By Ghassan Kadi for the Saker Blog
The Russian special operation in Ukraine has created the potential for an avalanche of geopolitical and geo-economic changes. Some of them were bound to happen; just waiting for a trigger factor.
Is the end of the Petrodollar one of them?
To understand the importance of the Petrodollar, we need to go back to its origin and definition.
Many articles and definitions have been given over the years to explain what the Petrodollar is all about; but none in my opinion comes close to the one explained by Mamdouh Salameh. Back in 2015, he predicted that the Petrodollar might have outlived its use-by date. His prediction is perhaps now outdated, but that aside, an extract of the abstract of his article outlines the definition and the importance of the Petrodollar for the US economy
‘The Petrodollar came into existence in 1973 in the wake of the collapse of the international gold standard which was created in the aftermath of WWII under the Britton Woods agreements. These agreements also established the US Dollar as the reserve currency of the world. The Nixon Administration understood that the collapse of the gold standard system would cause a decline in the global demand for the US Dollar. Maintaining demand for the US Dollar was vital for the United States’ economy. So, the United States under Nixon struck a deal in 1973 with Saudi Arabia.
Under the terms of the deal, the Saudis would agree to price all of their oil exports in US Dollar exclusively and be open to invest their surplus oil proceeds in US debt securities. In return, the United States offered weapons and protection of Saudi oil fields from neighboring countries including Israel. For the Americans, the Petrodollar increases demand for the US dollar and also for US debt securities and allows the US to buy oil with a currency it can print at will. In 1975, all of the OPEC nations agreed to follow suit. Maintaining the Petrodollar is America’s primary goal’.
Do you get the picture?
The Petrodollar was meant to be a win-win agreement in which America propped up its economy, and in return supplied Saudi Arabia with security.
As time went by, the deal became increasingly one-sided, one in which Saudi Arabia was getting the spiky end of the pineapple. The Saudis have been feeling shafted for a long time, but they did not have enough intestinal fortitude to stand up and show their dismay to Uncle Sam.
When America asked old-school Saudi royals to jump, they asked how high. Love him or hate him, young Saudi Crown Prince Muhamed Bin Salman (MBS) is different.
Over the last few years, I have written many scathing articles about MBS’s character, ambitions, thirst for power, sneaky behind-the-scenes deals with Israel, but the biggest black mark against him will always be his war on Yemen. I will not suddenly make a 180 degree turn and start praising him. But credit must be given when credit is due.
MBS happened to rise to power on the eve of Saudi Arabia’s failure in Syria. For fairness, this was not a war he started.
When he took control, Saudi Arabia had already lost its war in Syria, its biggest ally in Lebanon (Hariri) proved to be a wimp and a hopeless ally despite all the support and bottomless funds he received in order to put Hezbollah under control. In Yemen, the Houthis had already taken control of the capital Sanaa. Iran was moving in on Saudi Arabia on 3 fronts; or at least this was how he perceived it.
This is not to forget the oil price war that Saudi Arabia waged on Russia. It is difficult to put all of those events in exact chronological order because they are all interwoven and happened almost concurrently. Back in 2016, Saudi Arabia decided to increase its oil production in order to drop the crude oil price and put pressure on Russia in Syria. The plan backfired and only resulted in a huge slump in the price of oil, and when MBS tried to reverse that decision and bring the crude price back up again, he was unable to.
MBS inherited a Saudi Arabia that was teetering on the edge. He had few options to restore its image and stature. It faced bankruptcy and for the first time since its oil boom nearly a whole century ago, it fell into debt and he took drastic domestic spending cut measures.
He had to do something.
His American allies during the Obama Administration convinced him that defeating the Houthis was going to be a walk in the park. MBS was led to believe that his venture in Yemen will be a swift blitz, and he gave it a name to that effect; Operation Decisive Storm.
The last thing that MBS wanted was a letdown from his American allies.
The Obama Administration however proved to be either unable or unwilling to provide him with what it took to win that war.
