De-dollarization: The End of the Petrodollar Age?

The diminished reliance on the US dollars is one of the major trends of international geopolitics. A lot of media attention has been paid to steps taken by the BRICS states, namely Brazil, Russia, India, China and South Africa to decrease their dependence on American currency. Both the BRICS states and a number of other international players have repeatedly voiced their concern over the design of the modern global economic architecture that was imposed on the rest of the world by the United States. The whole structure of this global economy simply ignores the growing influence of new emerging markets. Because of Washington’s relentless desire to remain a global hegemon, imposing its will on other countries, the US dollar remains an instrument of economic suppression. The creation of the Euro, the rapid rise of the Chinese economy, and the intentions of a number of countries of the former USSR,  the Middle East and Asia to switch to regional currency settlements have transformed the US dollar in a measuring instrument, thus undermining its status as a mandatory transaction currency.

To reach the goal of a Petroyuan, China will pressure Saudi Arabia and other leading oil exporters to trade oil in yuan instead of the U.S. Petrodollar, which would create the new Petroyuan and weaken the dollar significantly. Analysts believe the Saudis will certainly bend to this pressure as a result of China’s immense buying power, a buying power the West is attempting to counter, but has a long way to go in doing so.

For decades, the U.S. dollar has served as the world reserve currency and helped solidify the United States’ role as a global economic power.

That’s all about to come crashing down as China seeks to make its yuan the preeminent global currency.

Foreign policy: The U.S. response.

Creating a Western industrial & manufacturing powerhouse:

By engineering a ‘migrant crisis’ and importing a significant number of migrants into Europe, Washington will be able to create a ‘new China’ equivalent — imported migrant workers will saturate the lower end of the job market, dramatically increasing the employment of low-paid migrant workers, pushing down wages and eliminating the Western middle class; coupled with a huge expansion of the agricultural & industrial sectors, and economic diversification (Western nations are predominantly services based at the moment).

The aim of this is to counter the overwhelming sino-centric dependency.

This will usher in the formation of a high-birthrate, high-population working-class industrial powerhouse to rival, and eventually surpass China’s immense purchasing power and industrial preeminence. The goal is to overturn China’s huge market share in agriculture and industry, which is actively being used to pressure oil exporters to deal in the Petroyuan.

Sanctions and tariffs:

Furthermore, by sanctioning and imposing tariffs on Chinese trade, shifting jobs back to the U.S., and boosting industry in Europe, the Globalists hope to tilt the scales back in their favour, reducing dependency on Chinese and Eurasian goods and services that are not aligned with U.S. hegemony.

Protectionist trade agreements and unions of Western states:

The U.S. backed formation of the EU has created a protectionist shield against the growing Eurasian trade dominion, as various Eurasian trade projects attempt to steal trade influence from Western-aligned nations.

Plans for further Western unionization, the “ganging up” against Eastern economic and military competition are in place.

Invasion, occupation, and subversion of non-aligned states.

U.S. subversion and occupation of states that refuse to align with Washington’s interests is commonplace. The economic sabotage of Venezuela, the occupation of Syria and attempted removal of Assad, the war drums beating against Iran, any state that won’t voluntarily align with Western interests will be occupied for a ‘humanitarian’ reason until they change their mind, or are forced to.

Information warfare:

Negative press and numerous staged ‘atrocities’ have been pinned to Eastern powers, these are designed to pull investment and business away from the East and towards the Western sphere. It also whets public appetite for anti-Eastern foreign policy.

Russia’s and China’s gold reserves against the dollar domination.

The traditional transaction scheme, in which all financial operations are processed by London and a number of Swiss banks is losing its relevance these days as new centers of gold trade are emerging, primarily in India, China and South Africa. Suffice to say that Moscow and Beijing have already signed a memorandum on the development of mutual trade in gold. According Singapore -backed financial expert Ronan Manly, the gold reserves accumulated by China and Russia are a part of their strategy to move away from international trade denominated in US dollars. Manly is convinced that should those states show that they are holding more gold combined than the US, this would deal an enormous blow to the US dollar and to the position of the US within the global economy.

