A giant step toward dedollarizing world trade
by Don Hank
In October of 2014 I lambasted US media here for refusing to alert Americans on the dedollarization scheme of non-aligned countries. Readers either didn’t discuss this with me or they told me the world would always prefer the dollar.
Then in December of 2014, renewamerica.com posted my translation of an eye-popping interview with a Chinese monetary policv expert who clearly showed that our allies, eg, in Europe, were busy setting up RMB (yuan) clearing centers, a clear sign that they believed in the future of the yuan in world trade. Again, my readers snoozed through this and the usual subjects said the yuan would never be accepted in international trade. Period.
In March of this year, I wrote a disturbing article here showing that a 1973 agreement with the Saudis obliging them to charge only USD for their oil exports was most likely the most important pillar propping up the US dollar and that if the Saudis ever reneged on this agreement, there would be little support for the USD.
In april of this year, I showed here that almost all US allies had turned their backs on the US-run World Bank and IMF by joining the Chinese-led AIIB. I told them the US could not compete with the AIIB because it was bullying it clients, for example, into accepting gay sex and privatization. At the end of the article, I warned that the “petroyuan” might be on the way. I got little reaction but again, normalcy bias led some to tell me I was worried for nothing.
The RMB has made a lot of progress in dedollarizing world trade and obviously, this is because ordinary Americans don’t see or don’t want to see it coming and the media refuse to talk about it. Therefore politicians and the Fed will do nothing about it. And now that it is too late, they are bitterly flailing about at the rest of the world.
But now we are at the talking stage regarding dedollarization. I now see an increasing number of articles in the Western press candidly admitting that the RMB is being used more and more in world trade. The latest event in this series is Russia’s acceptance of the RMB for oil payment in such a way that Russia has snatched the title of top supplier from none other than the Saudis, who seem to have made accommodations for this by raising Asian oil prices. Thus, without literally reneging on the 1973 agreement, they have made it easy for the Russians and Chinese to dedollarize, thereby cleverly circumventing the agreement.
I have also commented here and here showing beyond that shadow of a doubt that Russia had been helped more than harmed by US-imposed sanctions. These too garnered criticism from highly educated people including investment experts and authors who think the dollar is still sound as a you-know-what.
The story appears below in my translation from the Chinese journal finance.sina. The information reported here can also be found piecemeal in English in the msm.
Accepting payment in RMB, Russia surpasses Saudi Arabia as largest supplier of crude to China
At 8:25 on June 25, 2015 article business community favorites
Business community June 25
According to the Energy website Fuelfix.com, with the Chinese oil market share battle heating up, Russia has become China’s largest crude oil supplier (45.70, -0.24, -0.52%), surpassing Saudi Arabia.
According to e-mailed data from China’s General Administration of Customs on Tuesday (June 23), China’s imports from Russia in May amounted to 3,920,000 tonnes of oil, equivalent to 927,000 barrels a day, a record high, or an increase of 20 percent MoM, while imports from Saudi Arabia decreased by 42% to 3.05 million tons of oil compared to April.
The surge in domestic production of shale oil reduces US dependence of the US, the world’s largest oil consuming country, on foreign oil supplies, making China an important market for the world’s oil-exporting countries. The IEA [International Energy Agency] forecast in June of 2015 that Chinese oil demand will account for over 11% of global oil demand.
Chief oil analyst Amrita Sen of oil and gas analyst Energy Aspects said in an email: “As the Middle East oil was obliged to contend with competition from other parts of the oil market, Asia has become the darling of Russian oil exporters. Russia is paying increasing attention to its east, where its largest oil producer Rosneft has made a wide variety of transactions with China and is is likely to make more steady inroads for Russian oil into China.”
Supply from Russia increases thanks to acceptance of payment in RMB
Gordon Kwan, Head of Regional Oil & Gas Research at Nomura Securities commented in an e-mail on China’s currency: “After Russia begins to accept renminbi as a payment method for the purchase of oil, we expect to see more Russian oil exported to China. If Saudi Arabia wants to return to the throne, it needs to accept renminbi as payment for oil, not only the US dollar.”
Since Western countries imposed sanctions on Russia in the dispute between Russia and Ukraine, Russia has been looking for new markets for its oil. As a result of these efforts, Russia has become China’s largest oil supplier for the first time since October 2005. In 2013, Rosneft and China National Petroleum Group signed a $270 billion deal, with the former agreeing to supply 365 million tons of oil to the latter over the next 25 years. That year, Rosneft reached an $85 billion ten-year agreement with China Petroleum & Chemical Group.
Angola to China’s second-largest supplier of crude oil
In May, Russia was not the only oil-exporting country to surpass Saudi Arabia.
Data show that in May Angola sold 3.26 million tons of oil to China, an increase of more than 14%, becoming China’s second largest oil supplier. In the past 13 months, Saudi Arabia has lost its title as China’s largest oil exporter for the first time.
China General Administration of Customs data also show that Iran exported 2.2 million tons of oil to China. Iran had previously estimated that during the international sanctions, it could double its global oil sales within six months, and the international sanctions expires on June 30.
Saudi Arabia raised the price of oil supplied to Asia
In April, Saudi Arabia exported 5.26 million tons of oil to China, reaching the highest level since July 2013, capturing more of the Chinese oil market.
It is reported that, in the past four months, Saudi Arabia has raised the price of oil supplied to Asia. According to a public statement issued by Saudi Aramco, in July the price of Arab light crude and medium crude has been set to the highest level in 10 months.
Energy consultancy SCI International analyst Gao Jian told us on the phone: “Russia has used its good relations with China to increase oil supplies to that country to become China’s largest supplier of oil. At the same time, since Saudi Arabia’s oil price is less attractive in Asia, it loses the title.”
Translated by Don Hank