Trump, on the other hand, made his first overseas visit as a President to Saudi Arabia. He reassured the Saudis of America’s adherence to its obligations of protecting them and canceled Obama’s nuclear deal with Iran.
But the tables turned later on when Biden went further than Obama, making a 180-degree turn. He didn’t only threaten to cut off arms supplies to Saudi Arabia, but openly said that he is also desirous to resume talks with Iran in an attempt to resurrect the nuclear deal. In effect, Biden has breached the 1973 Petrodollar agreement and which clearly stipulates that the USA must protect Saudi Arabia.
A couple of weeks short of the seven years anniversary, nothing can excuse MBS for putting his ego before the lives and welfare of Yemeni people. That war has raged on for so long and created massive human tragedies.
So how do the events in Ukraine come into the picture?
With the global repercussions of the Russian operation in Ukraine reverberating all over the world, MBS is eyeing Uncle Sam, vowing that it is pay-back time.
America has actually requested ‘friendly’ countries to condemn the Russian action. Thus far, some, including Saudi Arabia and the UAE, have refrained from responding. This is an unprecedented Saudi stand.
In my previous article, I predicted that America’s sanctions against Russia would backfire. But, is MBS’s stand now related to the sanctions against Russia? The simple answer is yes.
America does not expect MBS to only condemn Russia and mirror the sanctions, but it also expects him to pump more oil into the global market in order to meet the shortfall created by the sanctions.
MBS is not playing ball the way America wants him to play. He is refusing to condemn Russia, thus far refusing to lift oil production. But most seriously, he is discussing with China doing oil transactions in the Yuan (Renminbi) instead of the USD.
Whilst the talks are not about doing all oil transactions in Yuan, it is however the beginning of a new trend that may see the eventual end of the Petrodollar. This is the first serious nail in its coffin.
If the Petrodollar collapses, quantitative easing (ie printing money) will constitute a more serious problem for the American economy.
Whilst writing the previous above-mentioned article, I did not expect that events were going to happen so quickly and that cracks alluding to the fall of the USD as the single global reserve currency were going show in less than a week. But here we are. The first steps have already been taken.
MBS seems to be maturing enough to know how to play the game of the big boys. What is really pertinent is that the so-called Petrodollar, and what is left of its future, rest in his hands; and America has no say in this. Even as I finalize this article, news of a USD collapse is already being reported on the mainstream media. With the deployment of the Kinzhal missile yesterday, the first-ever use of hypersonic weapons in combat, we can surely be certain that the changes we are witnessing now, economic or military, are not ones that the West ever desired or envisaged.
The US will invade Saudi Arabia. The Petrodollar is an existential factor for the US of A. Without it the USA is done.
Assuming that the US will (attempt to) invade Saudi opens questions. Such as how much oil will then be pumped? Can an invasion create the economic goal? And can the US actually invade Saudi? I note that the machinery necessary to extract, process, store, and load oil is 100% vulnerable to even minor military destruction…everybody in the region is able to fubar the Saudi oil system. This means that an invasion requires permission from everybody…and that’s a long bet.
They invade Saudi Arabia, and then what?
The dominoes will fall even quicker. And the oil shock around the world will catapult oil prices to the stratosphere bringing the world to a halt, dragging the US$ with it.
The US has no more options. They provoked Russia for this very reason, for not using the US$ in its trade and look what happened.
http://biblicisminstitute.wordpress.com/2015/03/17/the-truth-about-the-conflict-with-russia/
So basically, the US$ days are numbered.
Harry Stantz,
Excellent analysis.
” So basically, the US$ days are numbered. ”
We’ve been hearing this for decades now, although, The US is ultimately irrelevant.
Let us know when the Rothschild’s days are numbered, or Israel’s, or Zionism’s .
They may not need to invade KSA, they just have to find another “mentally deranged” member of the House of Saud like Faisal bin Musaid Al Saud.
https://www.bitchute.com/video/GL8zCT_Y0UI/
The above link pertains to a private analysts view on the end of the Petrodollar. The video is interesting, while some of the statements are perhaps questionable.
“The US will invade Saudi Arabia.”
