Tuesday, May 13, 2014

Russia Begins Process Of Replacing Petrodollar And Creating A 'De-Dollarized' World

Russia Holds 'De-Dollarization Meeting': China, Iran Willing To drop U.S. Dollar From Trade

That Russia has been pushing for trade arrangements that minimize the participation (and influence) of the US dollar ever since the onset of the Ukraine crisis (and before) is no secret: this has been covered extensively on these pages before (see Gazprom Prepares "Symbolic" Bond Issue In Chinese YuanPetrodollar Alert: Putin Prepares To Announce "Holy Grail" Gas Deal With ChinaRussia And China About To Sign "Holy Grail" Gas Deal40 Central Banks Are Betting This Will Be The Next Reserve Currency; From the Petrodollar to the Gas-o-yuan and so on).
But until now much of this was in the realm of hearsay and general wishful thinking. After all, surely it is "ridiculous" that a country can seriously contemplate to exist outside the ideological and religious confines of the Petrodollar... because if one can do it, all can do it, and next thing you know the US has hyperinflation, social collapse, civil war and all those other features prominently featured in other socialist banana republics like Venezuela which alas do not have a global reserve currency to kick around.
Or so the Keynesian economists, aka tenured priests of said Petrodollar religion, would demand that the world believe.
However, as much as it may trouble the statists to read, Russia is actively pushing on with plans to put the US dollar in the rearview mirror and replace it with a dollar-free system. Or, as it is called in Russia, a "de-dollarized" world.
Voice of Russia reports citing Russian press sources that the country's Ministry of Finance is ready to greenlight a plan to radically increase the role of the Russian ruble in export operations while reducing the share of dollar-denominated transactions. Governmental sources believe that the Russian banking sector is "ready to handle the increased number of ruble-denominated transactions".
According to the Prime news agency, on April 24th the government organized a special meeting dedicated to finding a solution for getting rid of the US dollar in Russian export operationsTop level experts from the energy sector, banks and governmental agencies were summoned and a number of measures were proposed as a response for American sanctions against Russia.
Well, if the west wanted Russia's response to ever escalating sanctions against the country, it is about to get it.

But more importantly, none of what Russia is contemplating would have any practical chance of implementation if it weren't for other nations who would engage in USD-free bilateral trade relations. Such countries, however, do exist and it should come as a surprise to nobody that the two which have already stepped up are none other than China and Iran.

Given that Vladimir Putin will visit Beijing on May 20, it can be speculated that the gas and oil contracts that are going to be signed between Russia and China will be denominated in rubles and yuan, not dollars.

In other words, in one week's time look for not only the announcement of the Russia-China "holy grail" gas agreement described previously here, but its financial terms, which now appears virtually certain will be settled exclusively in RUB and CNY. Not USD.
And as we have explained repeatedly in the past, the further the west antagonizes Russia, and the more economic sanctions it lobs at it, the more Russia will be forced away from a USD-denominated trading system and into one which faces China and India. Which is why next week's announcement, as groundbreaking as it most certainly will be, is just the beginning.

Hamas and Fatah representatives met in the Gaza Strip on Tuesday, to discuss the formation of a Palestinian unity government. Fatah senior official Azzam al-Ahmed represented his faction in the talks with Hamas, headed by exiled Islamist leader Moussa Abu Marzouk.

The two parties hope to complete the formation of the new government by the end of this month in accordance with the reconciliation deal signed in the Gaza Strip three weeks ago.

A spokesman said that the two sides have made “huge and positive progress” toward implementing the agreement, which envisages the establishment of a “national consensus” government within five weeks.

But as the two sides continued to voice optimism regarding the reconciliation accord, Hamas accused the PA security forces of arresting six of its supporters and Islamic Jihad members in the West Bank.
Hamas said the PA security forces also raided the homes of several Hamas and Islamic Jihad activists and summoned them for interrogation.

Israel will hold Palestinian Authority President Mahmoud Abbas responsible for every rocket fired on it from Gaza if he goes through with his national unity pact with Hamas, Prime Minister Binyamin Netanyahu said on Tuesday.

The prime minister made his comments in Tokyo before the start of a meeting with Japanese Foreign Minister Fumio Kishida, and two days before Abbas is scheduled to meet with US Secretary of State John Kerry in London.

Jerusalem has been lobbying the international community to place pressure on Abbas not to consummate his unity agreement with Hamas. Under the agreement, announced last month just prior to the expiration of the ninemonth deadline in the US-brokered diplomatic talks, an interim unity PA government is to be set up by the end of May, and elections held six months after that.

Netanyahu made clear in his statement that if the deal is not implemented, Israel would be willing to return to the negotiations.
“We hope that this pact is dissolved and we can find a way to return to genuine negotiations with a genuine peace,” he said.
“Hamas is committed to our destruction,” he said. “We remain committed to advancing the peace, preferably a negotiated peace. But we can only negotiate with a government whose constituent parts are committed to peace.”

Liberman complained to the ambassadors that the EU condemns Israel over every new structure in the settlements, but yet was strangely quiet when Hamas executed two people in Gaza last Wednesday for allegedly spying for Israel.
Liberman also appeared before the Knesset’s Foreign Affairs and Defense Committee, and said that in his estimation the freeze in the negotiations with the Palestinians will continue. Abbas was not interested in an agreement, regardless of what Israel would offer, and it is impossible to offer him more than was offered by former prime ministers Ehud Barak and Ehud Olmert, which he refused, Liberman said.

No comments: