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China in Process of Finally Destroying the Petrodollar by Negotiating an Agreement With Saudi Arabia to Denominate Oil in Yuan
by Kenneth Schortgen, The Daily Economist:
Ever since 2013 when Russia and China began to buy and sell oil in a currency other than the dollar, the clock began to tick on U.S. hegemony over the global financial system. This is because ever since 1973, the world has been forced to use the petrodollar system and function under a singular reserve currency that for the first time in centuries was not backed by a precious metal.
And subsequently over the next four years, the crack initiated by both Russia and China has begun to spread, with not only Moscow becoming the world’s leading producer and distributor in energy, but also in agreeing to sell their oil and natural gas in both Rubles and Yuan. And this left the last remaining roadblock to completely destroying the petrodollar being the stability and unity of OPEC nations who have stood firmly with the United States in holding onto that 1973 agreement.
However this final hurdle for the East in their battle against dollar hegemony may soon be achieved as China is currently in negotiations with Saudi Arabia to have oil also to be sold in RMB.
China is currently modifying the terms of its oil trade with Saudi Arabia. Specifically, China is working on a deal to pay for Saudi oil using Chinese yuan. This effort poses a direct threat to the security of the dollar.
If this China-Saudi deal happens — yuan for oil — it’s another step closer to the grave for the petrodollar, which has dominated global finance since 1974. You can revisit Jim Rickards article about the Assault on the Dollar, here.
To recap, the petrodollar is weakening because the dollar is losing power as the world’s reserve currency. This is similar to the way pounds sterling gradually fell out of favor during the decline of the British Empire. The decline may take a long time, but what we’re seeing today is another step in the death march of the dollar. – Daily Reckoning
The entire foundation of the dollar being designated as the global reserve currency today is due to its ties to oil, and in particular, to the agreement that OPEC nation force customers to buy their oil only in U.S. dollars. But once this agreement is breached, then not only will the dollar likely lose its status as the singular reserve currency by de facto rejection, but the U.S. economy and financial system will collapse because the only thing propping it up is the ongoing need for foreign countries to have to buy dollars in order to purchase energy and other commodities.
On the surface the U.S. doesn’t appear to be worried about losing its reserve currency status, but this is far from the truth when you understand that most of the wars that the U.S. has engaged in since 2001 have all been about protecting dollar hegemony, and trying to keep Russia and China from succeeding in their plans.
