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De-Dollarization: Russia Is On The Verge Of Dealing A Massive Blow To The Petrodollar


By Michael Snyder

The U.S. Dollar - Photo by Pen Waggener

Is the petrodollar monopoly about to be shattered?  When U.S. politicians started slapping economic sanctions on Russia, they probably never even imagined that there might be serious consequences for the United States.  But now the Russian media is reporting that the Russian Ministry of Finance is getting ready to pull the trigger on a “de-dollarization” plan.  For decades, virtually all oil and natural gas around the world has been bought and sold for U.S. dollars.  As I will explain below, this has been a massive advantage for the U.S. economy.  In recent years, there have been rumblings by nations such as Russia and China about the need to change to a new system, but nobody has really had a big reason to upset the status quo.  However, that has now changed.  The struggle over Ukraine has caused Russia to completely reevaluate the financial relationship that it has with the United States.  If it starts trading a lot of oil and natural gas for currencies other than the U.S. dollar, that will be a massive blow for the petrodollar, and it could end up dramatically changing the global economic landscape.

The fact that the Russian government has held a meeting to discuss “getting rid of the US dollar in Russian export operations” should be front page news on every mainstream news website in the United States.  That is how big this is.  But instead, we have heard nothing from the big mainstream news networks about this so far.  Instead, we have only heard about this from Russian news sources such as the Voice of Russia

Russian press reports 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 operations. Top 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.

The “de-dollarization meeting” was chaired by FirstDeputy Prime Minister of the Russian Federation Igor Shuvalov, proving that Moscow is very serious in its intention to stop using the dollar.

So will Russia go through with this?

After all, this wouldn’t just be a slap in the face.  This would essentially be like slamming an economic fist into our nose.

You see, Russia is not just a small player when it comes to trading oil and natural gas.  The truth is that Russia is the largest exporter of natural gas and the second largest exporter of oil in the world.

If Russia starts asking for payment in currencies other than the U.S. dollar, that will essentially end the monopoly of the petrodollar.

In order to do this, Russia will need trading partners willing to go along.  In the article quoted above, the Voice of Russia listed Iran and China as two nations that would potentially be willing to make the switch…

Of course, the success of Moscow’s campaign to switch its trading to rubles or other regional currencies will depend on the willingness of its trading partners to get rid of the dollar. Sources cited by Politonline.ru mentioned two countries who would be willing to support Russia: Iran and China. 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.

And the reality of the matter is that China has seemed ready to move away from the U.S. dollar for quite some time.  In a previous article, I included a quote from a French news source that discussed how China’s official news agency has even called for a “new international reserve currency… to replace the dominant US dollar”…

For decades the US has benefited to the tune of trillions of dollars-worth of free credit from the greenback’s role as the default global reserve unit.

But as the global economy trembled before the prospect of a US default last month, only averted when Washington reached a deal to raise its debt ceiling, China’s official Xinhua news agency called for a “de-Americanised” world.

It also urged the creation of a “new international reserve currency… to replace the dominant US dollar”.

For much more on what China is thinking, please see my previous article entitled “9 Signs That China Is Making A Move Against The U.S. Dollar“.

So why is the petrodollar so important?

Well, it creates a tremendous amount of demand for the U.S. dollar all over the globe.  Since everyone has needed it to trade with one another, that has created an endless global appetite for the currency.  That has kept the value of the dollar artificially high, and it has enabled us to import trillions of dollars of super cheap products from other countries.  If other nations stopped using the dollar to trade with one another, the value of the dollar would plummet dramatically and we would have to pay much, much more for the trinkets that we buy at the dollar store and Wal-Mart.

In addition, since the U.S. dollar is essentially the de facto global currency, this has also increased demand for our debt.  Major exporting nations such as China and Saudi Arabia end up with giant piles of our dollars.  Instead of just letting them sit there and do nothing, those nations often reinvest their dollars into securities that can rapidly be changed back into dollars if needed.  One of the most popular ways to do this has been to invest those dollars in U.S. Treasuries.  This has driven down interest rates on U.S. debt over the years and has enabled the U.S. government to borrow trillions upon trillions of dollars for next to nothing.

But if the rest of the world starts moving away from the U.S. dollar, all of this could change.

In order for our current standard of living to continue, it is absolutely imperative that everyone else around the globe continues to use our currency.

So if Russia really does pull the trigger on a “de-dollarization” strategy, that would be huge – especially if the rest of the planet started following their lead.

The U.S. economy is already teetering on the brink of another major downturn, and there are a whole host of indications that big trouble is on the horizon.  For much more on this, please see the article that I posted on Monday entitled “If Economic Cycle Theorists Are Correct, 2015 To 2020 Will Be Pure Hell For The United States“.

Just about the last thing that we need right now is for our petrodollar monopoly to be threatened.

It would be nice if things would calm down in Ukraine and the relationship between the United States and Russia could go back to normal.

Sadly, that does not appear likely any time soon.

In fact, the Ukrainian government has already admitted that “we are essentially at war“, and on Tuesday six Ukrainian soldiers were killedand eight were wounded in a convoy attack in eastern Ukraine.

