Is The Rupee-Ruble Oil Trade Disrupting Dollars Decade-long Dominance?

 In Forex Trading

financial institution

Stiff sanctions led by the United States, imposed on Russia means Russian exports cannot be paid in dollars. That’s because the payment has to go through New York clearing, and the U.S. refuses to honour any claim from Russian exporters. Even the overseas dollar wealth of Russian oligarchs and the elite are being frozen and not denied access. The U.S. will surely put pressure on Swiss banks to freeze Russian wealth in that country.

  • Last week, Russia announced that its bullion holdings jumped by approximately 1 million ounces over the past 12 months as its central bank loaded up on gold in the face of Western sanctions.
  • Post 9/11, the world witnessed more and more flashpoints emerging encompassing countries such as Afghanistan, Iraq, Libya, Syria, Lebanon, Sudan and Somalia.
  • Russia, Iran and Venezuela account for about 40% of the world’s proven oilfields, and the three sell their oil in exchange for yuan.
  • You just have to love this industry and the speed in which it develops!

THE FIRST us Mint and the establishment of the Federal Monetary system took place in 1792 due to the Coinage Act. The denomination of the coins was also set up based on their value in copper, silver or gold. The first $10 demand bill came into circulation that featured Abraham Lincoln after the U.S. The national banking system and particular guidelines for all the national banks were established in 1863. Now, these national banks had the authority to issue the national currencies.

While the OBOR will expand links between major economies in Asia, Africa, Europe and Latin America, many member countries are possible candidates for yuan-denominated payment transactions. Dr Dan Steinbock is an internationally recognised strategist of the multipolar world and the founder of Difference Group. He has served as Research Director at the India, China and America Institute and Visiting Fellow at the Shanghai Institutes for International Studies and the EU Centre . Expanding use cases of the Unified Payments Interface to instruments beyond bank accounts could lead to revenue generation for Paytm, the payment major’s chief executive Vijay Shekhar Sharma said in an earnings call on Saturday. Rupee reverses gains as dollar inflows end, Asian FX tepidThe dollar index has been rangebound in the run-up to the meeting, as worries over the health of the banking sector and the Fed’s rate hike trajectory have weighed. According to the USD definition, it is the primary currency of the U.S. , expressed with the symbol ‘$’.

To function fully, an exchange requires buyers and sellers involved in actual trade of the underlying commodity. But its domestic oil production is low and mostly comes from government companies, so there are no natural sellers of oil futures and options here. Many governments, including India, have publicly said that they don’t recognise these unilateral sanctions. But companies in these countries comply as they otherwise could lose access to the US financial system, which would be catastrophic for any large commercial entity.

The world’s developed countries met at Bretton Woods, New Hampshire, to peg the trade rate for all currencies to the U.S. dollar. The United States had established the Interstate Oil Compact Commission to join the Texas Railroad Commission in limiting overproduction. Oil-exporting international locations have been eventually motivated to kind OPEC as a counterweight to this concentration of political and economic power.

What does ‘oil money’ mean?

Again in 2019, Crown Prince Mohammed bin Salman visited China and signed an agreement to build a refining and petrochemical complex in Liaoning province as a joint Saudi-Chinese venture, among other deals. The Saudis are angry over the U.S.’s lack of support for their intervention in the Yemen civil war, and over the Biden administration’s attempt to strike a deal with Iran over its nuclear program. Saudi officials have said they were shocked by the precipitous U.S. withdrawal from Afghanistan last year.

Sovereign-wealth funds have additionally begun to supply debt to finance giant takeovers, together with by buy-out teams. On April 4th pif disclosed that it had acquired dozens of stakes in private-equity companies themselves. Perhaps sovereign-wealth funds have been ready for rates of interest to peak earlier than piling into bonds.

Discovery of Energy Resource

Oil prices plunged and are likely to stay relatively subdued for a protracted period. Nevertheless, President Trump signed a historic $110 billion arms deal with Saudi Arabia. After the 1945 Yalta Conference, which effectively divided Europe, the ailing President Franklin D. Roosevelt met Saudi Arabia’s King Ibn Saud. Bypassing the Brits, FDR and Saud agreed to a secret deal, which required Washington to provide Saudi Arabia military security in exchange for secure access to supplies of oil.

By the beginning of 2019, the US became the largest producer of oil in the world. Besides China fighting tooth and nail to capture the space being vacated by the USA, India’s legitimacy in the financial market is still a big worry for the country. Currently, products dominating the Indian financial market like UPI, and RuPay Debit card among others have been punching below their weight. Though RuPay has taken some initiative, UPI’s marketing in the market is still unchartered territory.

Discover videos related to petro dollar US military bases on TikTok.