Article: Will The Dollar Survive The Petro-Yuan?

While all these initiatives can not immediately render the US dollar obsolete, one has to remember that China has been building its financial system for years and shows no signs of stopping.

The existing Western sanctions along with threats of new sanctions are forcing China and Russia to cooperate more strategically in what is becoming the seed of a genuine alternative to the petro-dollar system.

Since the 1998 sovereign default triggered by the West, Russia has been extremely cautious in all of its financial dealings, which allowed it to withstand the sanctions imposed on in by Washington in 2014, and forced the country to search elsewhere for the means of ensuring financial stability. That “elsewhere” is increasingly called the Peoples’ Republic of China.

Yuan-denominated bonds.

Now the Treasury of Russia is planning to launch the sale of Russian debt in the form of bonds denominated in Chinese yuan. The size of the first offering, a sort of a test of the market, will barely reach 1 billion US dollars, which amounts to 6 billion yuan. The move is being accelerated by reports that the US Treasury is examining the potential consequences of extending its economic pressure on Russia. It’s curious that Turkey’s Deputy Prime Minister Mehmet Şimşek has recently announced that Ankara is going to issue bonds in rubles and yuan in 2018, as it’s been reported by the Gercek Gundem recently.

These events are unravelling against the backdrop of the undeclared economic war between the US and China, which is moving into its active phase. The United States has already formally notified the World Trade Organization (WTO) that they refuse to recognize China as a market economy and are preparing another portion of anti-dumping duties. Washington has been constantly engaged in all sorts of investigations of China’s market policies, while relying on the rules that are most commonly applied to states with non-market economies. In turn, China’s authorities are seeking ways to achieve a “market” status, in a bid to get rid of the protective duties that are hampering its goods.

Gold for oil.

But China has its own ways of turning the tables back on Washington, and while those ways are not quite as straightforward, their effects can potentially be much more devastating. China keeps pushing the US dollar off the global exchange market. Earlier, Beijing achieved the inclusion of the yuan in the SDR basket and is now about to challenge the dollar as a universal means of settling for oil futures. The twist is that the futures priced in yuans are going to be convertible into gold. It should be noted that gold-backed-oil-yuan-futures can prove to be extremely attractive for investors and oil-producing countries, particularly those that possess conflicting interests with the sole remaining “superpower”. Those are, among others, Russia, Venezuela, and Iran.

The sale of yuan priced futures is aimed at decreasing the dependency of the global financial markets on the US dollar, but this process can take a while. Since the 1970s, OPEC states have been selling oil in petrodollars, which has made the transformation of petrodollars into US treasury bonds an integral component of the US economy. But from now on, oil producers will be able to sidestep dollar priced futures by choosing those futures that they can freely convert into gold. In addition, China is going to give a greater share of the market to those countries that will agree to trade oil futures in yuan, thus the biggest trading partners of Beijing are going to be forced to invest in those futures in a bid to preserve their market share. The possibility of trading oil futures for yuan, no doubt, will be very in high demand across the Eurasian economic space, as well as in several countries of Africa and Latin America. Yet, this will be enough to increase China’s influence along the path chosen for the implementation of the One Belt, One Road massive infrastructure project.

Given the great strategic importance of oil and energy resources in general, the political aspect of yuan priced futures outweighs even the economic component of this shift. Even if initially they will occupy a small margin of the market, this will mean that China is capable of undermining the global reliance on the US dollar, which lays at the very foundation of Washington’s geopolitical power. As a result, we should expect a gradual, but nonetheless imminent reduction in the global dependence on petrodollars.

But don’t expect Washington to roll over and take it, escalations seen in Venezuela, with Iran, Syria, Pakistan, and any other nation that pivots away from the dollar and US hegemonic interests is all a direct result of this economic warfare that underpins major world events, unbeknownst to most.