If the US invaded Saudi Arabia, US forces would face an insurgency that would make the Iraq insurgency look mild in comparison. If the US attempted to forcefully gain control of exclusively the oil fields, leaving the rest of Saudi Arabia to itself, it would still face an insurgency but due to the fact that Shia’s reside in those areas, Iran would be supporting the insurgency as well as other Gulf players. No. It is not an option. It is more likely that the US would simply threaten to carpet bomb Riyad, Jedda, all the major cities, maybe excluding Mecca & Medina because of Islamic sentiment, but who knows? They are so stupid in Washington that even that could be a possibility.
…assuming that Russia would ever allow it , Washington’s single option is – as it has always been – to basically conquer Iran, i.e. send millions of foot soldiers takeover Tehran. If that’s not happening, with all due respects, our good old Uncle Shmuel might as well just pack up leave and survive peacefully in his corner of the world with the promise to keep quiet.
…the sleepy Joe would then have his name written in history books alongside Alexander the Great. He would then be named as Biden the Great.
Biden the great? Or biden the loser?
No, Biden’s name will be by that of Ozymandias.
“My name is Ozymandias , King of Kings; Look on my Works, ye Mighty, and despair! Nothing beside remains. Round the decay Of that colossal Wreck, boundless and bare The lone and level sands stretch far away.” – Shelley
Except the wasteland would include the wrecks of innumerable Walmarts and Amazon fulfillment centres
Iran can’t be conquered! It’s surrounded on2 sides by the Zagros and Alborz, the desert in the East and the Arabian sea in the South without a single unfriendly neighbour for a bridgehead. Besides, it’s dotted with a million villages who will delay every land invasion.
It’s probably in the top 5 countries in missile defence with stunning accuracy. Just ask Mossad in Kurdistan!
Sure You can turn it into glass with nukes but ok we’re not paying attention to what Putin said about nukes and its friends.
I totally agree
Americastan would bomb the Saudi Shia to teach the Saudi Sunni that this could be your fate, like nuking Japan to scare Russia. But if I we’re Saudi Shia, I’d move away from, water plants, food production buildings, power stations, dams and farms, Hospitals and Schools, those are they areas the US will destroy first.
Cheers M
Another alternative is to back a coup.
MBS has enough enemies that it would succeed.
That’s my guess. I would think the US would seek a more compliant stooge.
The USSA will try to invade Saudi Arabia but Iran won’t allow it and no USSA ships can come within 500 km of Iran without being sunk and Iran can attack and defeat the Zio USSA interests in Iraq at the same time and Iran can use its missile power against the USSA land forces if the USSA tries invade Saudi Arabia and Iran with Hezbollah can blast Israel the capital of Zio America at the same time. It will be a global united Muslim front against the racist supremacist global Jewish slave empire dictatorship
I have no objects to an Iranian retaliation, but Iran can no more beat the US than Ukraine can beat Russia. If Iran strikes America’s masters in Tel Aviv, the US military WILL respond. No, the counteroffensive will play out differently, possibly with China cutting off trade with the US. As a dictatorship, China can make its citizens bear the brunt of hardship. American cannot.
“China can make its citizens bear the brunt of hardship. American cannot.”
https://www.youtube.com/watch?v=Bhy3zI3wvAo
Cycling through Homeless Camps on Santa Ana River Bike Trail in Orange County California
https://www.youtube.com/watch?v=KF7hWzqdPDk
Riding through the Homeless Camps in Anaheim California on the Santa Ana River Trail
https://www.youtube.com/results?search_query=homeless+usa
homeless usa
In what way is the u.s incapable of letting the citizens bear the brunt of hardship??
American voters will not bear the brunt of hardship.
There are reported to be 580k homeless in America, less than 2 tenths of a percent of the total population and the vast majority are insane or drug-addicted.
If the Ruling Class cared about this sad-but-vanishingly-small cohort, they would institutionalize the insane and interdict drug flow. But they don’t, because they are not electorally relevant, being too small and too difficult to get to the polls.
