Syrper A good article about the petro-dollar and Chinese policy regarding Saudi Arabia, I have omitted the first paragraphs because it’s stuff about the petro-dollar system and the accompanying US hegemony that all Syrpers know about. ARTICLE:
“SAUDI VULNERABILITY The Saudis are the subject of occasional debate for a failed kingdom, a collapsed monarchy, a bankrupted nation, with finances bleeding red ink like never before in its brief history. Infighting has occurred to wrest the title of crown prince for Mohammed bin Salman (MbS), certain to have caused internal resentment and worse. The kingdom is depleting it financial reserves faster than it is the oil reserves. Deficits are at astounding levels. The lower crude oil price has resulted in half as much in revenues, while the filthy Yemen War has aggravated the costs within the financial ledger. The Saudis have issued bonds to finance their deficits, breaking new ground and angering some hardline Moslems. Their currency swaps are occasionally showing danger signals. The incidents with Qatar have left the Saudis with few if any friends, even in the Arab world. The arms deal charade with President Trump was one for the comic books. Even Langley is angry, as MbS screwed up their plans to stabilize the kingdom and region, with the goal of less terrorism. The other violent clown, Mohammed bin Zayed (MbZ) is the crown prince of Abu Dhabi in the UAE. Both might soon become expendable.
LIAR LIAR OILFIELDS ON FIRE The big fat liars in the oil room are the Saudis. They have lied about their spare production capacity since the year 2000 or so. Such lies are used in attempts to move and to control the oil price. They have lied about their oil reserves for years also. That they have depleted oil reserves is the perfectly fitting motive for their predatory war in Yemen. They wish to steal the Yemeni oil & gas reserves, which are enormous and plentiful, even as not ever mentioned in the dutiful lapdog Western press. After 50 years of oil production, the Ghawar field is pumping over 98% water and brine. Other elephant fields are equally tapped out. The Saudis do have several smaller fields in production, but they do not compensate for the vacated elephants. Not at all. The Saudis are liars on oil reserves.
ENTER THE ARAMCO DEAL The Saudis wish to conduct an IPO stock deal on 10% of the ARAMCO assets and income. They laughingly estimate the total petro-chemical corporation to be worth US$2 trillion. In response, the Western energy analysts hopped on the wagon to provide financial analysis of value. Well, surprise surprise! The analysts estimate the ARAMCO giant to be worth $500 billion or less, at least four times less than the bloated exaggerated value posted by the Saudi liar princes. The IPO deal is stalled, possibly since underwriting brokerage houses might not wish to be the object of lawsuits in the near future. Meanwhile, the Saudis are sweating badly, very worried about not having their $200 billion payday. They will be lucky to have $50 billion in the tainted IPO deal. Below is just one site of the sprawling state owned complex.
news.goldseek.com/2017/oil.png
CHINA ON WHITE HORSE The Chinese are always opportunistic. They invest in trade and structural placements, in the hope of winning commercial partners and friends. They do not wage war to win their way. The Chinese are observing the ARAMCO deal and its massive snag. They might hand to the Saudis an over-valued offer on a gilded platter. China has stayed away from any direct involvement in the Yemen War. However, they might be the supplier of some missiles used in Yemen by the native defenders, delivered by the Iran Military. China might over-pay for a stake in the ARAMCO company for two reasons. First, they want a toe-hold in the kingdom, in order to win other trade deals with a degree of exclusivity. They would become a favorite foreign son in the process, especially if other Western financial houses refuse to invest in the bloated over-valued petro-chemical firm. Second, the Chinese would then be in a position to demand that oil sales to China be paid in Yuan currency, in RMB terms. The ARAMCO investment, large or small, would serve as leverage to fracture the Petro-Dollar at its home base, within Saudi Arabia. The shock waves would be heard around the financial world.
