Death of the Dollar
Saddam Hussein tried to break the connection between dollars and oil. Under the UN Oil-for-Food programme, the US took Iraqi oil and paid for it in US$ via the UN. As that scheme neared its end Saddam declared that in future, Iraqi oil could only be bought with Euro. The US and like-minded countries then invaded Iraq, seized the oilfields and listed Iraqi oil for sale in US$. Next to try was Venezuela’s Hugo Chavez. Chavez makes oil available to Latin American nations and Cuba through barter deals. For example Cuba sends doctors to Venezuela; Venezuela sends oil to Cuba.
Next, and possibly most importantly, is Iran’s setting up of an oil and derivatives market, which will quote prices in euro. This market not only threatens the dollar, it challenges the existing oil and options markets which are US-based. The Iranian bourse will begin operating this March.
If, as seems possible, there is a sudden decline in the US$, then the countries which have large holdings of dollars, such as Taiwan; Japan and China, face a problem. China, which is said to have about US$1000 billion, appears aware of the threat. In November 2004, Chinese finance officials announced a sell-off of dollars. The US$ immediately plunged in value on world markets. Within minutes, the officials declared that there had been a misunderstanding, and the dollar recovered. The Chinese then tried to convert their dollars into oil, by making a bid for an American-based oil company with international holdings. This bid was blocked by the US government. The Chinese have since said that they are gradually diversifying their currency holdings away from the dollar, principally to euro. They have large oil contracts with Iran, and have used 2.3 billion of their dollars to buy a 45% stake in Nigeria’s OML130 oil and gas field. China also spent US$275 million for a 12.5 percent stake in Gorgon, Australia’s largest gas field, and contracted to buy, at set prices, 100 million tons of liquefied gas from the field.
What would a collapse in the US dollar mean to Australians? Would we be able to move to euro-based bank loans in an orderly way? Our economy is largely based on commodities, which would retain real value, but are we bound by contracts with prices in US$. Most of our exports go to Asia, not to the US, so in the medium to long term, we should be OK. As for the short term, a collapse of the dollar is certain to have an enormous impact not only on our financial institutions, but also on our political ones. I have a tired old brain, my scrying-glass is dim, and The Voices offer their uncanny advice less frequently, so I do not have a clear picture of the repercussions. You might have to ask the Federal Treasurer, the Hon. Peter Costello what provision he has made for this eventuality.
Click on Comments below for a chronology of reports from international sources and Big Island comments as this story developed …
April 26th, 2007 at 6:56 pm
Later: The US, Britain, France and Germany are seeking UN sanctions against Iran, alleging that Iran is building nuclear weapons. Such sanctions might prevent the Iranian oil bourse from operating. Iran has said that sanctions who result in the cutting off of oil supplies, a loss of around 5% to the world market. This would affect Europe, Russia and Asia more than the US, which buys no Iranian oil.
April 26th, 2007 at 6:57 pm
Later still: 23 Jan 2006 www.bloombergs.com
‘Saudi Arabia’s King Abdullah visits the two most populous nations this week as the global oil rally enters a fifth year. Prices have quadrupled since 2001, partly because of soaring demand from developing economies, prompting OPEC’s biggest supplier to pledge higher output.’
and
‘In March 2004, China Petroleum & Chemical Corp., or Sinopec, signed an agreement with Saudi Arabia to search for gas deposits in an area south of the kingdom’s Ghawar oil field, the world’s largest. Sinopec was the only Asian company to win the right to explore for gas as Saudi Arabia opened up its reserves to foreign participation for the first time since nationalization in the 1970s.’
This would seem to confirm that China is converting its $US holdings into ownership of oil deposits or contracts to supply oil. The likely results are rising oil prices and a falling dollar
April 26th, 2007 at 6:57 pm
15.03.06
New US Bill puts sanctions on individuals, companies and nations which do business with Iran:
Invest $US40 million or more in Iran’s energy sector in a 12-month period and face a ban on U.S. Export-Import Bank assistance, export licensing restrictions, and a ban on the U.S. government buying or contracting for goods or services.
If a company invests $20 million in a year, the US would withhold U.S. foreign aid to its home country.
The bill also requires public and private pension plan and mutual fund managers to notify investors if funds are invested in entities subject to sanctions, and urges U.S. government pension funds and similar funds to shun such investments
April 26th, 2007 at 6:58 pm
More Chinese oil contracts
“China agreed to add $1 billion to an existing $2 billion loan backed by oil it agreed to grant to Angola, Reuters reported yesterday, citing a person it didn’t name.
China Petroleum & Chemical Corp, or Sinopec, agreed last week to build a $3 billion oil refinery with Angola’s national oil company. Sinopec has borrowed $1.5 billion to develop its 50 percent stake in Angola’s Block 18 offshore oil field. BP Plc, Europe’s largest oil company, has the other 50 percent.
”
Bloombergs
http://www.bloomberg.com/apps/news?pid=10000087&sid=aIdwB3BWURDI&refer=top_world_news
April 26th, 2007 at 6:59 pm
Besides investment funds, analysts said some central banks with a lot of greenback-denominated reserves were also buying into gold and selling the dollar to protect themselves from the falling greenback.
“Gold and the euro are the most likely to benefit from the Chinese, United Arab Emirates and other central banks’ selling of dollars,” Wisdom Financial Inc senior market strategist Emanuel Balarie said.
From Gold Hits 25-year high http://biz.thestar.com.my/news/story.asp?file=/2006/4/6/business/13882361&sec=business
April 26th, 2007 at 6:59 pm
More central banks move away from the US$
Various sources 24.04.2006
The euro gained late last week after Sweden’s central bank said it had increased the share of euros in its foreign exchange reserves to 50 percent and cut the dollar’s share to 20 percent from 37 percent.
The Qatar central bank which has $US4.5 billion is also selling.
Dollar sentiment was further dented after Russian Finance Minister Alexei Kudrin questioned the dollar’s status as the wold’s main reserve currency. The comment fed worries that other central banks might diversify their holdings away from dollars.
Australia’s Reserve Bank has made no statements about planning for the contingency that the $US might collapse, nor have business journalists offered comment, other than this from today’s SMH:
“ANZ Investment Bank senior interest rate strategist Sally Auld said the Australian dollar was benefiting from US dollar weakness following the start of the G7 meeting, which created negative sentiment about the desirability of the US dollar as a reserve asset.”
