Petrodollar further analysis

Zenaan Harkness zen at
Sat Feb 20 19:08:13 PST 2016

Another factoid here in this well presented analysis - not only Saddam
but also Gaddafi attempted to jump off the USD onto the Euro, then to
a gold-backed local currency (dinar) - well well well, the bully keeps
demanding others' lunch money.

Now Iran seems to be able to survive the jump, due to Russia's
backing. And it certainly seems clear to me why Russia is so demonized
- they are leading the charge, and giving others the courage (like
Iran and India exchanging oil for Rupees).

With USGovMil reaching a thundering self-caused clusterfuck of dead
end in Syria, it looks pretty certain now that 'we' will be able to
realise a multi-polar world rather than a uni-polar USA hegemony,
going forward. Don't think anyone would disagree that's the lesser of
those two evils...

Gold currencies here we come.



02.02.2015 Author: Vladimir Odintsov
The Global De-dollarization and the US Policies
Column: Economics
Region: USA in the World

34234234In its quest for world domination, which the White House has
been pursuing for more than a century, it relied on two primary tools:
the US dollar and military might. In order to prevent Washington from
establishing complete global hegemony, certain countries have recently
been revising their positions towards these two elements by developing
alternative military alliances and by breaking with their dependence
on the US dollar.

Until the mid-twentieth century, the gold standard was the dominant
monetary system, based on a fixed quantity of gold reserves stocked in
national banks, which limited lending. At that time, the United States
managed to become the owner of 70% of world’s gold reserves (excluding
the USSR), therefore it pushed its weakened competitor, the UK, aside
resulting to the creation of the Bretton Woods financial system in
1944. That’s how the US dollar became the predominant currency for
international payments.

But a quarter century later this system had proven ineffective due to
its inability to contain the economic growth of Germany and Japan,
along with the reluctance of the US to adjust its economic policies to
maintain the dollar-gold balance. At that time, the dollar experienced
a dramatic decline but it was saved by the support of rich oil
exporters, especially once Saudi Arabia began to exchange its black
gold for US weapons and support in talks with Richard Nixon. As a
result, President Richard Nixon in 1971 unilaterally ordered the
cancellation of the direct convertibility of the United States dollar
to gold, and instead he established the Jamaican currency system in
which oil has become the foundation of the US dollar system.
Therefore, it’s no coincidence that from that moment on the control
over oil trade has become the number one priority of Washington’s
foreign policy. In the aftermath of the so-called Nixon Shock the
number of US military engagements in the Middle East and other oil
producing regions saw a sharp increase. Once this system was supported
by OPEC members, the global demand for US petrodollars hit an all time
high. Petrodollars became the basis for America domination over the
global financial system which resulted in countries being forced to
buy dollars in order to get oil on the international market.

Analysts believe that the share of the United States in today’s world
gross domestic product shouldn’t exceed 22%. However, 80% of
international payments are made with US dollars. As a result, the
value of the US dollar is exceedingly high in comparison with other
currencies, that’s why consumers in the United States receive imported
goods at extremely low prices. It provides the United States with
significant financial profit, while high demand for dollars in the
world allows the US government to refinance its debt at very low
interest rates.

Under these circumstances, those heding against the dollar are
considered a direct threat to US economic hegemony and the high living
standards of its citizens, and therefore political and business
circles in Washington attempt by all means to resist this process.This
resistance manifested itself in the overthrow and the brutal murder of
Libyan leader Muammar Gaddafi, who decided to switch to Euros for oil
payments, before introducing a gold dinar to replace the European

However, in recent years, despite Washington’s desire to use whatever
means to sustain its position within the international arena, US
policies are increasingly faced with opposition. As a result, a
growing number of countries are trying to move from the US dollar
along with its dependence on the United States, by pursuing a policy
of de-dollarization. Three states that are particularly active in this
domain are China, Russia and Iran. These countries are trying to
achieve de-dollarization at a record pace, along with some European
banks and energy companies that are operating within their borders.

The Russian government held a meeting on de-dollarization in spring of
2014, where the Ministry of Finance announced the plan to increase the
share of ruble-denominated contracts and the consequent abandonment of
dollar exchange. Last May at the Shanghai summit, the Russian
delegation manged to sign the so-called “deal of the century” which
implies that over the next 30 years China will buy $ 400 billion worth
of Russia’s natural gas, while paying in rubles and yuans. In
addition, in August 2014 a subsidiary company of Gazprom announced its
readiness to accept payment for 80,000 tons of oil from Arctic
deposits in rubles that were to be shipped to Europe, while the
payment for the supply of oil through the “Eastern Siberia – Pacific
Ocean” pipeline can be transferred in yuans. Last August while
visiting the Crimea, Russia’s President Vladimir Putin announced that
“the petrodollar system should become history” while “Russia is
discussing the use of national currencies in mutual settlements with a
number of countries.” These steps recently taken by Russia are the
real reasons behind the West’s sanction policy.

In recent months, China has also become an active member of this
“anti-dollar” campaign, since it has signed agreements with Canada and
Qatar on national currencies exchange, which resulted in Canada
becoming the first offshore hub for the yuan in North America. This
fact alone can potentially double or even triple the volume of trade
between the two countries since the volume of the swap agreement
signed between China and Canada is estimated to be a total of 200
billion yuans.

China’s agreement with Qatar on direct currency swaps between the two
countries are the equivalent of $ 5.7 billion and has cast a heavy
blow to the petrodollar becoming the basis for the usage of the yuan
in Middle East markets. It is no secret that the oil-producing
countries of the Middle Eastern region have little trust in the US
dollar due to the export of inflation, so one should expect other OPEC
countries to sign agreements with China.

As for the Southeast Asia region, the establishment of a clearing
center in Kuala Lumpur, which will promote greater use of the yuan
locally, has become yet another major step that was made by China in
the region. This event occurred in less than a month after the leading
financial center of Asia – Singapore – became a center of the yuan
exchange in Southeast Asia after establishing direct dialogue
regarding the Singapore dollar and the yuan.

The Islamic Republic of Iran has recently announced its reluctance to
use US dollars in its foreign trade. Additionally, the President of
Kazakhstan Nursultan Nazarbayev has recently tasked the National Bank
with the de-dollarization of the national economy.

All across the world, the calls for the creation of a new
international monetary system are getting louder with each passing
day. In this context it should be noted that the UK government plans
to release debts denominated in yuans while the European Central Bank
is discussing the possibility of including the yuan in its official

Those trends are to be seen everywhere, but in the midst of
anti-Russian propaganda, Western newsmakers prefer to keep quiet about
these facts, in particular, when inflation is skyrocketing in the
United States. In recent months, the proportion of US Treasury bonds
in the Russian foreign exchange reserves has been shrinking rapidly,
being sold at a record pace, while this same tactic has been used by a
number of different states.

To make matters worse for the US, many countries seek to export their
gold reserves from the United States, which are deposited in vaults at
the Federal Reserve Bank. After a scandal of 2013, when the US Federal
Reserve refused to return German gold reserves to its respective
owner, the Netherlands have joined the list of countries that are
trying to retrieve their gold from the US. Should it be successful the
list of countries seeking the return of gold reserves will double
which may result in a major crisis for Washington.

The above stated facts indicate that the world does not want to rely
on US dollars anymore. In these circumstances, Washington relies on
the policy of deepening regional destabilization, which, according to
the White House strategy, must lead to a considerable weakening of any
potential US rivals. But there’s little to no hope for the United
States to survive its own wave of chaos it has unleashed across the

Vladimir Odintsov, political commentator, exclusively for the online
magazine “New Eastern Outlook”

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