COPY CAT DAMAGE AS WILFIRE Once the Chinese win the privilege to buy Saudi oil in RMB terms, the other Gulf Arab oil producers will match the offer of selling oil to the Chinese in their own currency, and NOT in the USDollar. The Petro-Dollar defacto standard is about to suffer multiple coffin nails. The rival Gulf Arabs will not wish to lose market share to the Saudis. They will permit the Chinese payment terms in RMB, a no-brainer. On the other side, Southeast Asian oil customers will wish to buy crude oil from the Gulf region generally in currency other than the USDollar. They are fast dumping their USTreasury Bonds, a trend that has endured for almost two years. The Gulf Arabs will grant the Asians the right to pay for crude oil in whatever currency they wish, being very accommodative. The result will be deeply damaging. The Gulf Region will sell crude oil in non-USD terms on a widespread basis and significant scale. To be sure, the Saudis and other Arab rivals will be pressured by the USGovt not to agree to the RMB oil deal. But Washington has lost most of its prestige and most of its power. The NeoCons in charge are diverted in their attention with the slightest temptation toward useless nonsense. The USCongress is a chamber of corrupted members and babbling fools, the majority of whom are bribed into puppet status.
GEOPOLITICAL EFFECT When the Chinese, and Asians in general, begin to buy Saudi oil, and Gulf oil in general, the entire geopolitical balance of power will suffer a massive tectonic shift. The Petro-Dollar will be recognized as dead, no longer the standard. If not dead, it will be regarded as having left the Intensive Care ward and heading to the Morgue, a white sheet over its lifeless cadaver, with a cemetery plot being selected. With logic on the argument’s side, no standard can have such large exceptions on the buyer side or seller side. The advent of the Dual Universe will have its dawn, with the USD sphere coexisting with the RMB sphere. The impact will then fall on the global banking reserves for more avid bond dumping. Concerns will be raised on how the USGovt and USFed can manage the heaping volumes of dumped USTreasury Bonds. The derivative machinery will be put to screeching strains, even given some adverse publicity.
The Asians will shed their USTBonds, in favor of both RMB bonds and Gold bullion. The game will change in a way to make clear the end of the King Dollar Era. The great transition from Western sovereign bonds to Gold bullion will begin in earnest. Forty years of exported inflation will be reversed, and wreak havoc upon the USEconomy. The United States will be compelled to create and launch a new domestic only dollar, all in time, complete with official denials. Let it be dubbed the New Scheiss Dollar, complete with a long sequence of devaluations. The $500 billion annual trade deficit will become a major talking point. It will open the door for the United States to the Third World.”
news.goldseek.com/GoldenJackass/1501471342.php
Muslim Dude
@Canthama @Mike Florida and others,
1. I have been reading about the imminent demise of the US dollar and economy for over a decade now and it hasn’t happened. So whilst things may not be as dramatic as the article suggests with a huge collapse of the US economy, I think overall the fundamental long term current of global dynamics will be on that trajectory albeit at a much slower, less dramatic and thus turbulent pace than many anti-US imperialists (e.g. here on Syrper) would like.
2.I also find it hard to see the US allowing the Saudis to sell petrol in remnibi/Yuan with such ease without some sort of US mafia style action. In fact the $110 billion Saudi payment to the US a month or two ago is widely regarded as the Saudis paying protection money to avoid regime change which would of course be preceded by a US media campaign against the Saudis as sponsors of terrorism, land of backwardness, behind 9/11 etc, as a prelude to some possible military action or regime change campaign against them.
Or alternatively the US is too weak now e.g. Trump v anti-Trump civil war, US contemplating quiting Afghanistan, humiliation over Qatar crisis with the Qatari ruler refusing even to visit Washington DC (thus signifying what was the once omnipotent US global empire’s increasing decline in the world), humiliation over Syria with Russia essentially saving Syria from the US and defeating the Wahabis. Perhaps the US just doesn’t have enough sway now to force the Saudis to stay away from selling oil to the Chinese in RMB/Yuan.
3. Once the Saudis (if they do) start selling oil in Chinese currency it just accelerates the whole de-dollarization process and increases Chinese power.
China has already ensured compliance from Erdogan to stop the Turkish media posting anti-Chinese (pro-Uighur separatist) news content. So if that’s the sort of sway the Chinese have over the combative maglomaniac Erdogan with his highly over-inflated opinion of himself, the same Erdogan who insults/threatens Germany, the EU, the US, Egypt, Iraq etc imagine how much more powerful the Chinese will be with the Saudis selling oil in RMB then accompanied by other gulf states following suit?
