by Jay Syrmopoulos
is an geopolitical
and ardent opponent of
He is currently a graduate
student at the University of Denver pursuing a masters
in Global Affairs and holds a BA in International
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The death of the
petrodollar could be imminent
which would drastically reduce
to wage war with other people's
The formation of a
BRICS gold marketplace, which could
bypass the U.S. Petrodollar in bilateral trade, continues to take
shape as Russia's largest bank, state-owned
Sberbank, announced this
week that its Swiss subsidiary had begun trading in gold on the
Shanghai Gold Exchange.
Russian officials have repeatedly signaled that they plan to conduct
transactions with China using gold as a means of marginalizing the
power of the dollar in bilateral trade between the geopolitically
This latest movement is
quite simply the manifestation of a larger geopolitical game afoot
between great powers.
According to a
report published by Reuters:
was granted international membership of the Shanghai exchange in
September last year and in July completed a pilot transaction
with 200 kg of gold kilobars sold to local financial
institutions, the bank said.
plans to expand its presence on the Chinese precious metals
market and anticipates total delivery of 5-6 tonnes of gold to
China in the remaining months of 2017.
Gold bars will
be delivered directly to the official importers in China as well
as through the exchange, Sberbank said.
second-largest bank VTB is also a member of the Shanghai Gold
To be clear, there
is a revolutionary transformation of the entire global monetary
system currently underway, being driven by an almost perfect storm.
The implications of
this transformation are extremely profound for U.S. policy in the
Middle East, which for nearly the past half century has been
underpinned by its strategic relationship with Saudi Arabia.
THE RISE & FALL
OF THE PETRODOLLAR
The dollar was
established as the global reserve currency in 1944 with the
Woods agreement, commonly referred to as the gold standard.
The U.S. leveraged
itself into this power position by holding the largest reserve of
gold in the world. The dollar was pegged at $35 an ounce - and
freely exchangeable into gold.
By the 1960s, a
surplus of U.S. dollars caused by foreign aid, military spending,
and foreign investment threatened this system, as the U.S. did not
have enough gold to cover the volume of dollars in worldwide
circulation at the rate of $35 per ounce; as a result, the dollar
embraced a new paradigm in 1971, as the dollar became a pure fiat
currency (decoupled from any physical store of value), until the
petrodollar agreement was concluded by President Nixon in 1973.
The quid pro quo
was that Saudi Arabia would denominate all oil trades in U.S.
dollars, and in return, the U.S. would agree to sell Saudi Arabia
military hardware and guarantee the defense of the Kingdom.
A report by the Centre for
Research on Globalization clarifies the
implications of these most recent moves by the Russians and the
Chinese in an ongoing drive to replace the US petrodollar as the
global reserve currency:
Fast forward to
March 2017; the Russian Central Bank opened its first overseas
office in Beijing as an early step in phasing in a gold-backed
standard of trade.
This would be
done by finalizing the issuance of the first federal loan bonds
denominated in Chinese yuan and to allow gold imports from
government wishes to internationalize the yuan, and conduct
trade in yuan as it has been doing, and is beginning to increase
trade with Russia.
taking these steps with bilateral trading, native trading
systems and so on. However, when Russia and China agreed on
their bilateral US$400 billion pipeline deal, China wished to,
and did, pay for the pipeline with yuan treasury bonds, and then
later for Russian oil in yuan.
of, and unprecedented breakaway from, the reign of the US dollar
monetary system is taking many forms, but one of the most
threatening is the Russians trading Chinese yuan for gold.
are already taking Chinese yuan, made from the sales of their
oil to China, back to the Shanghai Gold Exchange to then buy
gold with yuan-denominated gold futures contracts – basically a
barter system or trade.
The Chinese are
hoping that by starting to assimilate the yuan futures contract
for oil, facilitating the payment of oil in yuan, the hedging of
which will be done in Shanghai, it will allow the yuan to be
perceived as a primary currency for trading oil.
The world's top
importer (China) and exporter (Russia) are taking steps to
convert payments into gold. This is known.
So, who would be the
greatest asset to lure into trading oil for yuan? The Saudis, of
All the Chinese
need is for the Saudis to sell China oil in exchange for yuan.
If the House of Saud decides to pursue that exchange, the Gulf
petro-monarchies will follow suit, and then Nigeria, and so on.
fundamentally threaten the petrodollar.
According to a report
by the Russian government media, significant progress has been
made in promoting bilateral trade in yuan, between the two nations,
as the first step towards an even more ambitious plan - using gold
to make transactions:
under consideration is the joint organization of trade in gold.
In recent years, China and Russia have been the world's most
active buyers of the precious metal.
On a visit to
China last year, deputy head of the Russian Central Bank Sergey
Shvetsov said that the two countries want to facilitate more
transactions in gold between the two countries.
In April, Sberbank
expressed interest in financing the direct import of gold to India -
also a BRICS member.
Make no mistake
that a BRICS gold marketplace could be used to bypass the dollar in
bilateral trade, and undermine the hegemonic control enjoyed by the
US petrodollar as the global reserve currency.
"In 2014 Russia and China signed
two mammoth 30-year contracts for Russian gas to China. The
contracts specified that the exchange would be done in Renminbi
[yuan] and Russian rubles, not in dollars.
That was the beginning of an
accelerating process of de-dollarization that is underway
strategic risk consultant F. William Engdahl.
Russia and China
are now creating a new paradigm for the world economy and paving
the way for a global de-dollarization.
Russian-Chinese alternative to the dollar in the form of a
gold-backed ruble and gold-backed Renminbi or yuan, could start
a snowball exit from the US dollar, and with it, a severe
decline in America's ability to use the reserve dollar role
to finance her wars with other
peoples' money," Engdahl