by Neisha Ramdass
28 September 2017
from Loop Website

 

 

 

 

 


 


Venezuela publishes its oil price in yuan

President of Venezuela, Nicolas Maduro, has made good on his promise to forsake the U.S. dollar and publish their oil prices in yuan, which is the currency of China.

 

This highly controversial move is likened to Venezuela giving the U.S. "the middle finger".

Former Venezuelan leader, Hugo Chavez has threatened this move for over 14 years, but Maduro made good on the promise in early September 2017.

While Maduro's brazen move was done as an act of standing up to the United States government since they did not support him on his quest to dictatorship, Chavez's motives were based purely on the fact that he felt that the U.S. dollar would someday lose its place in the global currency ranking.

Many view Venezuela's choice to price its oil in yuan as all bark and no bite since prior to Maduro's announcement, it was rumored that they would favor the Euro instead.

 

Whilst the U.S. is on a path to force Maduro to end his campaign to rewrite Venezuela's constitution, it is highly unlikely that China would assist, which makes the switch to pricing in yuan a very safe one for Venezuela.

 

It must also be noted that Venezuela borrowed approximately $60 billion from China in exchange for selling oil at a discounted price to the Asian powerhouse.

Venezuela's energy sector and by extension it's economy is currently a disaster. The countries state-run oil company, PDVSA is travelling downhill.

The oil that is to be used to pay back the $60 billion debt is not being produced since according to OPEC, Venezuela's oil production has been on a decline over the past few years, from 2, 375 barrels per day in 2015, to 2, 159 barrels per day in 2016.

 

Production fell further in 2017, with an average of 2, 057 barrels per day in the first quarter and dipping to a low of 1, 918 barrels per day in August. These figures contradict the countries massive oil reserves, which are reported as the biggest in the world.

On the Transparency International's corruption scale, Venezuela is ranked as 166 out of 176 countries. That fact speaks for itself.

 

While the government continues to attempt to take shots at the U.S. sanctions, the people of Venezuela are the ones suffering since they are in the middle of a humanitarian crisis, with intensifying food and medicine shortages.











 

What Does the...

Sale of Venezuelan Oil

in Currencies Other than the U.S. Dollar Mean?
by Mision Verdad
September 16,  2017
from TeleSurTV Website

Spanish original version




De-dollarization by the Eurasian Union

would throw the West into crisis,

especially when Europe is racked

by a banking crisis.

Photo: Reuters



The Venezuelan oil market

now has the chance

of trading future oil contracts

offered by China,

denominated in yuan.

 



The petrodollar is more important for U.S. global domination than either arms exports or Hollywood culture, because it allows the U.S. to be the biggest exporter of the dollar bills the rest of the world, which needs to be able to buy oil.

 

Venezuela has decided to start de-dollarizing its economy. To understand what this means, it's necessary to look at the geopolitical context in which the move takes place.

After President Nicolas Maduro announced last Thursday that every business signing contracts with the Venezuelan State should do so in a foreign currency other than the U.S. dollar, Vice President Tareck El Aissami sought to ensure the country's productive sector gets the necessary mechanisms via public and private banks to be able to migrate to a new basket of foreign currencies.

In a working meeting with business people on the Constituent Plan for Peace and Economic Prosperity, Aissami said,

"We have to throw off the yoke of the dollar",

...arguing that anyone wanting to bid in auctions of the Floating Exchange Rate System (DICOM) should switch their bank accounts to another currency.

 

Aissami added,

"We're doing no more auctions in dollars, those auctions are over".

He emphasized that these measures are meant to counteract economic sanctions imposed by the U.S..

Aissami also said that Venezuelan citizens promoting the sanctions would face trial, adding that Venezuela is closing existing bank accounts and migrating them to other banks around the world, whom he thanked for their assistance. He reported that,

"In the public banking system we already have partner banks in all those countries" (Russia, China, India, Europe).

 

 

 



Why does the petrodollar rule?

The U.S. dollar became the predominant currency for international payments because, until the middle of the 20th Century, the gold standard was the dominant monetary system.

 

This system was based on the fixed quantity of gold reserves stored in national banks, which set a limit on possible credit.

 

At that historical moment the U.S. government managed to appropriate 70% of the world's gold (except that of the Soviet Union), thus weakening Britain and bypassing the Bretton Woods financial system set up in 1944.

To reach its long desired world dominance, the U.S. government used two main tools:

the U.S. dollar and its military power.

Some countries developed alternative military alliances and broke with dependency on the U.S. dollar to avoid being subjugated.

In the 1970s, the U.S. dollar suffered a dramatic fall due to the economic growth of Germany and Japan and the reluctance of the U.S. authorities to adjust economic policy to maintain a balance between the U.S. dollar and gold.

 

The U.S. currency was revived with help from oil exporters like Saudi Arabia, who exchanged their oil for U.S. armaments. In 1971, U.S. President Richard Nixon unilaterally cut the convertibility of the U.S. dollar to gold (the so-called Nixon shock) and so oil became the basis of the U.S. dollar system, and for that reason keeping control of oil trading is today a priority of U.S. foreign policy.

So long as the members of OPEC supported this system, world demand for U.S. petrodollars reached historic high and countries were obliged to buy dollars in order to purchase oil on the international markets.

Currently, the U.S. contribution to global GDP is calculated at no more than 22%. But 80% of international payments are made in U.S. dollars, making the dollar overvalued in comparison with other currencies.

 

That is why U.S. consumers can buy imported goods at extremely low prices, giving them a significant financial advantage, while the high demand for dollars in the rest of the world allows the U.S. government to refinance its debt at very low interest rates.