Carefull there Sally, in the event of a $US collapse, Howard and Costello have to be able to say that nobody told them it was a possibility.
April 26th, 2007 at 7:00 pm
Tehran, April 26 - Oil Minister Kazem Vaziri Hamaneh said on Wednesday that the establishment of Oil Stock Exchange is in its final stage and the bourse will be launched in Iran in the next week.
April 26th, 2007 at 7:01 pm
6 May 2006 India proposes Asia free trade area and single currency
“This pan-Asian FTA (free trade area) could be the future of Asia and will, I am certain, open up new growth avenues,” Singh said at the meeting attended by over 3,000 delegates including finance ministers and corporate heads.
The “web of engagements” could herald a free trade area embracing all major Asian economies and possibly extending to Australia and New Zealand, he said.
Singh’s free trade pitch came as an ADB (Asian Development Bank) spokesman welcomed an announcement by Asean members along with China, Japan and South Korea that they would study the creation of a single Asian currency akin to the euro.
The ADB has been spearheading proposals for the creation of an Asian currency unit or ACU to bolster monetary stability, spur regional growth and even out disparities.
Gulf Daily News
April 26th, 2007 at 7:01 pm
Greenback runs out of friends
By Jessica Irvine
May 9, 2006
CURRENCY speculators have abandoned the US dollar, sending the Australian dollar to an eight-month high.
Amid commentary the greenback is “doomed”, the number of speculators betting on a US dollar fall is now at its highest in more than a year, having almost doubled last week.
The Australian
April 26th, 2007 at 7:02 pm
Russians get it
Russian Rouble to attack the $ - Exchange Controls in the U.S.?
Russian President Vladimir Putin called for work on making the national currency convertible to be completed, oil and gas to be traded in Roubles on a domestic exchange, and an innovation-based economy.
In his annual state of the nation address before both houses of parliament, ministers and reporters, Putin said work on making the national currency fully convertible should be completed by July 1, almost six months ahead of the original January 1, 2007 deadline.
The president called for the establishment of a Rouble-denominated oil and natural gas stock exchange in Russia. “The Rouble must become a more widespread means of international transactions. To this end, we need to open a stock exchange in Russia to trade in oil, gas, and other goods to be paid for in Roubles,” he said. Putin said this would be impossible without economic growth of over 7%, which, he said had been achieved in the past three years.
This is the second most significant step in removing the U.S.$ from the throne of sole global reserve and trading currency! Should any more oil producers take this step, it will precede a U.S.$ crisis and create massive potential instability in the globe’s foreign exchanges.
From SafeHaven http://www.safehaven.com/article-5181.htm
April 26th, 2007 at 7:02 pm
Peoples Daily, China
How to deal with the US$ as a “spoiled child”?
The average exchange rate (middle price) of RMB Yuan against US dollars Monday broke 8:1 mark and hit 7.9982:1. This is a new record in the exchange rate of RMB since the reevaluation of Yuan on July 21 last year. Clearly, it is an important symbol of the increasing flexibility of RMB exchange rate mechanism.
However, people should not ignore the fact that when China is rapidly advancing the reform of RMB exchange rate mechanism and actively promoting the trade balance through expanding domestic demand, the US dollar simply continues acting like a “spoiled child” within the international financial system, selfish and self-indulgent, not willing to be responsible for its dominant reserve status in the international financial system, for the excessive issuance of the currency, and for its low saving rates. All it expects is to let developing countries like China assume the consequences of the economic imbalances, just like what it did in dealing with the currency relations with the Japanese Yen in the last century.
China is facing an increasingly conspicuous problem: how should it deal with the US dollars as such a “spoiled child”?
Excessive issuance of US dollars has led to an excess liquidity of the global economy and served as a macro background of the appreciation of RMB. To observe the exchange rate curve of the RMB against the US dollar, one must first study the dollar trend.
From 2001 onwards, in order to hedge the technology bubble economy and the negative economic impact of the “9.11″ terrorist attacks, the US Federal Reserve continued to adopt a slack fiscal policy and lowered down the federal benchmark interest rate from the original 4%-8% to 1% and maintained the level for a three-year period. Associated with this, Bank of Japan implemented the world loosest monetary policy and lowered the interest rate to zero so as to fight against the long-term deflation and economic depression.
In recent years, Bank of England, the US Federal Reserve, the European Central Bank, etc, have already, one after another, begun to increase the interest rates. Bank of Japan has recently concluded the four-year expansionary fiscal policy in an attempt to tighten its excessive liquidity. But the overall pattern of the excessively loose fiscal environment still remains.
From the view of global pattern with the massive issuance of US dollars, some Asian countries, taking China as a typical head, accumulate this kind of “junk currency” (whose purchasing power is continuously declining) through large scale of export. This is a very unfair pattern for these Asian countries.
Given the overall pattern of the loose global liquidity, the status quo of the global economic imbalances has become the important surveyor’s pole that dominates the flow of the capital. In 2005, the US current account deficits amounted to over $800 billion, while the surplus of Europe, Japan, oil-exporting countries, and some emerging Asian economies increased. The huge amount of US current account deficits and the rapid growth of debt have gradually damaged the confidence of foreign investors. International investors believe that a long-term depreciation of the US dollars is inevitable which will unceasingly increase the exchange rate risks of the dollar assets. Meanwhile, the United States is right at the end of one interest rate rise cycle. But Japan, Euro zone countries, China and some other countries and regions are right under way of accelerating the economic recovery therefore right at the initial stage of an interest rate rise cycle. The gap of the yield spreads between dollar assets and the assets of other countries and regions will gradually be narrowing.
Under such circumstances, the investment attractiveness of the US dollar relative to other countries and regions assets is evidently weakening, which has led to a gradual shift of the global capital from focusing on the dollar assets to the assets with higher rate of return and smaller exchange rate risks in Japan, Asia and other emerging areas. This is also why the stock exchange prices keep on rising in the bull market in Japan, India, China’s Hong Kong, Brazil, China and other countries and regions. The flowing trend of the global capital led to an ample liquidity in the surrounding markets. Within a short term, it is difficult to reverse the trend. This also exerts pressure upon the rising of exchange rate of these countries.
