – modest in volume, significant in signal – are not a declaration of intent. They are a hedge. The beginning of an optionality strategy by an actor whose core security arrangement has become unreliable.

The yuan cannot absorb the recycling function at scale – not without capital account liberalization Beijing has consistently refused. The euro can. Fully convertible, institutionally credible, managed by a central bank with genuine independence. A shift toward euro-denominated oil settlement doesn’t require the Gulf states to trust a political actor. It requires them to trust an institutional framework – which is precisely what they are looking for now that the American security guarantee has failed.

For Europe the implications are structurally positive: reduced dollar dependency, an elevated ECB, and a demand anchor for the euro that doesn’t depend on American fiscal discipline.

This is not a fantasy scenario. It is the rational endpoint of incentives already in motion. But it requires the fourth effect to become fully visible.

Effect Four: Decarbonization at source, European technology, and the certification architecture that makes the petroeuro structurally inevitable

The Gulf states face a dilemma that goes beyond the immediate security crisis. Their entire revenue model rests on hydrocarbons – but the global decarbonization trajectory threatens that model on a twenty-year horizon. The question their sovereign planners are now asking is not whether to transition, but how to transition without destroying their revenue base in the process.

The answer that is emerging is carbon capture at source – and it points directly toward Europe.

The technical logic is straightforward. Rather than burning hydrocarbons and releasing CO₂, you reform them through steam methane reforming or partial oxidation to extract hydrogen. The CO₂ produced in that process is not released into the atmosphere. It is captured and injected back into depleted reservoirs or deep geological formations. The result is blue hydrogen: hydrogen with a minimal carbon footprint, produced from fossil sources but with carbon sequestration at the point of production.

The efficiency case is compelling. Conventional thermal combustion of oil or gas achieves energy conversion efficiency of 35 to 45 percent. Hydrogen in a fuel cell achieves electrical efficiency of 60 to 65 percent – and in combined heat and power applications, total system efficiency of 85 to 90 percent. The same hydrocarbon resource, processed differently, delivers roughly twice the useful energy to the end user. For the Gulf states, this means substantially higher revenue per barrel equivalent – because the buyer receives more energy per unit, and because hydrogen as an industrial feedstock, fuel, and energy storage medium commands an entirely different price structure than crude oil.

The technology required for this transition is overwhelmingly European. Industrial-scale CCS infrastructure: Germany, Norway, the Netherlands. Electrolyser and fuel cell technology: Germany, Denmark, the Netherlands. The European Hydrogen Backbone – the largest hydrogen transport network under construction anywhere in the world. And critically: the certification and regulatory framework for green and blue hydrogen is being written in Brussels. European standard is becoming global standard.

But here is the dimension that has not yet been mapped in European strategic thinking – and it is the one that connects the hydrogen transition directly to the petroeuro through an institutional mechanism that already exists.

The certification architecture – and why it is not a subsidy.

The EU Emissions Trading System is the world’s largest carbon market. European companies that emit CO₂ must purchase certificates – one certificate per tonne of CO₂. The price currently sits at roughly 60 to 70 euros per tonne, with a structural upward trajectory as available certificates are progressively reduced each year.

The Carbon Border Adjustment Mechanism – CBAM – extends this logic to imports. From 2026, goods imported into the EU must carry equivalent carbon costs to those produced within the EU. It was designed defensively, to prevent carbon leakage. But the architecture it creates can be turned productively.

Here is the model: a Gulf state produces blue hydrogen with verified CCS performance. The CO₂ avoided – measured, audited, certified under European standards analogous to the Renewable Energy Directive RED III criteria – generates a quantifiable carbon avoidance credit. This credit has a market value within the EU ETS system. The Gulf producer receives a certification that monetizes the environmental performance of the production process.

The revenue from that certification is not a transfer from the EU budget. It is a market price for a delivered service – the verified avoidance of CO₂ emissions. Structurally, it is identical to what a European industrial company receives when it reduces its emissions below its allocation and sells surplus certificates. No subsidy. No political transfer. A market mechanism operating on verifiable physical performance.

The revenue split could be structured as follows: roughly half of the certificate value flows back into the EU system – into the EU Innovation Fund or national climate investment vehicles, financing infrastructure and energy transition investment within Europe. The other half flows to the producing Gulf state as compensation for the CCS performance delivered. European companies buying carbon certificates finance both European infrastructure and Gulf decarbonization investment simultaneously – through a market price, not a budget line.

The geopolitical consequence – and the interest rate arithmetic that every European finance minister will understand immediately.

The Gulf states now receive a continuous stream of euro-denominated revenues from two simultaneous sources: hydrogen sales invoiced in euros, because the entire technology and certification value chain runs through European institutions; and carbon certificate revenues in euros, because the EU ETS is the pricing mechanism. These euro revenues must be invested somewhere. For sovereign wealth funds of this scale, the natural instrument is the sovereign bonds of the currency they are accumulating.