The regions in eastern Ukraine that have just declared independence have given the government in Kiev until Wednesday to pull their forces out of eastern Ukraine or else face war.

If a full blown civil war does erupt in Ukraine, it is going to take this crisis to a completely new level.

Unfortunately, most Americans are incredibly apathetic at this point and know very little about what is going on.

But in the end, this could have dramatic implications for all of us.

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  • Saul

    Ha ha so long and FUCK YOU America.This was a long time coming and couldn`t happen to more deserving cocksuckers.This is what you get for letting your government get out of control and raping the world.

    • Jack

      Thanks Saul, your right now 1 million armed citizens will have to defend this country against the duel citizen parasite Zionist who run the country. By the way this country was sold out 1913 when Wilson gave it to the fuc*ing bankers. And who owns and runs the banks?

      • Pravda01

        Your are so right about the Zionist parasites.

        • http://twentyninesecondsandcounting.wordpress.com Roland Martin

          Every day the US citizens get closer to realizing how their government sold out to the neo-nazi, neoconservative dual-citizen Israelis who are the real scourge of the planet, not the US.

          • Pongopatterson

            America is Jewry’s new USSR. The Nazis kicked the Jews and the banks out and rebuilt Germany into a mighty nation. I don’t know if you have noticed but America is doing the complete opposite and is rotting from the inside to the out. In the American, Communist police state you will all be equal in poverty, misery and death.

  • Raven Swift

    It gets better if one considers that Russia is the worlds largest diamond producer. This is explored in a novel called “Russia’s Diamond Ruble” at AMAZON. Extreme but possible to use other natural assets to destroy dependence on the petrodollar. Anything with intrinsic value could circumvent Uncle Sam’s buck, as long as there is another party willing to barter. I’ll take diamonds over paper anytime, anywhere.

    • me

      Diamonds are so abundant they are virtually worthless if the market was flooded with the current supply.

      • Rigor

        I guess that’s why you have no diamonds to throw away. Diamonds represent intrinsic worth and have industrial value that far exceeds the associated luxury. Next time you find a 10 carat diamond throw it away. In fact, when the petrodollar becomes extinct, a bucket of “abundant” manure will be an asset.

  • Georgio

    Rarely talked about Gold and silver is also mandatory to be traded in US dollars. Only reason USA can afford a military all across the planet–Yankee dollar being the world reserve, sadly all other nations actually subsides America and are poor because of this.
    just imagine if Greece was allowed world wide for their money as reserve status?

  • Pravda01

    In 2010 the Dollar lost its reserve currency status.

  • Shitstain

    If organized Jewry should ever get a foothold in a America, either
    financial or political. A nation with such vast resources but such
    little intelligence. It will end up resembling a stricken child with
    elephantitis, a mushroom nation, destroyed before it had even reached
    full maturity.

    Chancellor Hitler.

  • James E Doyle

    Russia could implode the EU quite quickly by just banning all German,French companies from Russia. Germany in particular does BILLIONS in business with Russia. Germans build everything household appliances, everything from soup to nuts. Germany has been bailing out the PIIGS. If Germany fails so does the EU. I personally am for the EU imploding and I live in the Netherlands, Go back to Mark and Guilder. and SOVEREIGNTY . Fuck Brussels, the New Washington D.C.,

    • https://plus.google.com/u/0/103822115462747470163/posts Mia

      James,

      I would agree with you, if you were correct.

      Russia is a gas station with nuclear weapons. Yes, this gas and oil producer may well be able to ‘implode’ the European Union. However, the Mutually Assured Destruction of the Chinese and Russian economies, thus effecting the globe, demands that you fully grasp that nothing of it would come quickly or easily. The devastation and potential loss of millions of lives would be global in scale. You have either not thought that far into what it is you advocate or, conversely, you don’t care.

      In brief: In your many years of global travel and learning you’ve failed to grasp that you are the reason men war.

  • http://1karatbarsgold.weebly.com Prepper Joe

    The Russians and the Chinese have been preparing for this for some time now. I suspect they would have liked to have more time to get ready, but their hands are being forced now by the belligerence from the west. This will not end well for anybody, and we will all be affected.

  • Joseph Lizak

    Remember what O’bama said about 3 months ago….”where the hell is the Ukraine”.

    • Stuart.

      Who’s that, the Killer Kenyan?

  • PJ London

    In 2001 : “EU leaders on Thursday made an audacious bid to lure Russia away from its reliance on the greenback, calling on Moscow to start accepting euros instead of dollars for its exports, dangling the attractive carrot of a boom in investment and trade.”
    A large proportion of Gas and (I think) most trade deals are denominated in Euro.
    The “N******r ” in the Woodpile in this is the EU. They have been pushing for normal international transaction for 13 years, America is trying to hold on to the “Petrodollar”. Russia’s Eastern trade (India – China) is already ignoring the dollar.
    The major exporters who moved from the dollar were, Khomeini, Hussein, Gaddafi, and Chavez.