By People’s Daily Online; The author Ba Shusong is deputy director and research fellow with the Financial Research Institute, Development Research Center of State Council
April 26th, 2007 at 7:03 pm
Financial Times (UK)
Russia shift fx reserves from dollar
By Steve Johnson
Published: June 8 2006 17:28 | Last updated: June 8 2006 17:28
Russia became the latest country to shift a chunk of its central bank reserves out of the dollar, further eroding the standing of the greenback as the world’s de facto reserve currency.
Sergei Ignatyev, chairman of the central bank, said 50 per cent of its forex reserves were now held in dollars, with 40 per cent in euros and the remainder in sterling. Previously it was believed that just 25-30 per cent of the reserves were in euros, with virtually all the remainder in dollars.
Moscow’s reserves have grown rapidly in tandem with high oil and gas prices. The central bank now boasts the world’s fourth-largest reserves, after China, Japan and South Korea, with its gold and forex holdings rising by 36 per cent so far this year to $247bn.
The move ties in with increasing signs that cash-laden Middle Eastern oil exporters are also looking to diversify reserves out of the dollar, following hints from the United Arab Emirates, Kuwait and Qatar.
“This is a bearish development for the dollar,” said Chris Turner, head of currency research at ING Financial Markets. “It reminds us that global surpluses are accumulating to the oil exporters, and Russia is telling us that an increasingly lower proportion of these reserves will be held in dollars. This suggests there is a trend shift away from the dollar.”
Clyde Wardle, senior emerging market currency strategist at HSBC, added: “We have heard talk that Middle Eastern countries are doing a similar thing and even some Asian countries have indicated their desire to do so.”
In a sense, Moscow’s move was unsurprising. Russia’s $71.5bn budget stabilisation fund is due to be converted from roubles to a mixture of 45 per cent dollars, 45 per cent euros and 10 per cent sterling, and the day-to-day movements of the rouble are monitored against a basket of 0.6 dollars and 0.4 euros.
Furthermore, some 39 per cent of Russia’s goods imports came from the eurozone in 2005, against just 4 per cent from the US.
The announcement failed to stop the dollar strengthening 1 per cent to $1.2661 against the euro on Thursday as interest rate differentials and geopolitical factors continued to support the greenback.
However the statement does play into a perception in the forex market that central banks, which together hold $4,250bn of reserves, are increasingly channelling fresh reserves away from the dollar to reduce potential losses if the dollar was to fall sharply as part of the process of reducing global economic imbalances.
April 26th, 2007 at 7:04 pm
Australian Treasurer Seeks Orderly Withdrawal From U.S. Dollar
By John Garnaut
Economics Correspondent
10/19/06 “SMH” — – TREASURER Peter Costello has called on East Asia’s central bankers to “telegraph” their intentions to diversify out of American investments and ensure an orderly adjustment.
Central banks in China, Japan, Taiwan, South Korea and Hong Kong have channelled immense foreign reserves into American government bonds, helping to prop up the US dollar and hold down American interest rates.
Mr Costello said “the strategy had changed” and Chinese central bankers were now looking for alternative investments.
“Of course you can have an orderly adjustment,” he told reporters. “And what I would recommend is that these matters be telegraphed well in advance. I think we should begin preparing ourselves for it.”
Mr Costello said the “re-emergence” of China as the world’s greatest economy “is not something to be feared”.
Asked if a muscular China would be a force for good, however, Mr Costello said it would be good for growth and stability. “With the growing economic strength you will see growing influence in diplomacy in the regional architecture, as you would expect.
“I am sure it will be a force for economic development and I am sure that in partnership with other global powers, China wants to see a stable East Asian region.”
Earlier, in a speech to open the Australian National University’s East Asian Bureau of Economic Research, Mr Costello said Australia’s involvement in the region was broader than economics.
“It is a key ingredient of who we are as a people,” he said. “While Australia has its own unique culture, we are also a people who confidently enjoy the cultures of Asia, with seven of our top 10 overseas travel destinations being in the region.”
Ahead of next month’s G20 meeting in Melbourne, Mr Costello called on regional leaders to reform their anachronistic financial systems.
He said underdeveloped financial markets were to blame for the emerging economies of East Asia sending 94 per cent of outward portfolio investment to “ageing” countries outside the region.
He said the region needed to improve poor macroeconomic frameworks, inadequate regulatory systems, uncompetitive markets and insufficient investment in health and education
Copyright © 2006. The Sydney Morning Herald.
April 26th, 2007 at 7:04 pm
CITIC in US$1.9 billion Kazakh oil purchase
By Mai Dou (China Daily)
Updated: 2006-10-27 08:53
China International Trust & Investment Corp (CITIC) Group will purchase the Kazakh oil assets of Canada’s Nations Energy Co for US$1.91 billion, boosting the energy deposits of the world’s fastest-growing major economy.
The assets being purchased by CITIC, a State-owned investment company, have proven oil reserves of more than 340 million barrels and a current daily output of 50,000 barrels, Nations Energy said in a statement yesterday.
http://www.chinadaily.com.cn/bizchina/2006-10/27/content_718250.htm
April 26th, 2007 at 7:05 pm
The Dollar’s Full-System Meltdown
The Dollar’s Full-System Meltdown
By Mike Whitney
10/30/06 “Information Clearing House” — – The U.S. Dollar is kaput. Confidence in the currency is eroding by the day.
A report in The Sydney Morning Herald stated, “Australia’s Treasurer…
April 26th, 2007 at 7:06 pm
Iran to replace dollar with euro in foreign trade: Finance Minister
TEHRAN, Dec. 4 (Mehr News Agency) – Iran has decided to replace dollar with euro in its foreign trade given the continual impediments and hostile policies directed by U.S. toward the country, Iranian finance minister said on Monday.
more:
http://www.payvand.com/news/06/dec/1041.html
April 26th, 2007 at 7:06 pm
Plunging dollar will set world markets reeling
By Heather Stewart, economics correspondent
12/03/06 “The Observer” — — The slowdown in the US economy, which has sent the dollar into freefall over the past fortnight, will have devastating knock-on effects in markets around the world, analysts warn.
more, plus comments:
http://www.informationclearinghouse.info/article15798.htm
April 26th, 2007 at 7:07 pm
Iran to replace dollar with euro
TEHRAN: Iran announced on Monday it would replace the dollar with the euro in foreign transactions and state-held foreign assets, in an apparent response to mounting US pressure on its banking system.