Even though the know-how of fracking technology was known since the 1980s, the Obama Administration, however, chose to widely deregulate the use of this process only at the time when Russia had once again taken on massive debt. By then, Russia was under so much of debt burden due to heavy loan that they needed the price of oil to be at least $85 dollars a barrel to be able to continue to service debts. Imports of products like crude oil and mobile phones are close to 600 billion dollars. The import of gold too crossed 1000 tonnes which means an outflow of 70 billion dollars of foreign exchange. The total trade deficit this fiscal year will probably reach 200 billion dollars.


Regardless of whether Saudi-China local currency trade deal materializes, Saudi Arabia’s proposed BRICS membership, if it happens, will be a big blow and mark the beginning of the end of the petrodollar. That led to the creation of the petrodollar system, the place the U.S. and Saudi Arabia agreed to set oil costs in U.S. dollars. That meant some other country that purchased oil from the Saudi government must change its forex into U.S. dollars earlier than finishing the sale. That led the remaining OPEC international locations to comply with suit and price their oil in U.S. currency. After the collapse of the Soviet Union in 1991, the United States became the sole superpower in the unipolar world that emerged thereafter. In the follow-up years, the world witnessed a number of flashpoints and regime changes in the quest to maintain the hegemony of the Petro-Dollar system.

South Africa shows a giant middle finger to the United States

«We look forward to developing our relationship as we enter a new Champions League cycle.» As well as owning and pumping money into clubs, Gazprom is also a notable sponsor of the Champions League. The partnership began in 2012 and the European governing body revealed in 2018 that it would be extended until 2021. Bundesliga side Schalke have a long-standing deal with Russian state oil company Gazprom. The partnership, which sees Gazprom appear on the club’s shirts and merchandise, was first established in 2007.

Oil money, as the term suggests, is wealth that has been acquired through the petroleum industry. But what exactly is ‘oil money’ and which clubs are on the receiving end of investment? The sport grants access to a unique global market and brings with it a certain level of prestige, particularly so when it comes to successful clubs.

Press Freedom rates India 161 out of 180 based on faulty data on govt spending on ads, claims it spent 13,000 cr on ads:…

“Unless we have something extraordinary, we are forbidden from pitching anything to them,” says a European asset supervisor. Adia has reduce its workforce from 1,700 to 1,300 since 2021, however new recruits embody a bunch of maths whizzes co-led by an Ivy League professor. The present hiring offensive suggests funds will develop extra impartial, retaining funding companies just for particular companies and market intelligence. It has further engaged in aggressive oil deals with the latter for cheap oil, helping it out at a time when the global west has tried to sanction it. Today, global currency diversification is vital because an overconcentration of foreign assets denominated in the dollar could bring huge collateral damage.

The US began using military power overtly to effect Regime changes. Thus, the quest for energy dominance had begun ensuring the dominance of the PetroDollar as the main currency of the world to trade-in. The US, now bolstered with the high demand of dollar from every corner of the world, started to print more and more dollars without getting affected by the inflation. Thus, it became necessary for the US to seek more and more control of oil and gas reserves world over through covert and over militaristic means. After the fall of the Soviet Union, the world began to witness the US, now unchecked and unchallenged as the sole superpower, adopting a more militaristic approach rather than covert means to protect its hold over the energy markets. The problem for the US had actually begun in 1965 when General Charles de Gaulle, President of France, who by that time, had made France a resurgent economic powerhouse through austerity programmes and had managed to build up gold reserves of the Nation.

The term PetroDollar actually originated in 1973 when the US agreed to provide military protection to Saudi Arabia and even sell them arms and other military equipment in a deal that would see Saudi oil sold the world over in US dollars. Saudi Arabia would also recycle the excess dollars back into the US financial system through US Treasury Bonds. By 1975, every OPEC member had adopted the PetroDollar system agreeing to sell their oil in the American currency. Today, the US dollar makes up for nearly two-thirds of the global economy and serves as the reserve currency for most of the world’s central banks due to the dollar being the primary currency required for purchase or sale of oil and natural gas.

It is because Russia and other countries around the world use the Dollar for their international trade. Apparently, by imposing sanctions on Russia, the United States thought that it would be able to tighten its noose around Russia. He then stated that the time has come when our strengthened financial markets and institutions should strive to become the backbone of international trade. Since countries around the world had to have dollars on hand in order to buy oil , the greenback became the world’s reserve currency, a status formerly enjoyed by the British pound, French franc and Dutch guilder. China buys more than 25% of the oil that Saudi Arabia exports, and if priced in yuan, those sales would boost the standing of China’s currency, and set the Chinese currency on a path to becoming a global petroyuan reserve currency.

The Petrodollar Decouple: A Geopolitical Domino Effect – Impakter

The Petrodollar Decouple: A Geopolitical Domino Effect.

