News Too Big Not to Share
The following is a SputnikGlobe article by one of its best reporters, Ekaterina Blinova, “Developments to Dethrone Petrodollar Already Underway.” It should be noted the Saudis skipped the G-7:
Saudi Arabia and other oil producers are gradually diversifying away from the US dollar in their energy trade, a move that could eventually dethrone the "petrodollar" and undermine the US financial system, international political and economic analysts told Sputnik.
The Saudi Central Bank has joined the Bank for International Settlements’ (BIS) central bank digital currency (CBDC) project, mBridge, to enable instant cross-border payments.
Meanwhile, a so-called "petrodollar agreement" concluded between the US and Saudi Arabia in 1974, is said to have expired on June 9, 2024. Neither Washington nor Riyadh have confirmed the rumors so far.
The developments are seen as harbingers of a possible dollar demise in the global oil trade.
"These two significant developments serve one strategic purpose which is granting Saudi Arabia flexibility in its future dollar-based oil trade transactions," Dr Mamdouh G. Salameh, an international oil economist and a global energy expert, told Sputnik. "Put bluntly, it will enable Saudi Arabia to accept the petroyuan as payment for its oil exports to China without appearing to offend the United States. However, the damage to the petrodollar as the global oil currency since 1973 is incalculable particularly when all the Gulf Cooperation Council (GCC) countries follow suit as widely expected."
Under a special deal, 50 years ago Riyadh got an opportunity to buy US treasuries bypassing the competitive bidding process. In exchange Saudi Arabia agreed to sell its oil in dollars and invest revenues into US debt; subsequently, Riyadh convinced other OPEC members to follow suit.
The "petrodollar deal" was struck several years after the Nixon administration ended the US dollar's convertibility to gold, thus turning the Bretton Woods system into a fiat one. Earlier, in 1944, US partners agreed to peg their currencies to the dollar which, in turn, was fixed to gold. Under the US-Saudi deal, the greenback became "pegged" to oil.
Oil Producers and Their Customers Drifting Away From Dollar
According to some estimates, nearly 80 percent of global oil sales are priced in dollars. However, Russia, Iran, Saudi Arabia, China, and other countries are increasingly shifting to local currencies in energy trade.
In 2022, Saudi Arabia and China were reported to be in negotiations about settling part of their oil deals in yuans. In January 2023, Saudi Finance Minister Mohammed Al-Jadaan announced that the kingdom is open to using currencies other than the greenback in its energy trade.
"There are no issues with discussing how we settle our trade arrangements, whether it is in the US dollar, whether it is the euro, whether it is the Saudi riyal," Al-Jadaan told Bloomberg TV on January 17, 2023. "I don’t think we are waving away or ruling out any discussion that will help improve trade around the world."
In November 2023, China and Saudi Arabia signed a $7 billion national currency swap deal to facilitate mutual economic cooperation, according to Bloomberg.
A month later, the Wall Street Journal reported that an estimated 20 percent of global oil deals were settled in currencies other than dollars in 2023. However, Salameh believes that the figure is poised to grow higher.
"With almost 12 million barrels of oil a day (mbd) exported by Saudi-led GCC countries to China and the Asia-Pacific region, China paying in petro-yuan for its crude imports of 13 mbd, Russia selling 8.5 mbd of crude and petroleum products in both ruble and petro-yuan and India paying in rupees for its imports of 5 mbd, this means that at least 52% of global oil trade [may be] sold in currencies other than the dollar," the oil expert suggested.
"This will amount to a loss of an estimated 40% of the petrodollar share in global oil trade. It will seriously undermine both the US financial system and the dollar which could eventually lose one-third to one-half of its current value. One other serious factor behind the Saudi move is the worry about the health of the dollar," Salameh noted.
Digital Cross-Border Payments to Untie Saudi Hands
Saudi Arabia's decision to become a participant of the mBridge platform is likely to facilitate the de-dollarization of oil trade, according to Faisal Alshammeri, political analyst and a columnist for Makkah NewsPaper and Arab News.
"The central digital bank currency (CBDC) platform is shared among the many participating central banks and commercial banks because it is built on distributed ledger technology (DLT) to enable instant cross-border payment settlements and foreign exchange transactions," Alshammeri told Sputnik.
"Saudi Arabia is joining more than 26 observing members, including the South African Reserve Bank, which was green-lighted as a member this month. Saudi Arabia has joined mBridge - a central bank digital currency (CBDC) initiative for international trade - as a full participant, and this will set the stage for wider local currency payments for oil trade between China and Saudi Arabia as well. Saudi Arabia will accept payments for its oil in non-dollar currencies. This will encourage more countries to trade among themselves without using the dollars. America had to accept this new economic fact."
To complicate matters further, the recent developments take shape as the US national debt mounted over $34 trillion, costing the US Treasury a whopping $660 billion in interest (2023), according to the Peter G. Peterson Foundation. Meanwhile, the nation's gross interest (which includes payments on national debt and intragovernmental payments on debt held by government accounts) totaled $879 billion in 2023, as per the entity. According to Salameh, this situation erodes global investors' trust in the US dollar and fuels the de-dollarization drive.