“The government has ordered the central bank to replace the dollar with the euro to limit the problems of the executive organs in commercial transactions,” government spokesman Gholam Hossein Elham told reporters.
“We will also employ this change for Iranian assets (in dollars) held abroad.” Amid US allegations that Tehran funds militant groups and is seeking a nuclear weapon, reports have suggested the US treasury has put major pressure on European banking giants to halt transactions involving Iranian clients.
Bankers in Iran have complained in recent weeks that it was becoming increasingly difficult to receive Iranian-held money denominated in dollars from European bank accounts. They said that this was because of US pressure on European banking giants not to allow dollar-denominated funds to be sent into, or out of, the Islamic republic.
Elham implied the move would apply to oil revenues from the world’s number four crude producer, although it would be difficult for Iran to force oil buyers to pay for all of its crude oil in euros.
“Foreign income sources and oil revenues will be calculated in euros and we will receive them in euros in order to put an end to our dependence on the dollar,” Elham said. In reality, Iran could still receive payment for oil in dollars and then convert it into euros for the state budget.
The move comes amid mounting pressure from the United States for the UN Security Council to agree sanctions against Iran over its controversial nuclear programme. Elham added that Iran’s budget would in future be calculated in euros.
“Until now the budget has been calculated according to revenues in dollars, but this calculation will now change,” he said. Economy Minister Davoud Danesh Jafari had already said in November that Iran would carry out transactions with currencies other than the dollar and its use of the greenback would drop to a minimum level.
Morteza Tamadon, a member of the government’s budget and planning commission, said the government was looking to reduce its dependence on the dollar due to the greenback’s recent slump as well as because of US pressure.
“Iran wants to reduce this vulnerability,” he said, adding that the most reasonable option for the government would be to use a basket mixing both currencies. “This is a political manoeuvre as a reaction to the US ban on dollar transactions with Iran,” said leading economist Mohammad Reza Behzadian.
However he cast doubt on whether Iran would ever be able to demand that all foreign exchange payments for its oil be made in euros. “Iran has said that 60 per cent of oil sales are already being carried out in dollars. I suppose the government would keep the remaining amount in dollars because it has to.
http://www.thenews.com.pk/daily_detail.asp?id=36064
April 26th, 2007 at 7:10 pm
Dollar drops; UAE selling US currency, buying euros
Posted online: Thursday, December 28, 2006 at 0000 hours IST
DEC 27 : The dollar dropped the most in more than a week against the euro as the United Arab Emirates said it will convert some of its reserves of US assets into the European currency.
The US currency also had its biggest decline versus the yen this month before a US report that may show consumer confidence fell for a third straight month, fuelling bets the Federal Reserve will lower interest rates next year. The dollar has slipped 10% versus the euro this year, its first slide since 2004.
“The report is hard evidence that diversification is happening,” said Shaun Osborne, chief currency strategist at TD Securities Inc in Toronto. “This is negative for the dollar in a broad sense as it reflects falling confidence in the currency.”
http://www.financialexpress.com/fe_full_story.php?content_id=150079
April 26th, 2007 at 7:11 pm
My thanks for this to an anonymous poster at
INFORMATION CLEARINGHOUSE
http://www.informationclearinghouse.info/
THE UNITED STATES IS INSOLVENT
http://www.financialsense.com/fsu/editorials/martenson/2006/1217.html
Oil producers shun dollar
http://www.ft.com/cms/s/277471c2-8889-11db-b485-0000779e2340.html
Washington On Unfunded Paper Money
http://www.barefootsworld.net/gwpapermoney.html
China To Dump One Trillion In U.S. Reserves!!!! - Breaking News
http://fourwinds10.com/NewsServer/ArticleFunctions/ArticleDetails.php?ArticleID=12395
US dollar weakness likely to crash global stocks
http://www.ameinfo.com/85966.html
Venezuela, Oil Producers Buy Euro as Dollar, Oil Fall (Update1)
http://www.bloomberg.com/apps/news?pid=20601103&refer=news&sid=aCVBzwWdstPk
Will Iran’s oil kill the U.S. dollar?
http://www.aljazeera.com/cgi-bin/review/article_full_story.asp?service_ID=9752
How low will the dollar go?
http://dissidentnews.wordpress.com/2006/12/06/how-low-will-the-dollar-go/
Santa Claus knows… the real figures of US retail trade in November 2006
http://www.leap2020.eu/Santa-Claus-knows-the-real-figures-of-US-retail-trade-in-November-2006_a308.html?PHPSESSID=ec6da97ccfeca4d75296c2583634df44
PAULSON AND THE PLUNGE PROTECTORS
http://www.surfingtheapocalypse.net/cgi-bin/forum.cgi?read=156626
Wake up people.. your being lead down a dark road. That road is to dump US dollars for a new currency.
Amero!!
Anonymous | 12.27.06 - 4:33 pm | #
April 26th, 2007 at 7:12 pm
The Great Dollar Crash of 07
Mike Whitney
Clearly, the well is running dry; the housing bubble is hang-gliding into the abyss and there’s nothing Fed-master Bernanke can do to save it from its inevitable crash-landing.
The central banks around the world are now watching for any sign that the American consumer is about to give up the ghost. As soon as that happens, bank managers everywhere will swing into action, ditch their U.S.Dollars and head for the exits. When the “global engine” sputters to a halt; it’ll be curtains for the greenback.
more
http://www.ichblog.eu:80/content/view/405/2/
April 26th, 2007 at 7:13 pm
Iran’s crude customers shifting currency
Fri, 23 Mar 2007 12:33:10
Iran’s efforts to switch from U.S. dollar to other currencies in crude oil deals appear to be progressing.
An official with Iran’s oil ministry says 60% of payments are now made in non-dollar currencies.
The U.S. has been trying to prevent overseas banks doing dollar deals with Iran, a move which Washington leaders think could undermine the Iranian economy.
However, Tehran has proved those efforts ineffective by introducing a currency shift in crude deals.
Iran has succeeded in ensuring that almost all European and some Asian clients have agreed to pay in currencies other than U.S. dollars, a senior oil official said on Thursday.