Posted: Fri, 24 Feb 2023 08:00:00 GMT [source]

The increased investment of ‘oil money’ into football has not been without controversy. Manchester City are also funded by UAE money, with the Abu Dhabi-based City Football Group – headed up by Sheikh Mansour – owning the club. City’s chief sponsor is Etihad Airways, which also gives its name to the club’s home stadium. One of the earliest and most notable examples of a football club receiving a boost from the industry is Premier League club Chelsea, who were taken over by Roman Abramovich in 2003. The Russian businessman invested money into the Blues and helped to propel them towards success on the national and continental stages.

Why We Shouldn’t Underestimate China’s Petro-Yuan Ambitions –

Why We Shouldn’t Underestimate China’s Petro-Yuan Ambitions.

Posted: Thu, 05 Jan 2023 08:00:00 GMT [source]

On the other hand, China, alongside emerging economies in South America and Africa, continues to be a big market for fossil fuels, something the oil-producing nations of Iran, Russia and Saudi Arabia cannot afford to neglect. So, baby steps for the Chinese currency are, indeed, being taken. Take the Carbon Border Adjustment Mechanism in the EU, and Inflation Reduction Act in the US, both of which are aimed towards aligning trade rules with climate change-mitigation policies pursued by developing countries.

On March sixth Saudi Arabia mentioned it could deposit $5bn on the nation’s central financial institution. Qatar and the uae have additionally arrange $19bn in forex swaps with the establishment, in keeping with an estimate by Brad Setser of the Council on Foreign Relations, a think-tank. All three have pledged to take part in Turkey’s forthcoming auctions of presidency bonds. In recent months, several analysts of the Cryptocurrency gazette, too have reported how the global BRICS nations like Russia, India, China, Brazil, and South Africa are attempting to undermine the US Dollar in the global oil trade. Chennai-Vladivostok Proposed Maritime CorridorNot only will it conjoin the south of India with the Russian Far East, but it will also be able to harness the natural resources of the region. More importantly, it seems to be an alternate route with a coverage time of 24 days from where Russia could provide the other natural resources alongside the crude oil.

As a result, all international transactions, including oil, are priced in dollars. Oil-exporting nations must receive dollars for their exports, not their own currency. Between 2014 and 2016 a petroleum glut fuelled by America’s shale growth induced the oil value to fall from $120 a barrel to $30, the steepest decline in trendy historical past. In 2020, as covid-19 lockdowns depressed demand, costs cratered once more, to $18 in April. To stand up to the earnings shock, Gulf states liquidated some overseas property; their central banks additionally offered a part of their foreign-currency stash. But that was not sufficient, so in addition they borrowed a number of laborious forex on Western capital markets.

  • This could have wide-ranging implications on not just a macro scale but also investment portfolios.
  • reserves the right to take any or all comments down at any time.
  • These bonds can be encashed from those respective sovereign entities, or by trading.
  • Chennai-Vladivostok Proposed Maritime CorridorNot only will it conjoin the south of India with the Russian Far East, but it will also be able to harness the natural resources of the region.
  • Though RuPay has taken some initiative, UPI’s marketing in the market is still unchartered territory.

A murkier monetary system makes it simpler for petrodollar meaning to maneuver round unnoticed. Financial sleuths reckon share of Russia’s oil earnings is deposited into banks within the Gulf, the place it’s blended with owned by others in order to develop into untraceable. More geopolitically astute petrostates additionally create the prospect for wavering international locations, like Turkey, to get financing outdoors of Western-led establishments, giving them an additional diploma of freedom. Two many years in the past, when sovereign-wealth funds grew to become trendy, many within the West fearful they is perhaps used to pursue political agendas.

In contrast, the world’s second-largest economy China’s currency yuan accounts for a piffling 2.7% each in both global trade and currency reserves. This means, the much-feared de-dollarization is unlikely, though not impossible. For over two decades, emerging economies have been making efforts to reduce the dollar’s reliance.

Since petrodollars are basically U.S. dollars, these surpluses lead to larger U.S. dollar reserves for oil exporters. Every country required oil, making it the best strategic option for the US. However, OPEC, which was formed in 1960, could effectively annihilate this US strategy, which could not be. As a result, following the Yom Kippur War, the United States used the USD’s position as a reserve currency to rebuild ties with Saudi Arabia.

A new agreement among Brics to use national currencies for trading was also floated. Ten years later in 2022, similar events repeated with Russia at the centre. But this time, the hit to dollars’ supremacy will be acute for two reasons. Countries led by India and China have tasted the benefits of inexpensive trading in rupees and yuan without dollar as an intermediary.

Recent Posts
Contacta con nosotros

Cumplimenta este formulario y contactaremos contigo lo antes posible!

Start typing and press Enter to search