4. Everyone knows that the Syrian war is “over”. Over in the sense that the Assad government will remain in power. That is assured. There may be peripheral insurgency zones controlled by Wahabis or Kurdish leftists (who are implementing the globalist Luciferian agenda e.g. their recent LBGTI military brigade: www.aljazeera.com/indepth/opinion/2017/08/decolonising-syria-called-queer-liberation-170803110403979.html).
The US doesn’t even talk about attacking Iran any more, the same US speaking of quitting from Afghanistan, the same US sidelined from the Qatar v Saudi feud, the same US attacked by Germany who called for Europeans to defend themselves militarily, the same US becoming weaker and weaker year by year.
When you use derivatives, the implosion will be quick and like an explosion. None of that slow death. When you sell your self backed up by your family, Well as long as you are doing good, everyone else does good. But you dont need to get hit for that to change to bring you down now does it.
The problem here is not only have they sold themselves but they have sold you and me as well. So they have others who cant let them fail either because if they go so do we. But you can at least take some precautions to make sure you dont get hurt and never recover which they wont. Ignoring this would put you in the same boat as them.
Pacificnorthwest
The massive global derivatives overhang… $700 Trillion, which is an astronomical sum that is really hard to comprehend the scale of, is an edifice of counter hedging bets. If one asset class goes down it is hedged by a counter bet that presumably goes up. This works, up to a point. The breaking point happens when big players go under, and all the massive hedged bets that were backed by the financial entity which is crumbling can no longer be collected on. In this scenario, quite suddenly the whole structure can shatter. In the ensuing panic, as every player tries to get ahead of other players by shedding risk the contagion of hedges that can no longer be counted as assets removes the financial underpinning that sustains the value of other derivatives classes, which in some manner depended on the classes of derivatives at the epicenter of collapse. There is an unavoidable fragility to our global financial system that is the inevitable outcome of the highly leveraged nature of the system, beginning with the too big to fail money center banks that are highly exposed.
Canthama
MD, good to have you back buddy. I agree it is hard to see KSA selling oil to China in RMB, that would be a betrayal to the US that could lead to regime change for sure, but on another side, main KSA competitors are doing already that, namely Russia, Iran, soon to start Libya-Tobruk, and maybe Qatar and Iraq next, that would be a disaster for KSA, they have lost nbr 1 spot as the main supplier to China and could lose nbr 2 if they do not accommodate the trend. The Dollar collapse is a long story, it is actually happening for decades, the PPP of US Dollar has been on the decline for many decades, but it is still the global reserve currency, for the Dollar to collapse it has to lose the confidence of its “customers”, and this has not entirely happened, yet, when it does, it will be fast, confidence is hardly won and easily lost and hard to get it back. The petrodollar is no longer what keeps the Dollar afloat, though it helps a lot, the US regime military power and threats and constant aggressions keep the Dollar afloat, the threat of war is what keeps the Dollar a viable global currency, but them what keeps the US military strong is the infinitive money printing, this cycle has to be broken first, no easy money printing, no military industry, we are not there yet, but the next 3 years 2018-2020, will be extremely important for the US, this cycle will not produce anything good for the US, but it can produce the collapse of the Dollar if confidence drops, EU will play an important role to keep the Dollar strong or not, a trade war between US-EU can be devastating for the US on its confidence, so does a Chinese tougher stance in US T bonds. One small addition to all, look in every main city around the world and see how many Chinese banks have been opening in the past 5 years, this is the first sign of the globalization of the RMB, next will be more RMB as reserve currency by central Banks (which is widely promoted since Oct 2016 as one of the IMF reserve currency basket) and then currency swaps. This process will take a while but in the next 3 years will be in full steam, unstoppable.
KSA is a puzzle, its oil reserves are a lie, they depleted their main wells, are selling their reserve inventory that they kept pumping into for decades, and now is burning its reserve currency like hell, (dropped form $750bi to $450bi and will end 2017 at $400bi), in 2 years at this pace, KSA would have no more than $200Bi in reserve which clearly will point to a very vulnerable position for a currency crash ( Riyal is pegged to US Dollar).
Hard to predict anything nowadays, but the trend is clear for a global economic shift & revolution, something the world saw, last time, 100 years ago when the Sterling started to lose its status. Amazing time to be alive and witnessing this shift.