Tehran has informed its clients that it would welcome their decisions to swap trade from the U.S. dollar to a mixture of currencies, Hojjatollah Ghanimifard, the director of international affairs of the National Iranian Oil Company (NIOC), has told Reuters.
This is based on commercial reasons such as the weak dollar.
Iran’s currency shift policy was provoked by a decision by Washington last September to impose U.S. dollar sanctions on the Bank Sederat of Iran (BSI).
This, as Ghanimifard has emphasized, made Iran push for payment in euros and other currencies due to concerns about the weak state of the greenback.
Nevertheless, the official emphasized that payments are still based on dollar pricing.
“Pricing as you know is based on the quotations that we get from the international market and when the international market quotes anything for crude or for the products all of them are for the U.S. dollar,” Ghanimifard said.
With exports hovering around 2.4 million barrels per day, Iran’s annual income from crude sales stand at an average of above $40 billion.
Iran’s leading crude clients are the big Asian consumers Japan and China with Italy and France the leading European clients.
http://www.presstv.ir/detail.aspx?id=3538§ionid=351020103
April 26th, 2007 at 7:13 pm
Gulf economies to ‘drop the dollar’
Nasser al-Shaali believes Gulf states will look
at eastern markets ‘aggressively’ [Reuters]
Gulf economies will move away from a dollar currency peg and shift foreign exchange reserves away from dollar to other currencies, including the Chinese yuan, the chief executive of Dubai International Financial Centre (DIFC) has said.
Nasser al-Shaali noted that the UAE central bank had already started buying euros - part of its strategy to move about 10 per cent of its reserves into the single European currency before the end of the year.
“We’ve seen, for example in the case of the UAE central bank, a movement into the euro,” al-Shaali told the Reuters Middle East Investment Summit.
“In the future, most likely, we predict some of the economies in the region will adopt the Chinese yuan currency as well,” he said, noting that he was not aware of that happening at the moment.
He said the appetite of the region as a whole was to increasingly diversify exposure.
“The investment strategies of Dubai Holdings entities, Kuwait Investment Authority and so on … you will see a lot of these bodies start looking at Eastern Asia more aggressively along with a lot of institutional and private investors in the region,” he said.
Deadlines
Saudi Arabia, the largest Gulf Arab economy, as well as Qatar, Oman and Bahrain have ruled out changes to their dollar pegs, adopted in preparation for a monetary union planned for 2010.
But the UAE and Kuwait, the third largest economy, have questioned the peg after the dollar fell about 10 per cent against the euro last year.
A Reuters poll of 15 analysts last week showed Gulf Arab states will probably not meet the deadline for currency union as member nations grapple with inflation and budget criteria, but Kuwait may revalue its currency before then.
Twelve of the 15 analysts, surveyed between March 16-20, said it was unlikely or very unlikely that the six members of the Gulf Corporation Council (GCC), representing the world’s biggest oil exporting region, would meet its single currency target in three years
http://english.aljazeera.net/NR/exeres/B09C0BC3-9CFC-4F8C-84B9-C8AC743C7389.htm
April 26th, 2007 at 7:14 pm
Russian general on why Iran is being attacked
This problem itself is by no means something secret - it is the possibility of a crash of the global financial system based on the US dollar. Currently the mass of US currency exceeds the total worth of US assets by more than a factor of ten. Everything in the US - industry, buildings, high-tech, and so on - has been mortgaged more than ten times all over the world. A debt of such proportions will never be repaid - it can only be relieved.
The dollar amounts on the accounts of individuals, organizations, and state treasuries are a virtual reality. These records are not secured by products, valuables or anything that exists in reality.
Writing-off this US indebtedness to the rest of the world would turn the majority of its population into deceived depositors. It would be the end of the well-established rule of the golden calf. The significance of the coming events is truly epic. This is why the aggressor ignores the global catastrophic consequences of its offensive. The bankrupt ‘global bankers’ need a force major event of global proportions to get out of the situation.
The solution is already in the plans. The US has nothing to offer the rest of the world to save the declining dollar except for military operations like the ones in Yugoslavia, Afghanistan, and Iraq. But even these local conflicts only yield short-term effects. Something a lot greater is needed, and the need is urgent. The moment is drawing closer when the financial crisis will make the world realize that all of the US assets, all of its industrial, technological, and other potentials do not rightfully belong to the country. Then, it must be confiscated to compensate the victims, and the rights of ownership of everything bought for dollars all over the world - everything drawn from the wealth of various nations - are to be revised.
http://www.globalresearch.ca/index.php?context=viewArticle&code=20070409&articleId=5311
April 26th, 2007 at 7:15 pm
At the high table of high finance…
The G7 (Britain, Canada, France, Germany, Italy and Japan and the United States) have just had a meeting of finance ministers, to which they invited Saudi Arabia, United Arab Emirates, China, and Russia, all countries which have large holdings of $US. These large holdings (China has $US 1.2 trillion) are normally just sat on in the form of US treasury notes, meaning they are loaned back to the US government at minimal interest rates. If all this money went into circulation there would be enormous inflation in the US and their dollar would crash, and the dollar has declined steeply in recent days, so we can imagine that the purpose of this meeting was to ask these countries what their intentions are.
Saudi Arabia has always been 100% pro-US and the $US but they are starting to quibble … the UAE has said they will diversify. China has moved a significant part of its holding to euro already, but seems aware that if they move too quickly, they will start a rush, the dollar will crash and their hard-won $1.2 trillion will be worthless. Instead they informed the meeting that they have formed an investment company to handle the dollars, but declined to say where the money was to be invested exactly. This would indicate that before the dollars lose all value, they want to convert them into ownership of foreign assets … like land, mines, companies etc. which could have the effect of causing prices to rise across the board …. an apparently booming US stockmarket while the dollar falls.
Russia, which is now dollar-rich from energy sales, and which begged for years to be admitted to the G7, snubbed the meeting altogether.
Summary: the geniuses who controlled the world’s money for the past century blew it, and now they have been told
May 3rd, 2007 at 5:11 pm
It’s true; the stock market IS floating on a cloud of cheap credit created by a humongous trade deficit, artificially low interest rates, and a 10% yearly expansion of the money supply
Post Mortem for the Stock Market
By Mike Whitney
http://www.ichblog.eu/content/view/1349/1/
July 13th, 2007 at 7:42 pm
Iran Asks Japan to Pay Yen for Oil, Start Immediately (Update3)
By Megumi Yamanaka
The Japanese oil tanker Mogamigawa July 13 (Bloomberg) — Iran asked Japanese refiners to switch to the yen to pay for all crude oil purchases, after Iran’s central bank said it is reducing holdings of the U.S. dollar.
