Tag Archives: Petro-yuan

Contrarian Thoughts on the Petro-Yuan and Gold-Backed Currencies, by Charles Hugh Smith

Posted on January 20, 2023 | Leave a comment

Charles Hugh Smith has a pretty good handle on how currencies work. From Smith at oftwominds.com:

Rather than cheer the concept of a new currency, we’re better served to look at the velocity of that currency and the cycles of investing that currency in assets denominated in that currency for a low-risk return.

Longtime readers know not to expect me to rubber-stamp anything, be it the status quo or proposed alternatives. Our interests are best served by screening everything through the mesh of independent analysis, a.k.a. contrarianism. Which brings us to the two sources of alt-media excitement in the currency space, the petro-yuan and another wave of proposed gold-backed currencies.

I’m all for competing currencies. The more transparent and open the market for currencies, the better. In my view, everyone should be able to buy and trade whatever currencies they feel best suits their goals and purposes.

In all the excitement over de-dollarization, some basics tend to get overlooked.

1. The yuan remains pegged to the US dollar, so it remains a proxy for the USD. It will only become a true reserve currency when China lets the yuan float freely on the global FX market and yuan-denominated bonds also float freely on global bond markets. In other words, a currency can only be a reserve currency rather than a proxy if the price and risk of the currency is discovered by global markets, not centralized monetary/state authorities.

2. Most commentators stop on first base of the oil-currency cycle: China buys oil from exporting nations by exchanging yuan for oil. So far so good. But what can the oil exporters do with the yuan? That’s the tricky part: the petro-yuan has to work not just for China but for the oil exporters who will be accumulating billions of yuan.

The oil exporters can hold some yuan as reserves, but the global market for yuan is not very large. What assets can they buy with yuan? Again, the global market of assets denominated in yuan is limited. The oil exporters can buy assets in China, of course, but with China’s property bubble finally popping, deglobalization sapping its export sector and Xi’s widespread disruption of private capital, the bloom is off the China Story in fundamental ways.

Why would oil exporters invest billions of yuan while Chinese wealth is leaving China?

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Posted in Currencies, Debt, Economics, Economy, Geopolitics, Governments

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Why We Shouldn’t Underestimate China’s Petro-Yuan Ambitions, by Alex Kimani

Posted on January 7, 2023 | Leave a comment

It’s not clear if China wants a petro-yuan to further its own geopolitical designs or out of disgust with the U.S. and the dollar. Probably some of both. From Alex Kimani at oilprice.com:

  • Credit Suisse’s Zoltan Pozsar: the de-dollarization of the global oil industry is in full swing–even if we can’t see the final end game from here.
  • Some 40% of proven oil reserves belonging to OPEC+ members is owned by Russia, Iran and Venezuela–all of whom are selling to China at major discounts.
  • Chinese President Xi Jinping has pledged to ramp up efforts to promote the use of the yuan in energy deals.

The de-dollarization of the global oil industry is in a treacherous mission creep phase. Things like this don’t happen quickly, but determinedly and gradually, not exactly fitting into today’s media headline game that only considers instant developments. But it is happening and the tide will not be turned based on current and near and medium-term geopolitical developments.  Credit Suisse’s Zoltan Pozsar recently warned clients, in essence, that the de-dollarization of the global oil industry is in full swing–even if we can’t see the final end game from here.

And it’s all about China, of course. Pozsar does the OPEC math for us.

Some 40% of proven oil reserves belonging to OPEC+ members is owned by Russia, Iran and Venezuela–all of whom are selling to China at major discounts, and all of whom are on board with Beijing’s petro-yuan plan.

The countries of the Gulf Cooperation Council (GCC)–most notably Saudi Arabia and the UAE–account for another 40% of proven oil reserves, and they are increasingly cozying up to China.

The remaining 20% is also accessible to China, and China is already the largest importer of crude in the world.

