Posted on 08/27/2014 12:25:39 PM PDT by Rusty0604
Several months ago, when Russia announced the much anticipated "Holy Grail" energy deal with China, some were disappointed that despite this symbolic agreement meant to break the petrodollar's stranglehold on the rest of the world, neither Russia nor China announced payment terms to be in anything but dollars. In doing so they admitted that while both nations are eager to move away from a US Dollar reserve currency, neither is yet able to provide an alternative.
This changed in late June when first Gazprom's CFO announced the gas giant was ready to settle China contracts in Yuan or Rubles, and at the same time the People's Bank of China announced that its Assistant Governor Jin Qi and Russian central bank Deputy Chairman Dmitry Skobelkin held a meeting in which they discussed cooperating on project and trade financing using local currencies. The meeting discussed cooperation in bank card, insurance and financial supervision sectors.
And yet, while both sides declared their operational readiness and eagerness to bypass the dollar entirely, such plans remained purely in the arena of monetary foreplay and the long awaited first shot across the Petrodollar bow was absent.
Until now.
According to Russia's RIA Novosti, citing business daily Kommersant, Gazprom Neft has agreed to export 80,000 tons of oil from Novoportovskoye field in the Arctic; it will accept payment in rubles, and will also deliver oil via the Eastern Siberia-Pacific Ocean pipeline (ESPO), accepting payment in Chinese yuan for the transfers. Meaning Russia will export energy to either Europe or China, and receive payment in either Rubles or Yuan, in effect making the two currencies equivalent as far as the Eurasian axis is conerned, but most importantly, transact completely away from the US dollar thus, finally putin'(sic) in action the move for a Petrodollar-free world.
More on this long awaited first nail in the petrodollar coffin from RIA:
The Russian government and several of the country’s largest exporters have widely discussed the possibility of accepting payments in rubles for oil exports. Last week, Russia began to ship oil from the Novoportovskoye field to Europe by sea. Two oil tankers are expected to arrive in Europe in September.
According to Kommersant, the payment for these shipments will be received in rubles.
Gazprom Neft will not only accept payments in rubles; subsequent transfers via the ESPO may be paid for in yuan, the newspaper reported.
According to the newspaper, the change in currency was made because of the Western sanctions against Russia.
As a protective measure, Russia decided to avoid making its payments in US dollars, which can be tracked and controlled by the United States government, Kommersant reported.
"Protective measure" meaning that it was the US which managed to Plaxico itself by pushing Russia to transact away from the US Dollar, in the process showing the world it can be done, and slamming the first nail in the petrodollar's coffin.
This is not surprising to anyone who has been following our forecast of the next steps in the transition from the Petrodollar to the Gas-O-Yuan. Recall from April:
The New New Normal flow of funds:
1.Gazprom delivering gas to China. 2.China Gazprom paying in Yuan (convertible into Rubles) 3.Gazprom funding itself increasingly in Yuan. 4.Russia buying Chinese goods and services in Yuan (convertible into Rubles) And all of this with the US banker cartel completely disintermediated courtesy of the glaring absence of the USD in any of the above listed steps, or as some may call it: from the Petrodollar to the Gas-o-yuan (something 40 central banks have already figured out... just not the Fed).
Still confused? Then read "90% Of Gazprom Clients Have "De-Dollarized", Will Transact In Euro & Renminbi" for just how Gazprom set the stage for the day it finally would push the button to skip the dollar entirely. Which it just did.
In conclusion we will merely say what we have said previously, and it touches on what will be the most remarkable aspect of Obama's legacy, because while the hypocrite "progressive" president who even his own people have accused of being a "brown-faced Clinton" after selling out to Wall Street and totally wrecking US foreign policy abroad, is already the worst president in a century of US history according to public polls, the fitting epitaph will come when the president's policies put an end to dollar hegemony and end the reserve currency status of the dollar once and for all, thereby starting the rapid, and uncontrolled, collapse of the US empire. To wit:
In retrospect it will be very fitting that the crowning legacy of Obama's disastrous reign, both domestically and certainly internationally, will be to force the world's key ascendent superpowers (we certainly don't envision broke, insolvent Europe among them) to drop the Petrodollar and end the reserve status of the US currency.
As of this moment, both Russia and China have shown not on that it can be done, but it is done. Expect everyone to jump onboard the new superpower axis bandwagon soon enough.
“This is what ‘change’ looks like.” —Barack Hussein Ubama
I cannot wait to hear the reaction from Obola to this one, after all it is in the paper so he should be aware of it since he gets all his news from them.
If other countries follow this lead, far from a certainty, the dollar could collapse as demand for it to settle exchange vanishes.
This is nothing new and I don’t see how this is going to make any difference at all. For years, the Soviet Union bartered oil for Cuban sugar, Polish ham, East German machinery and whatever other junk its satellites had.
Stop making sense! Embrace the paranoia!
Several countries are not happy with the devaluation of the dollar. The only reason it hasn’t collapsed is that EU, Japan and others have devalued their currencies even more.
In addition, China will put up with this as long as the value of the Yuan doesn't begin to rise against the dollar too much. If it does, China will abandon this scheme.
To establish a reserve currency, you have to run trade deficits that allow other countries to hold large amounts of your currency as a reserve. No chance China or Europe will allow that to happen.
By then it will be far too late to do anything about the situation
I could be wrong, but I think the Russian and Chinese economies are much, much larger than they were in those earlier days. This could therefore be a bigger deal than you think.
This would be really bad for the USA if the USA were not increasing oil production and if the USA were not involved in a hard fast scheme to collapse demand for oil world wide.
But since the USA is raising oil production precipitously and the USA is in the first years of a long term plan to collapse demand for oil...
....this agreement that presages the decline of the petrodollar — merely means that the world is returning to a pre 1973 pre petro dollar world...
...which is actually better for the USA.
“This is nothing new and I don’t see how this is going to make any difference at all.”
More than half of US dollars are being held by foreigners to settle their debts. This is equivalent of having a zero interest loan of that amount. If they are exchanged for other currencies, here, then they flood back into the US marketplace. If you think we have inflation now, wait until that happens. Inflation means too much money chasing too few goods.
China has been making currency swap deals with several other countries also.
BRIC nations and more have been in the process of using their own currencies for some time. The U.S. dollar has been long unnaturally overvalued in a world market without a big manufacturing base to back it up, resulting in the debt regime. The answer by our nations of the West is the big oil hoax.
Oil prices are too low for any nation or its government-linked producers to break even. At the same time, refineries (at least some of them owned by investor groups behind oil producers) are pricing very high, hence, the high fuel prices, especially in tourist areas.
That’s what’s “curbing demand” and keeping the game going for our western oil producers: high prices for both retailers and customers. Maybe it will work to break the Ruskies, who have much more difficulty affording the low oil prices than western producers hooked into refineries.
The bigger and more realistic question is whom will get screwed first. There really is no honor among thieves.
ping
~I could be wrong, but I think the Russian and Chinese economies are much, much larger than they were in those earlier days. This could therefore be a bigger deal than you think~
Yep, as far as 1980s Soviet international trade turnover was about just $20 bln. And China was a non-existent player.
Today China is on par with US and Russia worth about between 15 and 20% of total US economy which is not really little.
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