Oil producers to oust dollar?
Published: 07 October, 2009, 00:56
Edited: 14 April, 2010, 08:49
TAGS: Oil, Currencies, Economy
A report in the UK’s Independent newspaper says Brazil, China, Russia, Japan and the Gulf states plan to stop using the dollar in oil trading. The newspaper claims the countries have been in secret talks on the matter.
This prompted some analysts to speculate that an economic war is possible between the US and China over Middle East oil.
The nations would, instead, opt to use other currencies, including a regional one to be circulated in the Gulf States.
Economists say business would only benefit from such a diversity of currencies:
“It's only better for the central banks and only better for entrepreneurs I think, in the end, if there's a wider array of currencies from which they can choose from,” said Yaroslav Lissovolik, chief economist at Deutsche Bank in Russia.
But Saudi Arabia has swiftly denied any secret talks – and, in fact, the dollar strengthened slightly as denials spread.
And analysts say that given the situation in the Middle East, Saudi Arabia would not dare to take such a step.
“There is probably going to be a lot of pressure behind the scenes by investors on Saudi Arabia and the other Gulf States. And let us not forget that the United States does not only afford protection to these countries – it is a key player in the Israeli-Palestinian situation,” said energy economist and analyst Muhammad-Ali Zainy.
“I do not think that Saudi Arabia is going to take this gamble at this political stage when the Palestinians and the Israelis have to really negotiate. The only player who can intervene and mediate and find solutions is the United States.”
What has not been secret has been the desire of the G20 to move away from the dollar's dominance. Back in April, G20 members called for establishing an alternative currency. This idea is based upon what the IMF uses to rival the dollar.
The financial crisis in the United States has proven how dependent the world is upon one currency as economic instability spread. The downturn soured emerging markets on the dollar and caused more speculation about the possibility of diversifying reserves.
That's a tricky proposition, though, for Japan, China, and Russia, who hold hundreds of billions of US dollars in reserves and who would lose its value if the dollar is sidelined.
Washington is sure to use all of its resources to try to block the dollars' expulsion from the world stage. But how long the US can fend off calls for a new global currency depends on how strong and how fast the dollar can rebound and on how loud and frequent the calls are for a new leading currency.
Russia’s northern capital, Saint Petersburg, favors trading oil and gas in rubles. At a summit in the US recently, Russian President Dmitry Medvedev also supported the idea of the ruble as a regional currency.
Late last month, Iran announced that its foreign currency reserves would be held in euros from now on, instead of dollars. So while nations publicly deny a plan to oust the dollar…it may not be enough to quell speculation.
06.10.2009, 20:53
3 comments
“No single currency will replace the dollar”A switch from using the dollar as a world currency could hurt countries whose assets are mostly in dollars, says Ronald Smith, head of research at Alfa-Bank |
07.10.2009, 04:01
“Dollar’s demise will be felt worldwide”If the dollar collapses, it would spell economic disaster not just for the United States, but for the world, says Gerald Celente, director of the Trade Research Institute. |
The reason the US is so smug is because IT IS the one world government. It is stupid for the countries of the world (BRIC, et al.) to think they have any real power when the US owns them via the same ownership of the American serfs: "money." There is no such thing as money and so the countries pretend there is and that they are "trading." Ha ha, trading what? Oh, that is what it is in the 21st Century which is no different than in the 1st Century up to this time ... .... human flesh. What else is there, in reality, when the exchanges of this and that are everyday needs and then there is only one BIG TICKET ITEM and it is people. Why would the countries of earth pretend to be intelligent when every human can see cannibalism is continuing to be the du jour, forever and ever and the means to play this terrorism theme into eternity? Gosh, golly gee it is "the root of all evil, MONEY."
The question for those countries that hold too much of US dollars is: do you want to loose money now, or much more money later. The amount of liquidity in that has been pumped into the US economy is staggering, and there is no plan on how to remove it in the future. In fact, there are no exit signs on this edifice. Therefore, the message from Pittsburgh has been: let's keep on spending more. US can print more money, borrow more money, while the countries with the reserves will need to spend more money stimulating their consumption, and hopefully increase imports. In all this, dollars are being spent in unprecedented amounts to fund military occupations, expanded wars, new security related projects. There is a staggering amount proposed for Pakistan and additional staggering amounts for Afghanistan. And in Iraq, the talk of wrapping that money pit is --- just talk. More money for contractors, corporations and their lobbyists is the order of the day. And the constant hue and cry about the lack of money for health care is getting rather boring. So, when inflation hits, the holders of dollars will loose anyway. Just like ordinary folks, who do not have that much money to loose, worry about the consequences of inflation and are thinking up ways to save themselves, I do not doubt that those who have hundreds of billions in US dollars must realize that the loss is inevitable, but that future bleeding will have to be averted.
The sooner the USD becomes just another reserve currency, the better for real peace and prosperity for humanity, north-americans included . The misanthropic elite which rules the USA wants to flare up the planet and BRIC countries MUST never finance their own destruction by Israel/NATO tribalist and racist real power-brokers who use the USA for the sole interests of a "chosen" tribe . Enough is enough !