But nevermind real hardship. Slightly inconvenience the vast group of typical American voters via Covid mandates, inflation or rising gas prices and bad things happen to incumbent politicians as we will see in the November midterms.
Like the West in general, America is by far the greatest dictatorship on the planet because it has the greatest propaganda machine in history–one which can convince its own delusional slaves/citizens that they live in a democracy.
Meanwhile, corporate America, Wall Street, and the US Military Industrial Complex are turning its own people into serfs with massive poverty and socio-economic misery.
I think it’s time for Saudis to start buying S-500, Kalibars and Kinzhals!
They can pay by oil (њeft) or by Ruble…or gold.
Up to VVP…
Not even close. The US would lose its mask of respectability worldwide and become a pariah.It will fail another way. Possible there could be a real terroristic attack by some of the enemies America has made over the decades.
There are not enough ground troops in US Central Command to invade Saudi Arabia. Nowhere near enough.
It would take the USA at least six months to assemble the necessary forces (though where, exactly, would they assemble?) and the Saudis would know immediately what that buildup means: it means MBS eventually sharing the fate of Saddam Hussein.
So I don’t think the USA can do it: the moment they attempted to assemble the troops then MBS would flip to China and Russia and invite them in to protect the House of Saud.
Heck, MBS might even appeal to Iran, which would be one for the record books.
The only alternative is that the USA forgoes the ground invasion and just attempts a “shock and awe” bombing campaign to bomb Saudi Arabia back into the stone age. In effect, to do to Saudi Arabia what the Saudis are doing to Yemen.
Hmm, not sure that would topple anything…… except the petrodollar.
Bombing Saudi is like flinging a cigarette butt by the side of a petrol station. You better damn well know what you are doing
Retired Army Colonel Doug MacGregor says we (that is the US military) would be lucky to get 70,000 to 100,000 troops to put in Europe right now to “deter the Russians” (his quote/unquote).
https://www.youtube.com/watch?v=t3QX9YtjxCE
US would not dare. Imagine a crazed kingdom straps herself with detonators around all major oilfields. Those kabooms would send a gigantic shockwave through the global oil market that USD will instantly kaput.
I guess we can assume the Petro dollar is done when American bombs are landing on targets in Saudi Arabia…
@The Petrodollar was meant to be a win-win agreement in which America propped up its economy, and in return supplied Saudi Arabia with security.
Problem is that this is a very inefficient (non peaceful intent) way to run a country, and it was predicted to be unsustainable, and now it has become that.
Very informative and welcome perspective.
I like this refreshing straightforward concise analysis of the situation.
Article from March 12…”the disney channel” lol.
In all seriousness however, “But Western sanctions are sharply-pointed boomerangs that can only hit back, and hit with vengeance” ( Mar 12) can it be that the global fiends are looking to defeat america and restructure it according to their designs?
“can it be that the global fiends are looking to defeat america and restructure it according to their designs?”
Bingo! Number 1 in WEF was to get rid of Trump, but in the end, it was actually America.
I believe the first serious nail in the petrodollar coffin was the 79 revolution of Iran
Totally. Also, Iran and China are the world’s two successful youth revolutions and if our “betters” despise anything, it is youth.
That is very astute and most likely true.
Excelente análise .Creio q o processo de aceleração do controle americano está tomando um novo contorno em perspectiva de aflição aos EUA .
No, sanctions are not backfiring, they are intended to destroy what’s left of the US and European economies. This whole thing is scripted by the Transhumanists.
https://www.youtube.com/watch?v=QU2Mzl0jAaE
https://www.youtube.com/watch?v=0YPO9QeRdU8&list=PLlDxOv3vXbAec7NHW59QPX0cMMAEiCWwk
Replacing the dollar is not going to be a binary process but certainly one that demands our attention toward currency diversification for investments and trade. The US Dollar has been reserve currency since Bretton-Woods, as a gold-backed currency, then Nixon made it an oil-backed currency. I’m not sure there’s a new way to back it once other currencies become accepted for oil and commodities trades. It will always be used by Americans though so it isn’t going away any more than the British pound. If US inflation grows enough and rates soar, then Treasuries might once again attract outside capital as well, thereby supporting the dollar.
