Posted on 04/05/2014 6:51:12 AM PDT by Rusty0604
On the heels of Russia's potential "holy grail" gas deal with China, the news of a Russia-Iran oil "barter" deal, it appears the US is starting to get very concerned about its almighty Petrodollar
•*U.S. HAS WARNED RUSSIA, IRAN AGAINST POSSIBLE OIL BARTER DEAL •*U.S. SAYS ANY SUCH DEAL WOULD TRIGGER SANCTIONS •*U.S. HAS CONVEYED CONCERNS TO IRANIAN GOVT THROUGH ALL CHANNELS We suspect these sanctions would have more teeth than some travel bans, but, as we noted previously, it is just as likely to be another epic geopolitical debacle resulting from what was originally intended to be a demonstration of strength and instead is rapidly turning out into a terminal confirmation of weakness.
As we explained earlier in the week,
Russia seems perfectly happy to telegraph that it is just as willing to use barter (and "heaven forbid" gold) and shortly other "regional" currencies, as it is to use the US Dollar, hardly the intended outcome of the western blocakde, which appears to have just backfired and further impacted the untouchable status of the Petrodollar.
...
"If Washington can't stop this deal, it could serve as a signal to other countries that the United States won't risk major diplomatic disputes at the expense of the sanctions regime,"
And here is Voice of Russia, "Russia prepares to attack the Petrodollar":
The US dollar's position as the base currency for global energy trading gives the US a number of unfair advantages. It seems that Moscow is ready to take those advantages away.
The existence of “petrodollars” is one of the pillars of America's economic might because it creates a significant external demand for American currency, allowing the US to accumulate enormous debts without defaulting. If a Japanese buyer want to buy a barrel of Saudi oil, he has to pay in dollars even if no American oil company ever touches the said barrel. Dollar has held a dominant position in global trading for such a long time that even Gazprom's natural gas contracts for Europe are priced and paid for in US dollars. Until recently, a significant part of EU-China trade had been priced in dollars.
Lately, China has led the BRICS efforts to dislodge the dollar from its position as the main global currency, but the “sanctions war” between Washington and Moscow gave an impetus to the long-awaited scheme to launch the petroruble and switch all Russian energy exports away from the US currency .
The main supporters of this plan are Sergey Glaziev, the economic aide of the Russian President and Igor Sechin, the CEO of Rosneft, the biggest Russian oil company and a close ally of Vladimir Putin. Both have been very vocal in their quest to replace the dollar with the Russian ruble. Now, several top Russian officials are pushing the plan forward.
First, it was the Minister of Economy, Alexei Ulyukaev who told Russia 24 news channel that the Russian energy companies must should ditch the dollar. “ They must be braver in signing contracts in rubles and the currencies of partner-countries, ” he said.
Then, on March 2, Andrei Kostin, the CEO of state-owned VTB bank, told the press that Gazprom, Rosneft and Rosoboronexport, state company specialized in weapon exports, can start trading in rubles. “ I've spoken to Gazprom, to Rosneft and Rosoboronexport management and they don't mind switching their exports to rubles. They only need a mechanism to do that ”, Kostin told the attendees of the annual Russian Bank Association meeting.
Judging by the statement made at the same meeting by Valentina Matviyenko, the speaker of Russia's upper house of parliament, it is safe to assume that no resources will be spared to create such a mechanism. “ Some ‘hot headed' decision-makers have already forgotten that the global economic crisis of 2008 - which is still taking its toll on the world - started with a collapse of certain credit institutions in the US, Great Britain and other countries. This is why we believe that any hostile financial actions are a double-edged sword and even the slightest error will send the boomerang back to the aborigines,” she said.
It seems that Moscow has decided who will be in charge of the “boomerang”. Igor Sechin, the CEO of Rosneft, has been nominated to chair the board of directors of Saint-Petersburg Commodity Exchange, a specialized commodity exchange. In October 2013, speaking at the World Energy Congress in Korea, Sechin called for a "global mechanism to trade natural gas" and went on suggesting that " it was advisable to create an international exchange for the participating countries, where transactions could be registered with the use of regional currencies ". Now, one of the most influential leaders of the global energy trading community has the perfect instrument to make this plan a reality. A Russian commodity exchange where reference prices for Russian oil and natural gas will be set in rubles instead of dollars will be a strong blow to the petrodollar.
Rosneft has recently signed a series of big contracts for oil exports to China and is close to signing a “jumbo deal” with Indian companies. In both deals, there are no US dollars involved. Reuters reports, that Russia is close to entering a goods-for-oil swap transaction with Iran that will give Rosneft around 500,000 barrels of Iranian oil per day to sell in the global market. The White House and the russophobes in the Senate are livid and are trying to block the transaction because it opens up some very serious and nasty scenarios for the petrodollar. If Sechin decides to sell this Iranian oil for rubles, through a Russian exchange, such move will boost the chances of the “petroruble” and will hurt the petrodollar.