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Posted in Business, Currencies, Energy, Geopolitics, Governments, Trade

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The real reason Western media & CIA turned against Saudi MBS, by Darius Shahtahmasebi

Posted on December 15, 2018 | Leave a comment

In the eyes of Western politicians and media, Mohammed bin Salman’s unforgivable crime has been his independent, hard-to-control streak, not murder. From Darius Shahtahmasebi at rt.com:

The real reason Western media & CIA turned against Saudi MBS
Mohammed bin Salman (r) and Vladimir Putin at the G20 Summit Conference Centre in Buenos Aires © Global Look Press / Ralf Hirschberger
Forces are aligning against Saudi Arabia’s Crown Prince, lead by elements within the CIA and strong players in the mainstream media. But what is really behind this deterioration in relationship, and what are its implications?

Following the brutal murder of Washington Post columnist Jamal Khashoggi, western media and various entities, including the CIA, appear to have turned their back on Saudi Crown Prince Mohammad Bin Salman (MBS). In response to the scandal, the Guardian released a video which its celebutante, Owen Jones, captioned“Saudi Arabia is one of the biggest threats on Earth. Time to stop propping up its repulsive regime.”

The Guardian was not alone in its condemnation. “It’s high time to end Saudi impunity,” wrote Hana Al-Khamri in Al-Jazeera. “It’s time for Saudi Arabia to tell the truth on Jamal Khashoggi,” the Washington Post’s Editorial Board argued. Politico called it “the tragedy of Jamal Khashoggi.”

Even shadowy think-tanks like the Council on Foreign Relations (CFR) and the Atlantic Council released articles criticising Saudi Arabia in the wake of Khashoggi’s death.

A number of companies began backing away from Saudi money after the journalist’s death, including the world’s largest media companies such as the New York Times, the Economist’s editor-in-chief Zanny Minton Beddoes, Arianna Huffington, CNN, CNBC, the Financial Times, Bloomberg, Google Cloud CEO, just to name a few.

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Posted in Crime, Cronyism, Currencies, Energy, Foreign Policy, Geopolitics, Governments, History, Media, Politics

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Petro-yuan is the newest weapon for the China-Russia-Iran anti-USD alliance, by Jeff Brown

Posted on April 10, 2018 | 1 comment

China, Russia, and Iran’s move away from trading oil in dollars may or may not have dire consequences for the dollar. However, most people in the West are unaware of this potentially important shift, because the media is not covering it. From Jeff Brown at thesaker.is:

Pictured above, the currency symbols for the old Spanish peseta and the Chinese yuan. Maybe Baba Beijing can synthesize the two of them into a cooling looking petro-yuan logo.

After 25 years of dreams, planning, rumors and testing, the Chinese petro-yuan is now official. Right now, almost all global oil trade is conducted in US dollars, using two benchmark varieties of crude, West Texas Intermediate and North Sea Brent, as the industry standards. It is no accident that these two benchmarks are based on imperial crude, American and British, and the irony of this is surely not lost on Baba Beijing (China’s leadership).

China is not selling oil, so the petro-yuan is a futures purchase contract denominated in renminbi for the country to import the stuff. As the world’s biggest importer of hydrocarbons, Baba Beijing has long felt that pricing all its millions of tons of imports should be in its national currency. Why should China pay for Russian natural gas or Venezuelan crude in Western empire’s currency of global financial control, Uncle Sam’s greenback?

Opinions outside China range from being non-plussed, to claiming it is the most important news in modern financial history, but you would have to search far and wide in Eurangloland (NATO, EU, Israel, Australia and New Zealand) and its heavily censored and suppressed media, to see for yourself. Outside the obligatory statement of fact in financial outlets like the Wall Street Journal, Financial Times, Reuters and Bloomberg, silence from the West’s mainstream media is deafening, as this screenshot below shows, when searching the topic. Only one mainstream article showed up on page #1 of the web search and that was CNBC from 2017. Even just looking for “petro-yuan” gives identical results. It’s a Western media black hole.

To continue reading: Petro-yuan is the newest weapon for the China-Russia-Iran anti-USD alliance

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