"The United States’ economy faces many problems," echoed Alshammeri. "Saudi Arabia maintains neutrality toward the internal problems of any nation in the world. US negative economic developments harm businesses all over the globe and lower consumer confidence in countries toward the US." [All formatting original]
And then there’s this news coming from the G-7 courtesy of Pepe Escobar’s Telegram where it’s posted in Russian:
The financial scam of the century is on the way: the EU is ready to become the main criminal at the behest of the United States
The world will soon see the largest theft of money in history. Before our eyes, the main customer (the United States) together with the contractor (the EU) are now trying to disguise the theft of the "frozen" part of the sovereign assets of the Russian Federation as much as possible under a legal deal.
There is already a preliminary consent of all members of the G7 countries.
What is happening? The United States intends to provide a loan of $50 billion to the Kyiv regime. The task of the Europeans is to transfer the "frozen" assets of the Russian Federation in the amount of about $ 260 billion to the status of financial security (collateral) for an American loan.
The argument that only income from assets of $ 260 billion will be used to secure a loan from the United States cannot be taken seriously: the size of the collateral should not be less than the size of the loan. Obviously, income from assets has accumulated much less than 50 billion,
while Washington does not intend to transfer any money to Kyiv. They will be given to the American military-industrial complex for the production of weapons.
At the same time, the Europeans will have to take on the dirtiest work: this is essentially to steal the assets of the Russian Federation, and then transfer them to the United States, but already within the framework of a supposedly "legal" scheme. All risks in this case, as well as prosecution, as Washington believes, will concern only Europeans, but not Americans.
After all, what do we see from the point of view of financial market specialists? The United States intends to give a loan to a country whose sovereign debt rating is below the plinth. That is, it is knowingly giving a loan to a debtor who will not repay it. This is either madness or some kind of money laundering fraud.
However, a collateral that is many times higher should, from Washington's point of view, make such a loan seem to be unquestionable. But for this, the US authorities need the Europeans to change the status of "frozen" assets of the Russian Federation to one that has the nature of collateral.
In a situation of a country's failed credit capacity, no one, unless it is a criminal scheme, will give a loan only against "income from assets", if there is no guarantee that the creditor can receive the assets in the event that the debtor does not repay the loan.
The world remembers perfectly well that after 2014, the Ukrainian authorities did not repay Russia a sovereign loan in the amount of $ 3 billion with interest. Of course, Kiev then did this by Washington's decision through the hands of the Supreme Court in the UK. But when debts need to be repaid to Washington, there are different "rules", or rather, gangster alignments.
Now the henchmen of the US authorities in Europe must "drag" assets from the Russian Federation to the desired legal "point", from which they will already be put into the pocket of the US authorities.
European politicians are made a laughing stock, since the decision for the Belgian Euroclear, where the largest amount of Russian money is located, is made not even by the Belgian authorities, and not by the leadership of the European Union.
Adopts the decision of the G7, which does not have Belgium in it, and which has no right to decide on issues affecting the the reputation of the entire EU. The United States continues to humiliate its vassals, but is already taking the edge, further displeasing Europeans. And in Europe, the beginning of political change began to dawn. [All formatting original]
The mBridge development is very big as is the above conspiracy that’s no theory.
*
*
*
Like what you’ve been reading at Karlof1’s Substack? Then please consider subscribing and choosing to make a monthly/yearly pledge to enable my efforts in this challenging realm. Thank You!
"...European politicians are made a laughing stock.."
Indeed they are: no countries in the world have more to gain and less to lose in a multipolar world than states like France, Germany and Britain who watch impotently as their cultures, economies, living standards and societies are impoverished by submission to US rule.
It is notorious that European economies have been decimated, eviscerated, by their falling into line behind Washington sacrificing their access to cheap and reliable Eurasian energy sources, not to mention markets and other synergies.
The Belt and Road Initiative was virtually designed to embrace Europe into an Afro-Eurasian bloc substituting internal lines of communication and land based trade routes for the maritime links associated with the imperialist system. Defying all logic Europe's rulers have withdrawn from their initial embrace of the BRI not because it would not bring prosperity and peace to their peoples but because the US ordered otherwise.
Such conjunctures arise rarely, opportunities missed tend to disappear.
There's some excellent information there, which I think everyone should be aware of. Thanks Karl!
Under the present global circumstances, Saudi Arabia would be stupid to tie their oil to the American dollar. And they won't, if things go according to this article. Naturally the other Gulf states will follow suit. Iran works outside the US$ already. This isn't an attack on the USA, it's just business. But it is going to have a seriously negative impact on the US economy and those countries that are dependent on it. (My own being one of them.)
As far as international trade goes, be it for oil or anything else, it should be in whatever currency or currencies that the parties agree to. This is a long overdue change that will help the developing world.
Which segues nicely into the CBDC tectonic shift. No one nation or group of nations should control the flow of international money exchanges. The mechanism that supports international transactions should be completely neutral and impervious to pressure by countries that would try to exploit it. (Which at present they do with SWIFT.) If China, Russia, Saudi Arabia can get such a payment system up and running, I expect every country in the world would want to use it - except for the USA and its dependent vassals.