It can be said that the US sanctions have opened a Pandora's box of troubles for the American currency. The Russian retaliation will surely be unpleasant for Washington, but what happens if other oil producers and consumers decide to follow the example set by Russia? During the last month, China opened two centers to process yuan-denominated trade flows, one in London and one in Frankfurt. Are the Chinese preparing a similar move against the greenback? We'll soon find out.
Finally, those curious what may happen next, only not to Iran but to Russia, are encouraged to read "From Petrodollar To Petrogold: The US Is Now Trying To Cut Off Iran's Access To Gold."
But, but Soros has suggested that we sell our petroleum reserves to lower the price of oil! And legalize pot! That will fix everything!
What was your 50th clue? (;>
LOL, made me laugh out loud and cause my Grand-daughter to see what I was laughing about.
I didn’t tell her; she’s only eight.
We have enough natural gas to prevent Russia from using theirs to strong arm Europe. All you need to know is that the Saudis are panicking over fracking in this country, the huge potential and the repercussions for the world market. We’re on track to stop importing 25% of the worlds oil. That’s a huge amount to be left in the market. Even with other country’s growth it still means an over supply and eventually lower prices. One analyst is predicting oil in the $20 range simply because of the massive supplies we’re developing.
We have the potential to destroy OPEC. If you thought the cheating within OPEC was a problem before, you haven’t seen anything.
By exporting LNG we’ll also affect the market for oil. It’s all good. We do need slightly higher prices to encourage more drilling.
I agree that this is the position we have been brought to by feckless leadership, but why should individual countries have to fear us if they decide not to use the USD?
That makes it sound like the USA is a mafia bully .... use our dollar or something bad might happen to you on the way home from the market.
I see no reason why the world’s countries SHOULD HAVE TO use our dollars if it doesn’t make economic sense for them to do so.
Should we be threatening other countries over this?
I’m sure on Obama’s recent trip to Saudi he reassured them he is doing everything he can to stop fracking and the pipeline.
If other countries aren’t forced to use our dollar, the liberals here won’t be able to sell as much debt to finance their social agendas.
Exactly.
We should be using our energy to retool our manufacturing base and rebuild so that we can be self sufficient in other ways in addition to energy.
I can’t understand why people just want us to make the fastest buck we can on energy now that we might desperately need later or could sell for a much higher price later.
It’s like eating your seed corn.
That’s true. But liberals are not the only ones who believe is spend, spend, spend. They just spend it on different stuff.
Post of the day! ( you gotta admit his sex life sounds pretty exotic Or at least extra- terrestrial ?)
I don’t think that went as well as the Saudis expected. Obama pointedly wasn’t invited to stay for dinner. Drilling for natural gas has been going on for a long time. What the Saudis apparently didn’t note is that it’s not on federal land and the companies comply with regulations. The feds can’t do squat. Capitalism is merrily and greedily involved in the usual money making that will eventually drastically affect the price of oil.
When the world loses its largest buyer of oil because it’s become independent, it’s a game changer.
Not exactly. We’re in the situation of having so much seed corn we’re hampering the effort to grow more. Why grow more seed corn when your storage is over flowing?
The huge over supply of natural gas and the consequent low price have stopped drilling in some areas. Many are only drilling wells in areas where the wet gases that accompany natural gas such as propane, butane, ethane and pentane is sufficient to be profitable because the natural gas price is too low to be worth while drilling.
US dollars are made in Italy by fiat.
Maybe if the ‘stimulus’ had been spent on public works like city to city maglevs, a robust continental electrical grid, mission to moon, mars, and beyond, etcetera we’d still be fostering our industries. The problem was with the feminists, too many jobs for burly men because, speaking for the women, the did not want to be pushing shovels for the money, just the checks please.
ODumbA$$ threatening someone again? Drawing another red line in the red dirt? There is not one nation on earth that is afraid of ODumbA$$ and the USA today. They all know that he will only send in the Homo Brigade of Pink Fairies to fight with purses and high heels. It makes me sick to think that the United States military that I once served in, loved and supported has been turned into the Homo Brigade. Makes me sick to my stomach. This Pink Brigade is the very reason that America will fall. They will be too worried about having their panty hose getting a run in them than defending the Republic.
To put the remark by Cheney into context, he said that back when it was only a couple hundred or so billion. Still too high, but manageable.
But if left in the ground is security in the future. You don’t have to spend it RIGHT NOW.
We can get it later when we it’s likely more valuable , or we can use it to fund or fuel (literally) future capital improvements.
If we are just converting energy into more fiat currency, what good is that doing us in the long run?
And you don`t think that could backfire into an absolute hatred for, and international move to dump the petrodollar? Especially if the Russo/Chinese alliance calls that bluff with their new carrier killer weapons?
You can either allow Middle Eastern countries to maximize their income and use the excess cash flow to sponsor terrorism and pursue nuclear weapons while allowing Russia to use it’s excess cash flow to modernize its military while using aggressive actions against neighbors or get out of the way and allow capitalism to stop all of the above without spending a dime of taxpayer money. One leads to a better future by using LNG as an economic weapon. The other leads to a much more risky future.
Choose wisely.
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