Randall Forsyth of Barron’s offers some intriguing information about Saudi Arabia’s recent financial threats.

“YAMANI OR YA LIFE.” That was the priceless pun offered by William Safire, the New York Times’ language maven and the house conservative op-ed writer way back in the early 1980s.

It referred to Saudi Arabia’s oil minister, Sheik Ahmed Yamani, at a time when the Organization of Petroleum Exporting Countries, and the Saudis in particular, had the West over a barrel. Not only did they control the spigots of the black stuff, but they also engaged in a grand game of vendor financing. They would recycle their petrodollars, in large part, by investing their stash of cash in U.S. Treasury securities.

More recently, the Saudis have been trying to exert pressure on the U.S., threatening to dump $750 billion in Treasuries if Congress passes legislation that would allow the Saudi government to be sued for alleged participation in the Sept. 11, 2001, attacks.

But, as noted in the online edition of this column at Barrons.com last month, this threat was highly exaggerated. …

… Not only did published data strongly imply that the Saudis held significantly less than $750 billion in U.S. Treasury paper, but the kingdom had also raised a $10 billion loan. That was the first time the Saudi government had to go into hock in more than two decades, a result of the sharp falloff in revenues resulting from the collapse in crude-oil quotes. …

… Saudi foreign-exchange reserves total less than $600 billion—significantly lower than the $750 billion in Treasuries the kingdom threatened to dump.

Meanwhile, the Financial Times last week reported that Saudi Arabia is working on a major international bond offering to shore up its public finances, on top of the $10 billion bank loan it raised last month. Moody’s Investors Service downgraded the kingdom’s credit rating by a notch, to A1 from Aa3, citing “a combination of lower growth, higher debt levels, and smaller domestic and external buffers,” rendering it less able to absorb shocks.

And, most intriguingly, citing confidential sources, Bloomberg reported that the Saudi government is considering paying contractors with IOUs. The Saudis would pay some bills with debt instruments, which recipients could hold to maturity or sell to banks for cash.