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US threatens Russia over actions to undermine the petrodollar
Material posted: Publication date: 10-04-2014

After news about a possible "Holy Grail" of Russia – gas deal with China – and its a barter deal with Iran, the US was seriously worried for the fate of its Almighty petrodollar.

  • The U.S. warned Russia and Iran against the conclusion of an oil barter deal.
  • The US said that any such deal would mean sanctions.
  • The US has indicated its concern to the Iranian government through all possible channels.

We can assume that the new sanctions will be more toothy than just visa bans. But most likely, they will be another grandiose geopolitical fiasco. Designed initially to produce a show of force, sanctions rapidly emerging as a confirmation of extreme weakness.

Last week Russia announced its intention to use barter (and gold) and regional currency like the dollar now being used. It is unlikely that the West expected such consequences of his "blockade", which gave the opposite result and struck another blow to the petrodollar.

According to the analyst, "if Washington will not be able to prevent Russian-Iranian deal, it will show other countries that the U.S. will not risk unleashing a major diplomatic conflict for the maintenance of the sanctions regime".

The use of the dollar as world currency to pay for energy gives the U.S. a number of unfair advantages. It seems Moscow is preparing to deprive Washington of these benefits.

The existence of the petrodollar is one of the pillars of the economic power of America, because it supports a significant external demand for the US currency, allowing Washington to accumulate huge external debt without default. If, say, a Japanese buyer wants to buy oil from Saudi Arabia, he will have to pay in dollars, although no U.S. company has no relation to this transaction. The dollar is so dominant in world trade that even gas contracts "Gazprom" with Europe are paid in dollars. Until some time in large parts of the European-Chinese trade has also been used dollar.

Recently, however, China plays first violin in the BRICS efforts to dislodge the dollar from the position of world currency. "War of sanctions" between Moscow and Washington has given impetus to the introduction of "naftaros" prepare schemes for the transition to ruble in payments for Russian energy resources bypassing the U.S. currency.

The main proponents of such measures are the Russian presidential Advisor on economic Affairs Sergei Glazyev and the head of "Rosneft" Igor Sechin, a close ally of Vladimir Putin. Both actively support the replacement of the dollar with Russian ruble. Now they were joined by several senior officials.

Firstly, it's economy Minister Alexei Ulyukayev, who said that Russian energy companies should abandon the use of the dollar: "we Must boldly enter into contracts in rubles and the currencies of partner countries".

The head of VTB Andrey Kostin also believes that "Gazprom", "Rosneft" and "Rosoboronexport" the need to move to settlements in rubles. According to him, this issue has already been discussed with management, and they have no objections. Now we need to develop a mechanism.

Judging by the statement the Federation Council speaker Valentina Matviyenko, we can assume that the creation of such mechanism will not regret resources "Some hotheads have forgotten that the economic crisis of 2008-2009, whose consequences have not been completely overcome to this day began with bankruptcy number of credit institutions in the United States, Britain and other countries. That is why we believe that any hostile financial actions are a double-edged sword and boomerang at the slightest mistakes gets in the back of the head of the aborigine".

It seems that Moscow has decided, who will be responsible for the actions with the "boomerang". Igor Sechin is nominated to the post of Chairman of the Board of Directors of the St. Petersburg commodity exchange. Speaking in Korea at the International energy Congress in October last year, he called for the establishment of an international mechanism for trade in natural gas and proposed "to create an international exchange of the participating countries, where they could register the transaction with the use of regional currencies".

And now in the hands of one of the most influential leaders of the world's energy trade has got a wonderful tool for the implementation of the plan. Russian commodity exchange, where prices for Russian oil and gas will be set in rubles, not in dollars, would be a serious blow to the petrodollar.

Not so long ago, Rosneft signed a series of major contracts with China and are now close to concluding "mega-deal" with India. In both agreements the dollar is not involved. As reported, Russia is working with Iran over barter, which will bring the daily "Rosneft" 500 thousand barrels of Iranian oil for sale on the world market.

The white house and the Russophobes in the US Senate beside himself with anger. They are trying to prevent the deal because it promises serious trouble for the petrodollar. If Sechin decides to sell Iranian oil on the Russian stock exchange for rubles, it dramatically strengthen the prospects of neterus and weaken the petrodollar.

We can say that sanctions have opened a Pandora's box full of problems for the U.S. currency. The Russian response will not please Washington, but what happens if the other oil producers decide to follow suit? Last month, China opened two settlement centre for the Renminbi in London and Frankfurt. China is preparing for similar steps against the U.S. dollar? We will soon find out.


Tags: Iran , assessment , Russia , USA , oil , gaz

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