The difference today is that the dollar’s fate now lies in the hands of outsiders. I don’t see its immediate replacement but that snowball is picking up speed.
If I have my history correct, Bretton Woods was changed to the Petro-cycle in 1973 due the demand for gold settlement instead of USD. The USA was seeing too much gold leave their territory as countries started requesting the gold instead of USD.
Easy to announce the sudden change when it’s backed by nuclear weapons.
Re: “What is really pertinent is that the so-called Petrodollar, and what is left of its future, rest in his hands; and 𝗔𝗺𝗲𝗿𝗶𝗰𝗮 𝗵𝗮𝘀 𝗻𝗼 𝘀𝗮𝘆 𝗶𝗻 𝘁𝗵𝗶𝘀”
https://prouty.org/anatomy.html
“What is it then that keeps these people alive? In every country the King would not live if there was not an elite guard. Who trains the elite guard? .. when you control the elite guard of a country, when you train that guard, when you arm that guard, when you teach them the jump from an airplane at Fort Benning and in Fort Bragg and give them all kinds of weapons training, bring them down to Camp Ferry in Virginia where there’s a nice little resort, that guard knows how to keep a man alive, as long as that guard agrees to keep that man alive.. whether those men stay alive or not is the function of their inner guard .. These are important considerations because they are right there in the record, the thing is we in this country don’t think of it that way very often .. “Hey, you know what, the United States is changing its policy.” .. More interest to me than a genealogy of Lee Harvey Oswald and all the rest is, who said, “Lets go to Dallas Jack.””
Startin to sound a little unbelievable isnt it?
Next they will be
reading your mind,
and going back in time.
And who knows
what they’ll find.
One would “think” a top priorty of the US Govt would be to protect the Dollar’s “reserve status.” Minimize deficits, having low inflation, and do not weaponize. My only reasonable assesment is “The Powers That Be” want to destroy the “Dollar.” What is yours? Check out Michael Hudson – https://youtu.be/fgagkItxpBU
But the whole point of having a reserve status for you currency is precisely that you get to exploit the rest of the world by making them use it. Otherwise you would have ‘just plain’ status like every other currency on earth. It was good (for some) while it lasted.
Counterfitting is always a good leverage mechanism to force a country to use your currency.
The brits did it in 1812 to try to destroy a newly created U.S. economy, i’m sure the U.S. gvt is well practiced with this method and is 1/2 the reason country’s elected to use it in the first place.
Now crypto threatens to replace the inability to create a currency not counterfitable and also freeing them from the shackles of greatness.
MBS might as well do it now and enjoy protection from Iran. If he fails To Just Do It, the Houthis know how to make them listen. God Bless Russia and help her defeat the Neonazi gangs. Amen. Happy Norouz to all.
The CIA will assassinate MBS as they did to JFK. The USA will then put a puppet in charge that they can control.
In 1975, Faisal was assassinated for “reasons that remain obscure”, and his brother, Crown Prince Khalid, ascended to the throne.
If i am not wrong, King Faisal was assassinate in 1975, cause he was against the deal about the petrodollar between Arabia Maudita and Gringolandia
I wonder – how much time before CIA tries to do an Arab Spring on MBS?
Watch closely to see signs of emergence of The Petroshekel.
All the Abraham Accord Countries are not publicly chastising Russia; UAE, Saud and Israel.
Hmm?
Russia,china,Iran, Pakistan, Turkey will jump in to save Saudis from USA if situation demands.all of a sudden whole middle East will come to its rescue except little illigal occupied territories of Palestine (Israel).world is changing drastically and USA cannot do anything.The moment Saudi decides to sell oil in yuan its end of injustice done to whole global south for centuries.eagerly waiting for petroyuan.
And how do we know that petroyuan is any better?
My wish is to return to gold standard….
” To understand the importance of the Petrodollar, we need to go back to its origin and definition. ”
It is a myth as explained by Warren on RT
https://m.youtube.com/watch?v=ICSdZbEMZd0
And Here on RT
https://m.youtube.com/watch?v=w0yv32MdIko
It could be priced in paper clips.
