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Want to know when the fiat US dollar will collapse? Watch the petrodollar system and the factors affecting it. This is critically important, because once the dollar loses its coveted reserve status, the consequences will be dire for Americans.
The faltering strategic regional position of Saudi Arabia, the rise of Iran (which is not part of the petrodollar system), failed US interventions, Russia’s increasing power as an energy giant, and the emergence of the BRICS nations (which offer the potential of future alternative economic/security arrangements) all affect the sustainability of the petrodollar system.
My colleague Marin Katusa’s mentioned in his book; The Colder War, you need to be aware of what Vladimir Putin is doing. Putin would like nothing more than to sabotage the petrodollar, and he’s forging alliances across the planet that he hopes will help him achieve his goal.
At the same time, you should watch the relationship between the US and Saudi Arabia, which has been deteriorating.
Remarkably, the impact of lower oil for Russia’s economic growth is not as severe as might be expected. Sustained oil at USD80/bbl would see growth slow by 1.8pp to 0.6%. This compares with the worst hit economies of Angola (where growth is nearly 8pp lower at -2%), Iraq (GDP slows to -1.6% from 4.5% growth), Kazakhstan and Azerbaijan (growth falls to -0.9% from 5.8%).
originally posted by: onequestion
a reply to: BornAgainAlien
The dollar isn't going anywhere. You can talk about a collapse all you want.
China and Russia have been furiously signing energy deals that indicate their mutual energy interests. The most obvious is the $456 billion gas deal that Russian state-owned Gazprom signed with China in May, but that was just the biggest in a string of energy agreements going back to 2009. That year, Russian oil giant Rosneft secured a $25 billion oil swap agreement with Beijing, and last year, Rosneft agreed to double oil supplies to China in a deal valued at $270 billion.
"If Russia’s 'pivot to Asia' results in Moscow and Beijing trading oil between them in a currency other than the dollar, that will represent a major change in how the global economy operates and a marked loss of power for the U.S. and its allies," Halligan wrote in May. "With China now the world’s biggest oil importer and the U.S. increasingly stressing domestic production, the days of dollar-priced energy, and therefore dollar-dominance, look numbered."
"Taken alone, these actions do not mean the end of the dollar as the leading global reserve currency," Jim Rickards, portfolio manager at West Shore Group and partner at Tangent Capital Partners, told CNBC. “But taken in the context of many other actions around the world including Saudi Arabia's frustration with U.S. foreign policy toward Iran, and China's voracious appetite for gold, these actions are meaningful steps away from the dollar."
A small fire erupted on a gas pipeline in eastern Saudi Arabia on Tuesday after assailants shot at a security patrol, security and oil industry sources said, in an incident that may heighten concern about the vulnerability of Saudi energy infrastructure.”
“However, the Chinese have a problem in their plans for the yuan. The government has not yet removed capital controls that would allow full convertibility, for fear of unleashing a torrent of speculative flows that could damage the Chinese economy.”
“However, "[It] is clear that China is laying foundations for wider acceptance of the yuan," said Karl Schamotta, a senior market strategist at Western Union Business Solutions," as quoted in an International Business Times article.”
“Qatar will become the Middle East's first hub for clearing transactions in the Chinese yuan, in a step that could over the long run help Gulf oil exporting countries reduce their dependence on the US dollar.”
"It's a clear signal that there is demand from Qatar and some of the surrounding Middle Eastern countries," said Candy Ho, global head of yuan business development at HSBC.”
“According to Katusa, de Margerie was "a total liability" due to Total's involvement in plans to build an LNG plant on the Yamal Peninsula along with partner Novatek. The company was also seeking financing for a gas project in Russia despite Western sanctions.
"It planned to finance its share in the $27-billion Yamal project using euros, yuan, Russian rubles, and any other currency but U.S. dollars," Katusa writes, then entices the reader with this: "Did this direct threat to the petrodollar make this 'true friend of Russia'—as Putin called de Margerie - some very powerful and dangerous enemies amongst the power that be, whether in the French government, the EU, or the U.S.?"
That may be a stretch, but Katusa's U.S. dollar reference shows that any developments that point to a move away from the dominance of the greenback are not going unnoticed.
originally posted by: BornAgainAlien
a reply to: SubTruth
When the Petrodollar is losing its status, that`s exactly what will happen quickly.