The Gulf states become structural buyers of European sovereign bonds – not because of a political decision, but because it is the rational portfolio consequence of continuous euro income. Higher demand for European sovereign bonds – German Bunds, French OATs, and potentially European Union bonds if the instrument is developed further – compresses yields. Lower yields mean lower financing costs for European states.

This is the precise mechanism that the petrodollar performed for America for fifty years – now operating in favor of the euro.

The empirical precedent is the petrodollar system itself. Federal Reserve research estimated that sustained foreign official purchases of US Treasuries suppressed American long-term interest rates by 80 to 150 basis points over the period of peak petrodollar recycling. That effect – measured in the deepest and most liquid bond market in the world – would be proportionally larger in the more fragmented and less liquid European sovereign bond markets, where concentrated demand has greater price impact per unit of capital deployed.

A conservative estimate for a partial structural transition – Gulf states reinvesting 150 to 200 billion euros annually into European sovereign bonds – suggests a yield compression of 40 to 70 basis points on core European instruments. At the current Eurozone sovereign debt stock of roughly 10 trillion euros, that translates into an annual interest saving of 40 to 70 billion euros across the member states.

A full structural transition – in which the petroeuro performs the recycling function that the petrodollar performed for America – would imply yield compression of 80 to 150 basis points and annual interest savings of 80 to 150 billion euros.

To put that number in context: 100 billion euros in annual interest savings is more than the entire seven-year Horizon Europe research budget, realized every single year. It is the fiscal space that allows Europe to finance the hydrogen backbone, the energy transition, and its defense investment simultaneously – without choosing between them.

The quantitative order of magnitude of the underlying capital flows is not trivial. Saudi Arabia alone exports roughly six to seven million barrels of oil equivalent per day. Even a partial transition of twenty percent of that volume into certified blue hydrogen flowing into the EU, at a carbon certificate value of sixty-five euros per tonne and a CCS factor of approximately 0.3 tonnes of CO₂ per barrel equivalent, generates annual certificate revenues in the range of several billion euros – from Saudi Arabia alone, before including the UAE, Kuwait, and Qatar.

This is not a secondary consequence of the petroeuro transition. It is the primary fiscal argument for actively pursuing it. And it is the argument that turns the hydrogen certification architecture from an energy policy instrument into the most important macroeconomic decision European finance ministers will face in this decade.

Critically for the political economy in Brussels and Berlin: this construction requires no new EU institution. It uses existing instruments – ETS, CBAM, RED III. It requires no budget transfers. It is WTO-compatible because it pays a market price for a measurable service. It gives Germany and the Netherlands an industrial home advantage because their technology forms the certification foundation. And it gives the EU geopolitical relevance without military means – through institutional architecture alone.

The Gulf states are looking for an institutional anchor. Europe has one. The question is whether Europe understands what it is being offered – and whether it moves before the window closes.

Effect Five: Financial repression and the Mar-a-Lago Accord – where convergence becomes a perfect storm

This is where the four effects stop being a convergence and become a trap – because the most likely American policy response to that convergence makes every preceding effect worse.

John Llewellyn, writing for Independent Economics, has laid out the logic with uncomfortable precision. As foreign creditors begin their quiet reassessment of Treasury exposure, the United States faces a structural financing problem that cannot be resolved through orthodox fiscal policy. There is no political majority for the tax increases or spending cuts that would meaningfully address a $36 trillion debt load. So the government reaches for other instruments.

The first instrument is domestic financial repression. Regulatory or tax changes that incentivize – or effectively compel – American pension funds, insurance companies, and financial institutions to buy and hold US Treasuries regardless of whether the yield is market-appropriate. America deployed exactly this mechanism after the Second World War to absorb its war debt. The price is paid by domestic savers, whose capital is quietly eroded to finance the state. It is not expropriation in the legal sense. It is systematic redistribution from private savings to sovereign debt service – conducted through regulatory architecture rather than legislation.

The second instrument is more radical. Stephen Miran – Trump’s Chairman of the Council of Economic Advisers, now also a member of the Federal Open Market Committee – has put into circulation an idea that has come to be called the Mar-a-Lago Accord. The concept: foreign holders of maturing US Treasuries would face pressure, or be effectively compelled, to roll those holdings into ultra-long-dated securities – fifty or one hundred year maturities – at below-market interest rates. Rather than receiving repayment, foreign creditors would receive instruments worth substantially less than what they hold today.

The name echoes the Plaza Accord of 1985, when the G5 nations coordinated a managed dollar depreciation through mutual agreement. The difference is categorical: the Plaza Accord was consensual and multilateral. The Mar-a-Lago Accord, as conceived, is unilateral and coercive. It is not a negotiation. It is a restructuring imposed on creditors who have no exit.

The implications for the four preceding effects are not additive. They are multiplicative.