The Petro $ myth is wrapped up in all the other gold standard, fixed exchange rate nonsense.
What would happen if the US lost the US $ reserve status ?
https://activistmmt.org/reserve-currency/
Follow the assets and liabilities and ignore the myths
Sterling and $ savings are an export product.
That is what running a current account deficit means
https://new-wayland.com/blog/savings-are-an-export-product/
Follow the assets and liabilities
There is a very strange belief amongst MMT theorists, that loss of reserve status of the dollar will simply cause all other countries to immediately attempt to offload their dollars by purchasing American-made goods, since the currency is otherwise worthless . Eeerrr… which “American-made” goods would those be? And what would stop other countries treating their USD holdings as a sunk cost, and printing and issuing their own currency domestically to make up the shortfall? I mean when no one has any more real use for the dollar, the compliance headache of hanging onto vast USD reserves, just in case, seems more than it is worth. The US no longer produces goods and services of significant value to the world economy, in the way it once did. The one thing that they could sell was “brainwork”. The last few years have put the kibosh to global belief in American “smarts”. For example, the best Tesla engineers, for instance, are not “American” in any meaningful sense. They are likely Chinese or Indian grad students who studied in America. They have loyalties that can easily be bought and repatriated by their ancestral countries. This IS the massive Achilles heel in US immigration policy.
By contrast, the best Russian and Chinese engineers are staying right where they are.
It remains to be seen how much longer the world is going to want to buy overpriced American “thinking/services” using USD, from the kind of people who have spent the last few weeks boldly declaring that Russia is about to collapse.
It seems that investors are offloading their US dollars to buy US real estate.
What else is there?
“There is a very strange belief amongst MMT theorists, that loss of reserve status of the dollar will simply cause all other countries to immediately attempt to offload their dollars by purchasing American-made goods”
Not at all. If you’re going to talk about MMT theorists, at least take a little while to actually understand what they say rather than projection.
“And what would stop other countries treating their USD holdings as a sunk cost, and printing and issuing their own currency domestically to make up the shortfall? ”
What makes you think that isn’t what they have already done? The reason foreign exchange tends to end up on the asset side of the central bank is because they have discounted it into local currency via their bank reserve system.
And any central bank could write off these ‘foreign reserves’ and nothing much would happen. For example the Russians could nationalise their central bank write out these foreign reserves, replacing them with a ‘Way and Means’ account with the Russian Treasury. The outturn would be precisely the same as now – other than a few hard money nuts would have heart failure.
As we have seen foreign promises aren’t worth the electronic impulses they are recorded with.
If people would see foreign reserves in the same was as the drawer of loose foreign change you have left over after a foreign holiday, then we might get somewhere.
Foreign reserves don’t back currencies, they are just shrapnel that should be considered as largely worthless. A mistake caused by focussing on exports – which drains a country of capacity to grow, rather than imports – which adds to capacity to grow if the right stuff is imported.
Not really.
In national budgeting, imf allows sustainae level of deficit which is 5 percent of GDP.
Now if 50 percent of 30 trillion dollars of internation trade in conducted in USD, it comes to almost 15 trillion additional circulation of USD.
The 5 percent sustainble currency deficit for USD being used as primary trade currency comes to 750 billion us dollars.
Its this free ticket to run 750 billion usd deficit and seinorage income (amount to 50 billion usd more), it allows us givernment excess 800 billion usd virtually free money-interestingly equivalent to military spending. (750 billion, 2021)
question: is nt a secret agreement between Saudi A and Moscow the best of worlds? We gather they have one.They control the oil prices, they squeeze some reluctant consumers whenever useful, they get more oil income, more allies and further, they can easy explore a deniability of the whole tricky script.
And further, oil producers anywhere else CANNOT efficiently blow up or nullify this game.
Possibly there is some weak point or flop premise in this reasoning, pls let me know.
