China’ s Low Key Launch Of Its Challenge To Petrodollar Supremacy

petrodollar
Goodbye petrodollar, hello petroyuan? 

We have been blogging and commenting for several years on moves by Russia, China and Iran to replace the US dollar as the global reserve currency, or at least to create a serious rival to the dollar hegemony. There can be no greater threat to the established order (or to the global banking cartel’s dreamed of New World Order,) than the emergence of a serious rival to the dollar. As economic game-changers go there is none bigger or more disruptive than a yuan-denominated settlement system for crude oil contracts, especially when set it is set up up by the largest importer of crude on the planet and the second largest exporter of hydrocarbons.

Given the level of U.S. provocations of Russia and China over the past few years and the recent return to cold war conditions with a new arms race on the cards, perhaps we ought to be happy that the Russians and Chinese seem to prefer currency wars to shooting wars as both have demonstrated they have formidable arsenals of advanced weapons and it is far from certain the U.S.A. and NATO could take on either, let alone both simultaneously.

And yet Beijing’s strategy seems to be a softly softly approach. Oil trades are already being conducted in petro-yuan at the Shanghai International Energy Exchange is on hold. This may be related to US sabre rattling and concern that the US deep state, having no economic response to the move may react rashly if presented with a fait accompli. Thus the fact that China and its partners chose to play down the official launch of the new settlement system is understandable. There was room for some euphoria following the launch, Brent Crude soared to $71 a barrel for the first time since 2015. West Texas Intermediate (WTI) reached the highest level in three years at $66.55 a barrel; then retreated to $65.53.

The launch also signalled a series of “firsts” for China’s trade links with the west, including the first opportunity for overseas investors to access a Chinese commodity market. Significantly, US dollars will be accepted as deposit and for settlement. In the near future, a basket of currencies will also be accepted as deposit. This is entirely in line with the Sino – Russian policy of moving their economic partners towards conducting trades in the currency of the vendor nation.

Will the launch of the petro-yuan be a deathblow to the petrodollar and U.S. economic dominance and the birth of a new era in trade relations? It will but the change is likely to take years rather than weeks. Many variables have to be considered, the most important being China’s capacity to manipulate and eventually dominate the global oil market.

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