Martin Berger is a freelance journalist and geopolitical analyst, exclusively for the online magazineNew Eastern Outlook.”  


Washington Is Intent on Destroying Iran

On February 18 the leader of Israel, Benjamin Netanyahu, declared that Iran “is trying to establish this continuous empire surrounding the Middle East from the south in Yemen but also trying to create a land bridge from Iran to Iraq, Syria, Lebanon and Gaza. This is a very dangerous development for our region.” Netanyahu’s presentation was dismissed by the Iranian foreign minister as “a cartoonish circus,” but it was nonetheless a reflection of the policy of the United States, which is Israel’s mentor and unconditional ally.

Last November Iran’s Supreme Leader Ayatollah Ali Khamenei suggested to President Vladimir Putin that Tehran and Moscow should cooperate more fully to try to dissuade the US from further disruptive dabbling throughout the Middle East. His opinion was that “Our cooperation can isolate America. The failure of US-backed terrorists in Syria cannot be denied but Americans continue their plots,” which is certainly the case, because although the so-called “moderate rebels” who were recruited to overthrow President Assad, with massive amounts of assistance from the Pentagon and the CIA, collapsed in ignominious failure, the US fandangos continue. Washington is not going to give up, and the Trump administration seems to relish being isolated by almost everyone.

During his time in the White House, President Obama tried to get US-Iran relations on an even keel, and managed to temporarily overcome the Washington warmongers to some extent and push forward the tension-reducing, trade-improving, Joint Comprehensive Plan of Action (JCPOA) concerning Iran’s nuclear programme, which the BBC described as “the signature foreign policy achievement of Barack Obama’s presidency.” It was settled two years ago by China, France, Germany, Russia, the UK and the US in a most welcome example of international solidarity and downright common sense, and removed sanctions on Iran in exchange for Teheran’s agreement to limit its nuclear research and development.

Federica Mogherini, the European Union’s foreign affairs representative wrote last year that the arrangement was achieving its main purpose of “ensuring the purely peaceful, civilian nature of Iran’s nuclear programme. The International Atomic Energy Agency – the United Nations’ nuclear watchdog – has issued four reports on the matter and has regularly verified that Iran is complying with its nuclear-related obligations. This means that the Iranian nuclear programme has been significantly reformatted and downsized and is now subject to intense monitoring by the IAEA. The joint commission – which I coordinate – oversees constantly the implementation of the agreement, meeting regularly, which allows us to detect even minor possible deviations and to take necessary corrective measures if the need arises.

The deal is also working for Iran. Major companies are investing in the country: the oil sector, the automotive industry, commercial aircraft, just to give a few examples, are areas where significant contracts have been concluded.”

The JCPOA was indeed a marked diplomatic success on the part of Obama as well as being a victory for pragmatic common sense. So naturally the egregious Donald Trump has been trying to destroy it. On February 3 Trump enforced and it’s been downhill all the way since then. The sanctions that had been imposed and then withdrawn had been aimed at limiting Iran’s nuclear programme and the EU quite rightly wanted to confine them to nuclear-related agencies — the individuals and organisations directly associated with nuclear matters — but the United States, even in the Obama-guided era, wouldn’t confine itself to the main aspect of the agreement. It introduced sanctions of its own, intended to make it difficult for other nations to trade with Iran, which is consistent with its longtime spiteful attitude to Tehran’s government.

The United States is determined to destroy Iran. For almost forty years, since the overthrow of the corrupt CIA-backed monarch, Mohammad Reza Shah Pahlavi, Washington has been on the warpath against the mullahs in Tehran. There wasn’t much to choose, comfort-wise between the Shah and his successor, the intensely religious Ayatollah Ruhollah Khomeini, but morally there was a chasm.

The Shah was deeply unpopular and in the late 1970s there were mass demonstrations against him and the country dissolved into chaos. He had to go, and the only possible replacement was the Ayatollah who was living in exile in France, having escaped from the persecution of the Shah’s dreaded secret police, the Savak, in the 1960s. Two weeks after the Shah fled from Iran, the Ayatollah returned to Iran on 1 February 1979 in triumph and to a level of acclaim not shared by all its citizens.