Iran wants yen-based transactions “for any/all of your forthcoming Iranian crude oil liftings,” according to a letter sent to Japanese refiners that was signed by Ali A. Arshi, general manager of crude oil marketing and exports in Tehran at the National Iranian Oil Co. The request is for all shipments “effective immediately,” according to the letter, dated July 10 and obtained by Bloomberg News.
Full article: http://www.bloomberg.com/apps/news?pid=20601087&sid=aLaColVYu5LA&refer=worldwide
September 9th, 2007 at 10:35 pm
Last week in Australia, at the Asia Pacific Cooperation conference, the leaders of China, Russia, Japan and the US had an opportunity for private discussions.
No statements were issued about Iraq or Iran or oil, but reflect on this brief report from the Sydney Morning Herald:
Dr Zhu Min, the executive vice-president of the Bank of China, the country’s second-biggest lender, agreed a shift of financial power away from the US, now at the centre of a global storm stemming from its subprime mortgage meltdown, would lead to a “more healthy” global financial system.
China had the capacity to become the centre of a powerful Asian financial hub, he said.
September 9th, 2007 at 10:35 pm
If instead of dumping the US$, the Chinese use their reserves and their economy as the basis of a new alternative world banking system, all nations will be freed from the monopoly abuses perpetrated by New York. These abuses are not only economic, they are political. For example, the US would not be able to confiscate billions in Iranian or Iraqi oil revenues as they have done in the past when those countries defied the US, because the funds would not be in US banks.
For more compliant countries like my own, Australia, politicians could no longer be manipulated by suggestions that votes for this political policy would mean a high credit rating and low interest rates while votes for another meant a low credit rating.
Many may be wary of the newly-powerful Chinese, but for Australia, they have demonstrated in the four decades since full recognition and trade began, that they are honest businessmen, committed to win-win outcomes and mutual respect.
October 4th, 2007 at 4:33 am
By Ambrose Evans-Pritchard
Last Updated: 12:12am BST 04/10/2007
Vietnam is planning to cut its purchases of US Treasuries and other dollar bonds, raising fears that Asian central banks with control over two thirds of the world’s foreign reserves may soon join the flight from US assets.
Fears of dollar collapse as Saudis take fright
China threatens `nuclear option’ of dollar sales
Jump off the deranged bull now
The Saigon Times said this morning that the State Bank of Vietnam was abandoning the attempt to hold down the Vietnamese currency through heavy purchases of dollars. The policy is causing the economy to overheat, driving up inflation to 8.8pc.
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Vietnam, which has mid-sized reserves of $40bn, is seen as weather vane for the bigger Asian powers.
Together they hold $3,575bn of foreign reserves, over 65pc of the world’s total. China leads with $1,340bn, but South Korea, Taiwan, Singapore, and even Thailand all built up massive holdings.
The concern is that once one or two members of the region jump ship, it could set off a broader scramble. None of them want to be the last one left holding a devalued asset. Vietnam’s central bank said this week that it would move “gradually” to a floating currency.
Separately, the gas-rich Gulf state of Qatar announced that it had cut the dollar holdings of its $50bn sovereign wealth fund from 99pc to 40pc, switching into investments in China, Japan, and emerging Asia.
The move is intended to increase long-term returns for future generations, but it can easily be seen as a vote of no confidence in US economic management.
The drastic shift by the Qatar Investment Authority is a warning that petro-dollar powers with some $3,500bn under management may pull the plug on the heavily endebted US economy — which needs to suck in the majority of the world’s savings just to stay afloat.
“OPEC and Asia have been the two blocks funding the US current account deficit,” said Hans Redeker, currency chief at BNP Paribas.
“Vietnam is a relatively small country but it is symptomatic of Asia. The entire region is seeing inflation move up as a result of mercantilist policies of holding down their currencies with ‘dirty floats’, which are designed to help their export sectors. They need to change monetary policy, ” he said.
There have been reports that China is already pulling out of US bonds to fund its new sovereign wealth fund. Foreign central banks slashed holdings by $32bn in the last two weeks of August. We will not know which country was responsible the Treasury’s TIC data is released in November.
Japan also has colossal reserves, now near $914bn, but it is does not face the same inflationary threat as the rest of Asia, and is in any case an intimate military ally of the United States.
It is likely to coordinate its dollar policy very closely with Washington for geo-strategic reasons.
Saudi Arabia set off jitters in the currency markets last month when it decided not to cut interest rates in lockstep with the US Federal Reserve, raising doubts about its commitment to the Saudi dollar peg. But it too has strong political reasons to stick with America.
Kuwait has already abandoned its peg, fearing that its economy would overheat if it continued to import America’s loose monetary policies.
Separately, Iran said it would soon refuse to accept dollars for its oil exports, preferring to be paid in a “more credible currency”.
It already receives 65pc of payments in euros and 20pc in yen, but insisted that the remaining 15pc in dollars entailed an excessive risk of devaluation.
The demarche is largely policitcal, since oil is a fungible commodity and the currency markets are highly liquid.
However, if a number of OPEC suppliers began demand long-term futures contracts in euros instead of dollars, this would have an impact over time.
http://www.telegraph.co.uk/money/main.jhtml;jsessionid=HU3MNOZRAFXIDQFIQMGSFFOAVCBQWIV0?xml=/money/2007/10/03/bcnviet103.xml
October 4th, 2007 at 4:35 am
China issues treasury bonds
Editor: Lin Li
BEIJING, Sept. 24 (Xinhua) — About 35 billion yuan of ten-year special treasury bonds were released on Monday, the second batch of a total 200 billion yuan in treasury bonds to be made available to the general public.
The Chinese Ministry of Finance launched the first batch of 15-year special treasury bonds valuing 31.97 billion yuan on Sept. 18.
The ministry said the second batch of bonds, on offer from Sept. 24-26, have an annual yield of 4.46 percent, and will be tradable from Sept. 28 through the national inter-bank bond market and stock markets.
Another batch of 32-billion-yuan bonds will be issued from Sept. 27 to Oct. 9 and will be tradable from Oct. 12, said the ministry.
