Saudi Aramco told at least two oil refining customers in Europe that they will be allocated no crude next month under long-term agreements after the kingdom’s key pipeline to the Red Sea was attacked, people informed of the decision said.
European customers normally receive Saudi Arabian crude on so-called term contracts, ensuring a steady flow of supply every month. Those deliveries will not take place next month, the people said, asking not to be identified because the information isn’t public. The decision applies to all European buyers, they said.
Perhaps giving Iran control over the Strait of Hormuz wasn’t a great idea in hindsight.
Or in foresight. Or in same-time-sight, as every administration up to the present one knew and predicted in the case of a conflict. Or at least, prepared by topping off the reserves instead of doing nothing. Or possibly bringing allies in on the plan.
Sorry, forgot. Allies are just leeches. “They’ve been ripping us off for years.”
We will have no choice on the war. We are getting two resets, the US as imperial and higher corporate tax rates well beyond him after 2028. He is not causing the second reset on purpose. He is forcing the first reset. He will force default.
Long after November. The thing is we do not have to default, but the only solution not to default is raising taxes. The debt versus industrial production in the US is an unsustainable ratio. No one wants more factories. China is not done screwing up, but if any of us default, Japan, China, or the US, all of us will default. And maybe others will default.
This is another Asian contagion. Someone is going to pull the plug.
After the US defaults the only solution is raising taxes that does not change, and the public will demand it. The current representatives do not have an honest bone in their bodies on this topic.
If China and Japan get there first, our bond market will cause it. He will just be swept up in it. He does not always have to be guilty. The results either way are hellish.
One of the parties is used to a default. Odd, it is a norm.
Read bullet point: Historical Pre-1949 Bonds:
China is not talking about defaulting on its modern sovereign national debt , and domestic demand for its government bonds remains exceptionally high . [1]
Understanding China’s Debt Landscape
Sovereign Stability: Beijing faces no risk of defaulting on its current sovereign debt denominated in yuan, backed by high domestic savings and strict capital controls.
Domestic Demand: Chinese investors routinely rush to snap up local government savings bonds, which often sell out within minutes.
Historical Pre-1949 Bonds: China is currently criticized by some U.S. investors and commentators for refusing to honor over $1 trillion in sovereign debt issued by the pre-communist Republic of China prior to 1949, a longstanding default Beijing ignores rather than actively negotiates.
Local & Consumer Pressures: While national sovereign default is off the table, China has cracked down on hidden local government borrowing (LGFVs) and faces rising consumer loan defaults, managing these through state-directed debt swaps and bank restructuring rather than default. [4, 5, 6]
Would you like to explore more details on:China’s local government financing vehicles (LGFVs)The pre-1949 sovereign bond dispute
This is where it begins, the meltdown in global, the bond markets begin to fail here…
*****NOTE all AI senarios are for things to be ok. That is because most of the literature says things have risk here and there but will be ok. AI can gather information, but can not intuitively put information together.
…if you read to the bottom Argentina and Pakistan both collapse. The reason I say ignore Argentina is to get beyond the low hanging fruit in the first response.
Me:
Let’s ignore Argentina because it is not a major economy. Rule it out as a candidate. Let’s take a second look at Turkey, Egypt, and Pakistan. The Gulf is running out of money because oil and gas are not flowing. The Western powers and China might not keep the IMF money appearing. Then how good a case is there for those three nations to default.
Claude:
Under your premise the ranking is Pakistan first, Egypt second, Turkey a distant third.
One check on the premise first. Gulf cash flow is hurt, but the Gulf isn’t broke. Hormuz traffic has been far below pre-war levels since February, though CENTCOM said today that shipments hit a six-month high. The sovereign wealth funds still hold trillions. The realistic version of your scenario is the Gulf triaging who it supports, and that has already started.
Pakistan: strong case, likely first
The reserves are borrowed. Gross reserves are $18.5 billion, about three months of imports. Against that, bilateral partners committed to keep $12.5 billion in deposits at the central bank.
Your scenario already happened once. The UAE demanded repayment after the war started, opening a $3.5 billion gap. Saudi Arabia filled it, raising its exposure to $8 billion, and is now a single point of failure.
The IMF depends on the Gulf. The program’s continuation depends on those deposits rolling over, and deposit maturities have been shortening as the amounts grow. If the Gulf pulls out, the IMF stalls without any Western or Chinese decision.
Scale of dependence. Pakistan took $27.2 billion in foreign loans and rollovers in FY26, and is asking Riyadh for a $6.7 billion deferred oil facility over 15 years.
Timing. The IMF program expires in September 2027, inside your window.
Mitigants. China has strategic reasons to keep rolling. The bond stock is small, so a default could take the form of quiet bilateral arrears and rescheduling, not a declared event.
Egypt: good case, longer fuse
The numbers. External debt is $169 billion, with $27 billion of debt service due in 2026 against roughly $53 billion of reserves.
The rescue model is Gulf megadeals. Ras El-Hekma brought $35 billion from Abu Dhabi and the Alamein deal about $29.7 billion from Qatar. Your premise stops these.
Suez is hit. One estimate has the crisis cutting canal traffic 20–30%, with Bab al-Mandab still disrupted.
It’s holding so far. Egypt passed its IMF review and unlocked about $1.8 billion in late July, helped by record remittances and tourism.
Remittances are exposed. A large share comes from Egyptians working in the Gulf, so your premise hits that too. This is my inference, not sourced.
Hot money. The IMF noted record foreign inflows into local debt, and those can leave fast.
Buffer. About five months of import cover puts any break in late 2027 or 2028. Default needs the “too big to fail” politics to fail, which is what your premise assumes.
Turkey: weak case
The strain is real. The current account deficit was $29.4 billion in the first four months of 2026, and ING expects about $45 billion for the year. Turkey burned about $12 billion of reserves in one week in March defending the lira.
The vulnerability isn’t the government’s. Government debt is around 30% of GDP, and there’s no dependence on the IMF or Gulf deposits. The exposure is private and bank short-term external debt.
Failure mode. Expect a lira crash, inflation, and capital controls, as in 2018 and 2021, with the Treasury still paying its Eurobonds. Your premise barely affects Turkey’s sovereign debt. It would more likely push Turkey toward the IMF than into default.
Problem with the framing. Argentina’s economy is larger than Egypt’s or Pakistan’s, and it’s in the G20 while they aren’t. If “major” excludes Argentina, it excludes those two and leaves only Turkey, the weakest default case of the three. If you keep them in, Pakistan in 2027 is the answer.
Understanding China’s Debt Landscape