Friday, October 4, 2019

China's Big Plan To Kill The Petro-Dollar


Iran Is China’s Secret Weapon for Killing off the US Dollar’s Global Reserve Status



The Chinese have a well-planned operation in mind that could change the entire economic landscape of the world. China will firstly help Iran develop its exports while at the same time guaranteeing future supplies for itself, allowing both countries to shield themselves from American economic terrorism. Naturally, Iran’s sale of oil to China takes place outside of the SWIFT system, and therefore outside the purview of the US petrodollar combine.
With this move, Beijing seeks to secure the future sale of hydrocarbons for its enormously growing economy, ensuring the country’s continuing development, complementing the investments already made in North Africa (minerals and raw materials) and in the east of Russia (agriculture).

The real danger for US economic hegemony posed by China lies in Saudi Arabia. If Washington continues to rely less and less on the Saudis for oil imports, shifting its attention to Southeast Asia, then there will be less and less reason for the US to offer an impediment to Iran’s rise as a regional hegemon. Riyadh will therefore be forced to start looking around and reassess its place on the regional map.

Riyadh’s nightmare is that of a Shia arc stretching from the Mediterranean to the Persian Gulf, with China as its primary trading partner and Russia as its military partner. All of this without its US ally offering a balancing counterweight in the region!


China’s strategy with regard to Iran is to pressure Saudi Arabia to consider selling oil in currencies other than the US dollar. As things stand now, Beijing imports substantial amounts of crude oil from Saudi Arabia. This could change if China transfers its oil imports to Iran, paying for this oil in currencies other than the dollar, or maybe even simply in renminbi.
Should this contagion spread to Qatar (an Iranian economic partner of fundamental importance to the development of the South Pars/North Dome gas field) and other Gulf countries, Saudi Arabia would see its status as a gas- and oil-exporting economic power threatened, with such hopeful schemes as the Saudi Vision 2030 offering little in terms of compensation.

Beijing’s strategy seems to be designed to progress in phases, modulating according to the reaction of the US, whether aggressive or mild; a kind of capoeira dance where one never actually hits one’s opponent even when one can. Nevertheless, the long-term objective of this dance is to undermine the primary source of income and power of the United States: to wit, the US dollar as the world’s reserve currency.


The first phase of this strategy focuses on Iran and the precarious economic situation the country finds itself in, primarily as a result of US sanctions. In this first phase, Beijing’s credit line will serve to keep Iran afloat as it fends off American economic terrorism. A second phase will likely involve some kind of Iranian legislative change to allow Chinese state-owned companies to work alongside Iranian ones in the oil and gas fields. A third phase will probably see the involvement of Qatar in the development of the largest gas field in the world, shared between Doha and Tehran. Meanwhile, the BRI will continue to expand, moving to the outskirts of the Persian country and involving many Southeast Asian countries along the way, thereby expanding trade between different parts of the globe.


Confirming how this strategy is already in play, China is also seeking to safeguard its sea lines of communication in the event of any war. Beijing realizes how having strong naval capabilitiesis imperative, and has accordingly invested heavily towards this end.

In such a geopolitical context, it is difficult to imagine Saudi Arabia continuing to be so unquestioningly accommodating of American interests — selling oil exclusively in US dollars, while not receiving sufficient military protection or economic benefits in return. Washington has seriously miscalculated if it believes it can keep the US dollar alive as a global reserve while continuing to destabilize the world economically, continuing to disregard the military protection of its regional allies, and all this in spite of the rising Sino-Iranian-Russian alternative for all to see.

Beijing understood this mechanism years ago, and now sees Iran as the catalyst for effecting epochal change. Iran is useful not only because the BRI transits through its territory, but because it also offers the economic checkmate to America’s petrodollar hegemon, offering itself as a stalking horse for approaching Saudi Arabia and bringing this kingdom into the multipolar fold.



Beijing’s economic and moral overtures to Riyadh will encounter problems, and the US, in recognition of Saudi Arabia’s importance in sustaining its petrodollar hegemony, will naturally resist this. Russia is contributing to this geopolitical transition by offering to sell defensive weapons to the Kingdom.
Obama and Trump’s efforts to undermine Beijing’s rise, by hook or by crook, have only ended up undermining Washington’s ability to maintain the US dollar as the global reserve currency — only kicking off the denouement of this privileged and unnatural arrangement.

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