During the Shah’s dictatorship Iran was a good place to live for many people. There was no freedom of speech, but there was a lot of freedom to make money, especially in the US. There was sixty per cent illiteracy, but women were allowed to wear what clothes they wished and to move freely in society — except in the countryside, of course, where they were kept in their place as second-class citizens exactly as they are in present-day Muslim states such as US allies Saudi Arabia and Bahrain.

What really vexes the extremists in Washington is the memory of humiliation when the US embassy in Tehran was attacked by mobs of students in November 1979, only ten months after Khomeini took over. There is little doubt that the attackers were students, but there is equally little doubt that they had the Ayatollah’s blessing (as it were) to storm the embassy and take the staff hostage. They demanded the return of the Shah to stand trial in Tehran — a ridiculous condition for cessation of their demented antics — but 52 US citizens were held hostage in Iran from November 1979 to January 1981, which was not just an awkwardness for Washington: it was an ineradicable embarrassment, an international degradation of colossal proportions that could never be forgiven.

It was convenient to forget the hideous savagery of the Shah’s regime when, for example,

“American-trained counterinsurgency troops of the Iranian Army and Savak [the Iranian CIA] killed more than 6,000 people on June 5, 1963.”

The Ayatollah had taken over and was forever to be condemned for his audacity. His successors in the political sphere could never right the wrongs that had been done to the global image of the United States. As put by Martin Ennals, secretary general of Amnesty International,

“The Shah of Iran retains his benevolent image despite the highest rate of death penalties in the world, no valid system of civilian courts and a history of torture which is beyond belief.”

In 2002 the appalling President George W Bush, the man who took his country into its disastrous wars against Iraq and Afghanistan, conjured up the phrase the axis of evil, and put the world on notice that America would overcome any country that opposed it. His speech was dramatic and he declared that “North Korea is a regime arming with missiles and weapons of mass destruction, while starving its citizens” which was true. And still is true, after 15 years in which the US has managed to do exactly nothing to discourage North Korea from arming itself against invasion. Then he said that “Iraq continues to flaunt its hostility toward America and to support terror. The Iraqi regime has plotted to develop anthrax and nerve gas and nuclear weapons for over a decade” and a few months later he invaded Iraq to destroy its weapons of mass destruction, which of course didn’t exist.

Then Bush announced that “Iran aggressively pursues these weapons and exports terror, while an unelected few repress the Iranian people’s hope for freedom” which was formal warning to Iran that it was definitely on the target list, because “States like these, and their terrorist allies, constitute an axis of evil, arming to threaten the peace of the world.”

Since the era of the Bush wars, the world has certainly known no peace. Washington’s Military Industrial Complex has flourished while its soldiers died for nothing but profit.

The present US campaign against Iran is aimed at destroying the country economically and thus encouraging a violent revolution. And many western observers consider there’s a lot to be said for rising up against the ayatollahs, because they’re a bumptious arrogant unforgiving bunch of bigots who repress women and democracy. So why doesn’t the US have the same thoughts about Saudi Arabia and the Gulf States, whose unelected princely rulers repress women and do not tolerate democracy? What a horde of humbugs.

Iran is fighting for its life and the Trump administration is following George W Bush in his determination to destroy it. In January Trump tweeted that “The people of Iran are finally acting against the brutal and corrupt Iranian regime. All of the money that President Obama so foolishly gave them went into terrorism and into their “pockets.” The people have little food, big inflation and no human rights. The U.S. is watching!”

Washington is intent on destroying Iran, and the contents of that tweet could hardly be better reason for supporting Tehran in its struggle against the growing menace from the Trump-supported military-industrial complex. The world is watching.


Brian Cloughley is a British and Australian armies’ veteran, former deputy head of the UN military mission in Kashmir and Australian defense attaché in Pakistan.