I have a question that I would like to ask from a monetary point of view: I was thinking that the USA is in some sort of an inflationary trap. What I am trying to get a check on is this. If a majority of the worlds carbon energy is settled in dollars, and oil continues to trade between $135 and above, won’t the USA be required to print/create more dollars to satisfy the increased need for more dollars to buy the same quantity of oil, thereby increasing the quantity of dollars, which then will push oil higher? And If this increases interest rates does that not divert more tax dollars to interest payments, requiring the cost of government to rise at the same time the USA is interning into an economic downturn creating even more excess dollars, the central bank will have to QE? And being in this trap will that not cause addition economic hardship for the working classes, who in turn will look for political change?
1. It increases demand for usd very marginally.
2. So, if its 1 barell trade its 35 usd.
3. So what the country who sold this barell do with this extra 35 usd?
4. Invest in usd treasury securities which has very low rate. Currently 2.35 percent on 30 year tenure.
5. So every year, just 60 cents for one barell.
6. US can print dollars so it pays 60 cents in interest.
7. So happens with those 60 cents?
8. Gets invested in more US securities.
That how us amassed 10 trillion debt.
I believe that the petrodollar came into existence in 1974, but I might be wrong.
https://economictimes.indiatimes.com/news/international/business/the-untold-story-behind-saudi-arabias-41-year-us-debt-secret/articleshow/52528470.cms?from=mdr
We in so called west should finally realize that days of U.S Petrodollar is over and world trade generally has moved to China-India-Middle East-African Axis while especially Europe is becoming less important. Their population (excluding Russia/Belo Russia) is just 570 million and share just 7% of world population. When it comes young people, just 4%. Business grow where there are consumers and workers.
I wouldn’t hold my breath yet. From what I read the PetroYuan thing is overblown as the deal is (supposedly) not even about pricing oil itself at all in Yuan, but rather some petroleum “products”, which would be a tiny fraction/percentage of trade. With that said of course it still may be a beginning of something and a testing the water, but just don’t hold your breath expecting some rapid collapse of the PetroDollar as every side is still hedging their bets.
Of course there are tectonic shifts seemingly happening (like Syria’s Assad reemergence to the world stage and subsequent re-acceptance by UAE) but I expect these things to slowly develop and not result in any immediate positive results
I think the thing is, in the Empire game, Empires collapse very slowly and almost imperceptibly at first. And then one day all of a sudden. The Roman Empire didn’t “collapse” in the way that Russia collapsed completely after the October Revolution, and the Civil War and Polish invasion. But one day, a dispatch rider showed up and informed the garrisons and settlements along Hadrian’s Wall that from this point forward, they needed to organise their own defence. This is really what I see happening. No, not an overnight elimination of the dollar. But a more insidious “unwinding”. Look, the USD itself has no been exposed as a massive derivative bet. The underlier? The “full faith and credit of the US government”. Well, it turns out that that is a very difficult underlier to measure and to value. The biggest myth in global investment markets was the assumption that the USD had risk only in as much as the US economic strength (and corresponding IR) would be driving the valuation against other commodities and currencies. One thing the entire planet agrees on now, though, is that USD now has embedded risk premia beyond the mere economic fundamentals. “Full faith and credit” no longer means what it once did. That is no longer in serious dispute, even in the EU, America’s small colonial Empire.
All the RoW has to do is pass domestic financial regulations that force banks to radically increase the RWA impacts of all USD holdings, and increase their Tier 1 capital impacts by 30% as a result. The Basel Accords already not only allow that, they in fact require domestic regulators to force banks to accurately reflect all risks in their asset base, in accordance with their domestic risk assessments.
The US has just injected geo-political risk into USD holdings. But you are right. This is not the end of the destruction of the USD as the reserve currency. It is not even the beginning of the end, maybe? But it is the end of the beginning.
So the US, like ancient Rome, will slowly bleed influence and clout, and as a result, domestic political stability. They will soon be forced to begin closing bases, and furlough aircraft carrier groups. Domestic unrest coupled with the steady erosion of value due to Affirmative Action in critical sciences and industries will further weaken their competitiveness, and as a result, confidence in US “leadership”.
