This is 100% support for the article we recently penned discussing Nigeria joining
forces with China to end the Federal Reserve Notes’ world reserve currency
status. To date, Russia, has made good on most, if not all, challenges to
U.S. dominance and now we learn that Putin is very much focused on attacking
dollar hegemony and using oil – the number traded/used commodity in the
world.
If we go back to Putin’s 2015 UNGA speech when he announced Russia would
be taking over military operations in Syria to rid the nation, and the world,
of ISIS, he made good on that promise. When Putin first announced “the Federal Reserve Note is a threat to our national security”
he immediately began putting into place ways to change the Russian monetary
system, including talks with the developer of Ethereum cryptocurrency. It
is now believed there will be a Russian crypto ruble coming to market in the
very near future.
This is to say nothing of the ties with China being strengthened, with
more bilateral contracts, more commerce and more integration of their banking
and financial systems. All of these steps equal one thing – no more
dependence on the Federal Reserve Note, world reserve currency system.
Add to all these steps the biggest, and most notable, step is the fact
that Russian oil will be settled in China and not using the Brent/WTI or any
other Western based oil settling market. While this is not happening today, I
can’t imagine Russia continuing to use Western based futures oil contracts
when she can settle in yuan with her biggest trading partner, China, who is
moving away from the dollar hegemony as well.
So, when Putin announces announces “Russia needs to get rid of the dollar
burden in oil trade”, you can bet that, not only is he serious, he is
probably 4 or 5 moves ahead of where he is currently standing.
Addressing the Russian Parliament following his inauguration, Vladimir Putin called for the
“unburdening” Russia’s economy from the dangerous monopoly of the
US dollar in the pricing of oil in global commodities
markets. He indicated that the underlying reasons were
security-related.
“We used to behave naïvely, but now we see that the WTO
[the World Trade organization] rules are all too often broken, the
restrictions are imposed for political reasons, which they call
sanctions. Plus more and more of them are imposed to secure its
favorite competitive advantages,” Putin said.
He stated that the new “restrictions,” breaking the world trade
principles, make the world see that monopoly of the US dollar is
dangerous for many regions. According to him, de-dollarization
should be promoted on principle, in order to preserve the
country’s sovereignty. Putin didn’t name an alternative currency in his
speech.
Chinese Wall to Petrodollar
Putin’s recent announcement came less than two months
after China launched yuan-denominated oil futures on the
Shanghai International Energy Exchange, thus challenging the dominance
of the Brent and West Texas Intermediate (WTI) benchmarks. Incidentally,
in 2017 China emerged as the largest oil buyer, surpassing the
United States. According to the US Energy Information Administration
(EIA), in 2017 China imported 8.4 million barrels of crude per day,
half a million more than the US.
Russia is ready to support the Chinese contracts, as Sputnik
contributor Igor Naumov wrote, citing a source close to the top
management of the Saint-Petersburg Stock Exchange (SPBEX).
“Currently, the US dollar is used as the contract currency
in the global hydrocarbon trading system, as well as for other
commodities,” the journalist explained. “This is what largely provides the
dollar with its status as the world’s leading reserve currency.
[However], the yuan is seeking to dislodge the American [petrodollar]
from one of the fastest growing oil markets in the world.” Source
We should learn very quickly the impact of these statements and the
reality of the change it announces. Putin, as we stated at the beginning, has
made good on most of his announcements and backed them up with real action.
Putin is smarter than Trump’s predecessor and his continual announcements of
“red line” nonsense. This is force to be reckoned with and as the stakes
larger we should heed the warning. The real question for all of us reading
this – how will these coming changes impact our wallet and our lifestyle? My
guess is, by 2025 we will have a very good idea.