The ministry announced on Sept. 10 that it would issue 200 billion yuan in special treasury bonds as part of a plan to raise 1.55 trillion yuan to fund the country’s new foreign exchange investment firm.
“The bond selling to the public will help ease liquidity, prevent the economy from overheating and strengthen the macro-control policy,” the ministry said.
The special treasury bonds will be issued in two groups, with the first 100 billion yuan to be issued this month in three phases, while the sale of the remaining 100 billion yuan is scheduled for the fourth quarter.
Private investors can trade the bonds through the pilot commercial banks - branches of the Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China and China Construction Bank, said the ministry.
In June, China’s legislature approved the issuance of 1.55 trillion yuan of special treasury bonds by the Ministry of Finance to buy 200 billion U.S. dollars of the foreign exchange reserve for a state investment firm to better use the country’s huge foreign exchange reserves.
At the end of August, the ministry issued 600 billion yuan of special treasury bonds targeting the country’s commercial banks with an annual interest rate of 4.3 percent. ( One U.S. dollar equals to 7.51 yuan)
October 4th, 2007 at 4:39 am
The dollar is going down as a reserve currency, and the eurozone is not big enough to take up the burden. These moves appear to me to be the establishment of an independent Western Pacific alternative to the current structure.
Projection: Less Chinese dollar holdings going to US bonds, and more into real estate, solid companies with real assets etc.
China/Japan deal:
China, Japan renew currency swap agreement
www.chinaview.cn 2007-09-22 17:04:33
BEIJING, Sept. 22 (Xinhua) — China and Japan has renewed their currency swap agreement, according to a statement released by the People’s Bank of China.
China’s central bank governor Zhou Xiaochuan and Bank of Japan governor Toshihiko Fukui signed the agreement in Tokyo on Sept. 20.
The agreement was sponsored in 2002 as part of the Chiang Mai agreement to head off a repeat of Asia’s 1997/98 financial crisis.
Under the Chiang Mai accord, named after the northern Thai resort town where it was signed, regional central banks agreed to make hard currency available to fend off speculative attacks.
The agreement had played an important role in strengthening regional financial cooperation in East Asia, maintaining regional financial market stability and promoting East Asian economic development, said the statement.
Zhou and Toshihiko Fukui also exchanged views on the two country’s latest economic and financial situation, global financial problems and other topics of mutual interest, according to the statement.
October 27th, 2007 at 4:08 am
Gold Climbs to 27-Year High as Oil Surges, Dollar Declines
By Pham-Duy Nguyen
Oct. 26 (Bloomberg) — Gold rose to the highest since 1980 after crude oil surged to a record and the dollar fell to the lowest ever against the euro, boosting the appeal of the precious metal as an investment. Silver also gained.
Gold has rallied 23 percent this year, heading for the seventh straight annual gain, as a weak dollar and rising energy costs sparked demand for an inflation hedge. Investment in the StreetTracks Gold Trust, an exchange-traded fund backed by bullion, is up 31 percent this year to a record 594 metric tons.
“Investors have to have a way to hedge inflationary risks, and gold is perhaps the best vehicle to accomplish that,” said Matt Zeman, metals trader at LaSalle Futures Group Inc. in Chicago.
Gold futures for December delivery rose $16.50, or 2.1 percent, to close at $787.50 an ounce on the Comex division of the New York Mercantile Exchange. After the end of floor trading, the price reached $789.50, the highest for a most-active contract since Jan. 21, 1980, the day gold reached a record $873.
Silver futures for December delivery jumped 37.5 cents, or 2.7 percent, to $14.28 an ounce. The metal is up 10 percent this year.
Crude-oil futures reached a record $92.22 a barrel today after the U.S. accused Iran’s military of supporting terrorism. Iran is the world’s second-largest holder of oil reserves. After the Middle East country cut supplies in the late 1970s, oil costs doubled in a year, triggering a surge in the inflation rate and demand for gold.
“The idea that the next war is around the corner and that this one will impair oil supplies, as opposed to securing them, has the crowd on edge,” said Jon Nadler, an analyst at Kitco Minerals & Metals Co. in Montreal.
Middle East Demand
Gold also gained on speculation that investors in the Middle East will buy the metal, instead of U.S. Treasuries, should conflict escalate in the region.
“This is safe-haven buying because of the potential for an expanded conflict in the Middle East,” said Frank McGhee, head metals trader at Integrated Brokerage Services LLC in Chicago. “If you’re full of petro-dollars, and they’re going to ease U.S. interest rates again, you’re going to put your money in euros or gold.”
Gold demand in the Middle East rose 20 percent to 97.5 metric tons in the second quarter from a year earlier, according to the latest figures from the producer-funded World Gold Council.
The dollar fell to $1.4393 against the euro, the lowest ever, on speculation the Federal Reserve will cut interest rates again this year.
The Fed lowered the overnight lending rate 0.5 percentage point to 4.75 percent on Sept. 18, the first cut in four years. Interest-rate futures show a 94 percent chance the Fed will reduce the rate to 4.5 percent by Oct. 31, up from an 86 percent chance yesterday.
Last year, gold gained 23 percent while the dollar fell 10 percent against the euro. The dollar has declined 8.3 percent against the euro so far this year.
January 27th, 2008 at 5:14 pm
January 2008
Saudi to debate riyal-dollar peg
RIYADH: Saudi Arabia’s finance minister and central bank governor will appear before a council to discuss the riyal’s peg to the US dollar and a surge in inflation, a council member said yesterday.
Inflation in Saudi, which pegs its riyal to the dollar, rose to a 16-year high of 6.5 per cent in December, partly driven by a rise in global commodity prices and the declining US currency.
The Shura Council, whose members are appointed by King Abdullah, will meet Finance Minister Ibrahim Al Assaf and Saudi Arabian Monetary Agency governor Hamad Saud Al Sayyari on February 10, Mohammad Al Zulfa said.
“The finance minister and the central bank governor were invited to debate these issues, discuss this dollar peg debate, its repercussion and what the government plans to do about it,” Zulfa said.
The 120-member Shura can review draft legislation and make recommendations, which are not binding on the government.
Saudi Arabia has been trying to offset the effect of higher prices on its 25 million people through measures such as subsidies on imported rice and baby milk, introduced last month by order of the king.