Sure. The US can print USD all it wants, driving up the “price” of oil in USD. But soon (and I think we are nearly there already) the question is going to be not “what can I buy with $100 USD” but rather “what can I buy with a barrel of oil”.
Russian pipelines to China selling NG & crude oil to China was the first nail in the Petrol D0llar coffin. Nordstream I was the second nail. Now Russia heads into Jerusalem, only this time Peter has drawn his sword. The Tables of the Money Changers will once again be overthrown, but this time it’s the Pharisees who get themselves crucified.
Russia exports about 7 million barrels/day, of that about 3 million already sell outside the D0llar. Russia will find buyers for the additional 4 million barrels. Turkey & India will be 2 of the larger customers. Japan will also find buyers since they do conduct business in oil outside of the Govt. Once Russia is finished with Ukraine, the Russian crude & NG flowing through Ukrainian pipelines will also find alternative currencies to transact in.
Certainly the Saudi’s agree to sell crude to China using the Yuan. OPEC will have a hard time maintaining the Petrol D0llar & several crude producing nations will join. US Empire is just about over.
According to the prophecy of Muhammad s.a.w, mecca and Madina are protected by God Himself. There’s no war on such cities ever
“Back in 2016, Saudi Arabia decided to increase its oil production in order to drop the crude oil price and put pressure on Russia in Syria.”
Nope. That was not the reason.
Saudi Arabia wanted to kill the shale gass and shale oil surge in usa.
Usa was overflowing the market with barely economically oil.
Usa shale oil companies did not really make much money, but they pumped and dumped oil into the market to stay afloat.
Since usa is not part of OPEC, that hurt the global oil prices.
Saudi tried to therefor get the oil price so low that it could hopefully kill of all the shale etc oilcompanies that had no real profitmargins.
That attempt was very costly for Saudi.
Russia was not really the problem (yes a competition, but Russia was not the one who had hundreds of new shale companies pumping out bug spike of new oil to under own breakeven prices).
Not sure if it is a good move to stop the export of fertilizer. Does Russia need it all to itself?
I suppose the picture will be clearer when the list of friendly/unfriendly nations is clear.
But all in all it may not be in Russia’s interest to impose sanctions as destructive as those of the ‘civilized nations’..
Better to provide an alternative together with China – this will be needed to help other nations if the West persists in trying to blow up the entire global economy.
Which is nothing new – Britain did pretty much the same in 1931 when it was clear that its hegemony and control over the global reserve currency could no longer be upheld. Depression and WW2 ensued.
MBS is a psychopath, sitting on a very unstable throne, who has made many enemies within the royal family. Even the incompetent Yankess should have little difficulty overthrowing him. I have read that he is popular with younger Saudis for having opened up its society somewhat with cinemas etc. So the question asks itself; if the US does topple him, will the youngins revolt and overthow the house of Saud? And if so, what would replace it?
Be careful what you wish for Uncle Sam.
The “petrodollar” died when the Fed launched QE in 2008. The key element of the Petrodollar was that Saudi would purchase US debt, which the US needed after it defaulted 1972/1973 on its gold commitments. Pricing oil in dollars is just a convenience. The Saudi’s can swap a billion USD to Euros in a minute with a phone call to private bankers that are assigned to them in London and Frankfurt. It was the Saudi debt buying in exchange for security guarantees that was the crucial piece. With the Fed directly purchasing the debt, the petrodollar arrangement died in 2008.
The BIG problem for the US is the damage done to the prestige and reputation of New York and the City of London with the robbery of a G20’s foreign reserves. This spells the end to the dollar reserve currency status. It will take time, but nations will now be shifting to gold, other currencies, and maybe some crypto.
Soon there maybe be another Belarus moment in KSA. We will read on the news about how Russian secret services warned MBS about an imminent coup and he brutally stamps it out. The petrodollar dies on that day.
I have to disagree that Washington speaking with Tehran about JCPOA resumption is a betrayal to Saudi security. Economic interests, maybe but not defense and military security.
Unless ending sanctions somehow cause an Iranian invasion of the Arab peninsula…