If foreign creditors believe – even with modest probability – that their Treasury holdings could be subject to forced conversion into below-market instruments, the rational response is not to wait and see. It is to reduce exposure now, before the mechanism is triggered. The quiet parallel reassessment in Effect One accelerates immediately. The threshold between incremental adjustment and self-reinforcing capital flight moves closer. And the very act of implementing financial repression confirms precisely the institutional unpredictability that was driving the reassessment in the first place.

This is the feedback loop that transforms four converging effects into a perfect storm.

The petrodollar mechanism was built on a security promise. That promise has been broken. The dollar’s reserve status rests on the assumption that American institutions are predictable and that American sovereign obligations will be honored on market terms. The Mar-a-Lago Accord puts that assumption directly in play – not as an external attack, but as an internal policy choice by the sovereign itself.

The detail that deserves particular attention from Ms Stelzenmüller institutional perspective: the man who designed this concept now sits on the Federal Open Market Committee. This is no longer academic speculation circulating in policy papers. It is inside the room where decisions are made.

The Suez parallel has one final dimension. After Eden resigned and Britain withdrew, the pound did not recover. The confidence, once broken, did not return on the old terms. Britain was offered a different relationship with the dollar system – as a junior partner rather than a peer. It accepted, because it had no alternative.

The Mar-a-Lago Accord raises the same question for America’s creditors and allies: accept the new terms, or find alternative arrangements.

The Gulf states are already finding alternative arrangements. The hydrogen supply chain runs through European technology. The certification framework is being written in Brussels. The institutional anchor they are looking for is not in Washington anymore.

What I’d genuinely like Ms Stelzenmüller`s perspective on:

The perfect storm is not a metaphor. It is five effects – a sovereign credibility crisis, imported inflation, petrodollar erosion, a European hydrogen and certification pathway, and the internal logic of financial repression – converging on the same pressure point, reinforcing each other, and potentially triggering a feedback loop that no single policy intervention can reverse once it gains momentum.

Europe is not a bystander in this storm. It is – if it chooses to be – the institution that the storm is reorganizing the world around.

My specific questions for Ms Stelzenmüller:

• Is the European institutional framework – the ECB, the European Hydrogen Backbone, the ETS and CBAM certification architecture – actually capable of absorbing the role I’m describing, or is this still a decade away from being structurally real?
• Is there political will in Berlin and Brussels to recognize the hydrogen-petroeuro pathway as a strategic opportunity rather than a side effect of energy policy?
• Does the interest rate arithmetic I’ve described – 40 to 150 basis points of yield compression, 40 to 150 billion euros in annual interest savings – change the fiscal calculus in European capitals in ways that could accelerate the institutional response?
• Does the Mar-a-Lago Accord scenario change European institutional behavior now – before the threshold is crossed – or does Europe wait, as it has before, until the crisis makes the choice for it?
• And most fundamentally: does the transatlantic relationship survive a world in which Europe becomes the institutional anchor for Gulf energy transition – or does it require a fundamental renegotiation of what that relationship is for?

Ms Stelzenmüller has built her career on the premise that the transatlantic relationship is worth preserving. That investment gives her both the analytical depth and the honest distance to see what it would need to become in a world where these five effects are already in motion.

The Gulf states are not waiting for America to rediscover its reliability. They are making other arrangements. The question is whether Europe is ready to be the arrangement they make – and whether it understands that the hydrogen certification architecture is not an energy policy question. It is the infrastructure of the next monetary order.

That is the conversation I think was missing on YouTube this week.

I would like to address a few personal words to Constanze Stelzenmüller as my go-to expert on transatlantic and geopolitical issues:

• Constanze, as far as I’m concerned, your entire intellectual identity is based on a clear premise: the transatlantic relationship forms the foundation of Western security and the liberal order. 
• When Trump withdraws, renounces security guarantees, or threatens to break ties with the Gulf states, you don’t just see these as political mistakes—to you, they are attacks on your life’s work.
• You find yourself caught between the need to view these developments analytically and the desire not to lose your own intellectual investment in the transatlantic ideal.
• I see your golden path in demonstrating that the transatlantic relationship is not over—but that Europe must now take the lead. This is not a failure, but a sign of maturity.

• You always think in terms of security architecture, alliance dynamics, and institutional guarantees. Your perspective is shaped by an understanding of the complexity and interplay of these structures.
• For you, the security guarantee extended to the Gulf states is by no means an abstract concept—rather, you see it as a fundamental component of a global order that ultimately ensures Europe’s security as well.
• If this guarantee is violated, you do not view it merely as the failure of a political deal. For you, it represents a breach of a fundamental principle.

Constanze Stelzenmüller is a Senior Fellow and holds the Fritz Stern Chair on Germany and Transatlantic Relations at the Brookings Institution in Washington. Previously, she served as director of the German Marshall Fund’s Berlin office and as defense editor at Die Zeit.

That is a very specific background—and it creates a very specific set of tensions.

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A personal acknowledgment