 

 

 


 

 

 


The threat of de-dollarization

Any country fighting against the dollar is considered to be a direct threat to U.S. economic hegemony and its citizens' high standard of living which means the U.S. elites do whatever it takes to defeat resistance.

 

Libyan leader Muammar al Gaddhafi was overthrown and brutally murdered when he decided to sell oil in Euros, and then to replace the euro by introducing a gold dinar currency.

That meant the emergence of a national leader with 150 tons of gold reserves proposing to sell oil in exchange for real gold, which is why then French President Nicolas Sarkozy said,

"Libya is putting at risk global financial stability",

...which is based on an unsupported currency of benefit only to U.S. consumers.

Along with some banks and energy companies operating in their countries, China, Russia and Iran are following a de-dollarization policy to escape U.S. domination.

 

In 2014, the Russian treasury announced a plan to increase the participation of ruble-based contracts while, last May, at the Shanghai Summit, Russia committed to selling China U.S.$400 billion of natural gas over the next 30 years, invoiced in rubles and the yuan.

 

It has been called "the deal of the century".

During his visit to China last August, Russian President Vladimir Putin announced,

"the petrodollar system should be a thing of the past".

Given the Western sanctions policy against his country, he added,

"Russia is discussing the use of national currencies in swap agreements with various countries."

Over the last few months China has signed currency swap agreements with Canada and Qatar, thus making Canada the first offshore center for the Chinese yuan in North America, while doubling or even tripling trade with China by as much as an estimated RMB200 billion (RMB).

 

The currency swap between China and Qatar, itself recently the target of sanctions, are equivalent to U.S.$5.7 billion, turning Qatar into a base for the yuan in Middle East markets already suspicious of the U.S. dollar because it exports inflation.

 

It may only be a matter of time before other OPEC countries sign currency swap agreements with China.

China has also promoted establishing a compensation center in Malaysia's capital Kuala Lumpur to encourage greater use of the yuan in South East Asia.

 

This is within less than a month of Singapore, Asia's biggest financial center, becoming an exchange center for the yuan via a currency swap for Singapore dollars.

Iran has also recently announced its reluctance to use dollars for foreign trade.

 

Kazakhstan's President Nursultan Nazarbayev, has likewise instructed his country's national bank to de-dollarize the economy. The United Kingdom plans to issue debt in yuan while the European Central Bank is discussing whether to include the yuan in its official reserves.

While in the real world this tendency grows, along with domestic U.S. inflation, so too does anti-Russian propaganda.

 

 

 


 

 


The war is worldwide and self-evidently economic

In terms of resources, whoever has gold or oil underground is be able to decide geopolitical issues or currency hegemony.

 

However, military power is also a determining factor in the readjustment of leadership currently taking place with the collapse of the capitalist system.

 

Many countries are seeking to withdraw their gold reserves held in the vaults of the U.S. Federal Reserve Bank, especially since that bank refused in 2013 to hand over German gold reserves to their respective owners.

Seeing that much of the world no longer needs dollars, the U.S. government opted for regional destabilization so as to weaken any potential rival.

In the meantime, U.S.$20 trillion of U.S. debt is almost as much as the total of the 28 members of the European Union and bigger than U.S. Gross Domestic Product. The message investors take away from the ratio of debt to GDP is that the U.S. might eventually be unable to pay its debts.

 

Presidents George W. Bush and Barack Obama used up the state's reserves and plundered Social Security, among other things, to finance the "War on Terror", and increasing spending in other departments.

Even though Russia, through its Prime Minister Dmitry Medvedev, has recognized that the U.S. has waged a large scale economic war against it, Russia's debt is low in comparison with European countries.

 

Russia's growth before 2011 was greater than that in,

  • the United States

  • Germany

  • France

  • Japan,

...and the rest of the G8 countries.

 

President Vladimir Putin paid off almost all of Russia's debt selling hydrocarbons during the period when prices were high.

The established mechanisms of global power wrecked relations between the U.S. and Russia via intrigues and offensives ending up with a battery of sanctions against the Russian people.

 

Furthermore, despite the blockades NATO has contrived against Russian natural gas via conflicts in Ukraine and Syria, Vladimir Putin's government has finessed them via the South Stream project with Turkey and the imminent defeat of the Islamic State in Syria.

De-dollarization by the European Union would throw the West into crisis, especially when Europe is wracked by a banking crisis and the U.S. Senate has decided to raise the U.S. government debt ceiling temporarily to allow the U.S. authorities to assign U.S.$15 billion to help victims of Hurricane Harvey.
 

 

 


"Futures" on the horizon

The Venezuelan oil market now has the chance of trading so called future oil contracts offered by China denominated in yuan.

 

Under this type of contract, the parties agree to buy or sell an asset at a price fixed beforehand. This could become the new template for people trading financial instruments in commodities markets and could well become a new standard reference point for traders, since China is the world's biggest oil importer.

 

Also, according to Venezuela's vice president, China has expressed interest in paying for Venezuela's oil in yuan.

Currently, only contracts in the West Texas Intermediate and Brent oil benchmarks are traded in global futures markets and both are traded in U.S. dollars.

 

But oil and gas exporters like,

  • Russia

  • Iran

  • Qatar

  • Venezuela,

...could avoid dollar trades if their buyers could pay for oil in yuan or even in gold after converting their yuan into gold ounces.

According to Michael Snyder in his blog The Economic Collapse, in economic and financial terms China's government has been playing chess while the West has been playing checkers.

 

Unfortunately for the U.S., play has now reached a stage where check mate is within view.

 

Venezuela is positioning itself to preserve its peaceful sovereignty and self determination at a moment of geopolitical reconfiguration that will decide the world's economic course for decades to come.