Debate in the Gulf about dollar pegs has intensified because they force central banks to track US monetary policy at a time when the Federal Reserve is cutting interest rates in an effort to stimulate the US economy.
Inflation is now above official interest rates. The negative real interest rate environment could deepen if the Fed cuts again when it meets this week.
source: http://www.gulf-daily-news.com/Story.asp?Article=207044&Sn=BUSI&IssueID=30314
February 13th, 2008 at 11:44 pm
Iran’s Oil Bourse Will Start Operations Feb. 17, IRNA Reports
By Ayesha Daya
Feb. 13 (Bloomberg) — Iran’s oil exchange will start operations on Feb. 17, the official Iranian news agency IRNA said, citing the country’s oil minister.
The Iranian rial will be used for all transactions on the Tehran Oil Bourse, Gholamhossein Nozari said today, according to IRNA.
Iran, the second-largest producer in the Organization of Petroleum Exporting Countries, was originally expected to start its own oil-trading market in 2005.
To contact the reporter on this story: Ayesha Daya in Dubai
October 6th, 2009 at 9:09 pm
Half a decade later, the mainsteam media have this piece of original investigative reporting:
The demise of the dollar
In a graphic illustration of the new world order, Arab states have launched secret moves with China, Russia and France to stop using the US currency for oil trading
By Robert Fisk
Tuesday, 6 October 2009
Iran announced late last month that its foreign currency reserves would henceforth be held in euros rather than dollars.
Iran announced late last month that its foreign currency reserves would henceforth be held in euros rather than dollars.
In the most profound financial change in recent Middle East history, Gulf Arabs are planning – along with China, Russia, Japan and France – to end dollar dealings for oil, moving instead to a basket of currencies including the Japanese yen and Chinese yuan, the euro, gold and a new, unified currency planned for nations in the Gulf Co-operation Council, including Saudi Arabia, Abu Dhabi, Kuwait and Qatar.
Secret meetings have already been held by finance ministers and central bank governors in Russia, China, Japan and Brazil to work on the scheme, which will mean that oil will no longer be priced in dollars.
The plans, confirmed to The Independent by both Gulf Arab and Chinese banking sources in Hong Kong, may help to explain the sudden rise in gold prices, but it also augurs an extraordinary transition from dollar markets within nine years.
Related articles
* Econoblog: The markets have spoken on the future of the dollar
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* Sean O’Grady: China will overtake America, the only question is when
The Americans, who are aware the meetings have taken place – although they have not discovered the details – are sure to fight this international cabal which will include hitherto loyal allies Japan and the Gulf Arabs. Against the background to these currency meetings, Sun Bigan, China’s former special envoy to the Middle East, has warned there is a risk of deepening divisions between China and the US over influence and oil in the Middle East. “Bilateral quarrels and clashes are unavoidable,” he told the Asia and Africa Review. “We cannot lower vigilance against hostility in the Middle East over energy interests and security.”
This sounds like a dangerous prediction of a future economic war between the US and China over Middle East oil – yet again turning the region’s conflicts into a battle for great power supremacy. China uses more oil incrementally than the US because its growth is less energy efficient. The transitional currency in the move away from dollars, according to Chinese banking sources, may well be gold. An indication of the huge amounts involved can be gained from the wealth of Abu Dhabi, Saudi Arabia, Kuwait and Qatar who together hold an estimated $2.1 trillion in dollar reserves.
The decline of American economic power linked to the current global recession was implicitly acknowledged by the World Bank president Robert Zoellick. “One of the legacies of this crisis may be a recognition of changed economic power relations,” he said in Istanbul ahead of meetings this week of the IMF and World Bank. But it is China’s extraordinary new financial power – along with past anger among oil-producing and oil-consuming nations at America’s power to interfere in the international financial system – which has prompted the latest discussions involving the Gulf states.
Brazil has shown interest in collaborating in non-dollar oil payments, along with India. Indeed, China appears to be the most enthusiastic of all the financial powers involved, not least because of its enormous trade with the Middle East.
China imports 60 per cent of its oil, much of it from the Middle East and Russia. The Chinese have oil production concessions in Iraq – blocked by the US until this year – and since 2008 have held an $8bn agreement with Iran to develop refining capacity and gas resources. China has oil deals in Sudan (where it has substituted for US interests) and has been negotiating for oil concessions with Libya, where all such contracts are joint ventures.
Furthermore, Chinese exports to the region now account for no fewer than 10 per cent of the imports of every country in the Middle East, including a huge range of products from cars to weapon systems, food, clothes, even dolls. In a clear sign of China’s growing financial muscle, the president of the European Central Bank, Jean-Claude Trichet, yesterday pleaded with Beijing to let the yuan appreciate against a sliding dollar and, by extension, loosen China’s reliance on US monetary policy, to help rebalance the world economy and ease upward pressure on the euro.
Ever since the Bretton Woods agreements – the accords after the Second World War which bequeathed the architecture for the modern international financial system – America’s trading partners have been left to cope with the impact of Washington’s control and, in more recent years, the hegemony of the dollar as the dominant global reserve currency.
The Chinese believe, for example, that the Americans persuaded Britain to stay out of the euro in order to prevent an earlier move away from the dollar. But Chinese banking sources say their discussions have gone too far to be blocked now. “The Russians will eventually bring in the rouble to the basket of currencies,” a prominent Hong Kong broker told The Independent. “The Brits are stuck in the middle and will come into the euro. They have no choice because they won’t be able to use the US dollar.”
Chinese financial sources believe President Barack Obama is too busy fixing the US economy to concentrate on the extraordinary implications of the transition from the dollar in nine years’ time. The current deadline for the currency transition is 2018.
The US discussed the trend briefly at the G20 summit in Pittsburgh; the Chinese Central Bank governor and other officials have been worrying aloud about the dollar for years. Their problem is that much of their national wealth is tied up in dollar assets.
“These plans will change the face of international financial transactions,” one Chinese banker said. “America and Britain must be very worried. You will know how worried by the thunder of denials this news will generate.”
Iran announced late last month that its foreign currency reserves would henceforth be held in euros rather than dollars. Bankers remember, of course, what happened to the last Middle East oil producer to sell its oil in euros rather than dollars. A few months after Saddam Hussein trumpeted his decision, the Americans and British invaded Iraq.