(ANTIMEDIA) — Recent economic developments are seeing the power of the petrodollar chipped away piece by piece, and the result is the inevitable decline of America’s hegemony.
Recently, Venezuela launched the world’s first state-backed cryptocurrency, known as the petro. According to TIME Magazine and its sources, however, the petro is “in fact a collaboration – a half hidden joint venture between Venezuelan and Russian officials and businessmen, whose aim was to erode the power of U.S. sanctions.”
While some people may shrug their shoulders and laugh at such a proposal, the fact is that the move was enough to irk the Trump administration. It is no coincidence that U.S. President Donald Trump preemptively signed an executive order to designate anyone who buys or uses the cryptocurrency as in breach of economic sanctions imposed on Venezuela by the U.S. in August of last year, including anyone inside American jurisdiction who helps Venezuela develop the petro.
“Any conspiracy formed to violate any of the prohibitions set forth in this order is prohibited,” the executive order stated.
Though it was previously unknown, TIME alleged that Russia’s fingerprints were all over the creation of the petro through advisors Denis Druzhkov and Fyodor Bogorodsky, both of whom reportedly have ties to major Russian banks and billionaires close to the Kremlin.
Venezuela sits on the world’s largest oil reserves. Russia, for its part, has sizable oil and natural gas reserves of its own. It also should be no surprise that even the American media is trying to gear the public up for a full-on American invasion of Venezuela, something Trump himself hinted at doing last year.
Cryptocurrencies are one way of rivaling the U.S. dollar, but Russia is not solely relying on this technology. Russia has been stockpiling large quantities of gold for years, and by the end of 2017, Russia’s total gold reserves had risen to 1,828.56 tons, passing China’s reserves in the process.
Rising economic giant China is also reportedly looking to introduce gold-backed futures to circumvent the U.S dollar. The United States, on the other hand, has had zero gold-backing of the dollar for years and has not increased its gold reserves for at least a decade. Conversely, Russia is reportedly the world’s third-largest gold producer.
Last month, Reuters reported that China planned to launch its crude oil futures on the 26th of this month. As expected, this week China did, indeed, launch its first Chinese crude oil futures. However, the most important development in this regard is the suggestion that China is officially taking the first steps to pay for oil in yuan instead of U.S. dollars, which could begin as early as the second half of 2018.
Oil is the world’s most traded commodity, with an annual trade value of around $14 trillion (roughly the same as China’s GDP last year). China is the world’s second-largest oil consumer, and just last year, it became the biggest importer of crude oil, surpassing the United States on its way.
To make matters worse for the U.S., Russia and Saudi Arabia are reportedly considering a 10 to 20-year oil alliance, strengthening Russia’s hand as the dominant player in the Middle East and almost effectively ousting the United States as the major player in the region in the not-too-distant future.
A little-known theory, which is slowly becoming increasingly mainstream, is the contention that the U.S. has maintained its edge on the global financial system (without experiencing a total collapse in the face of trillions of dollars of debt) because, for decades, oil exports have been conducted in transactions involving only the U.S. dollar. The theory also alleges that this explains Washington’s desire to intervene militarily in North Africa and the Middle East so it can ensure this financial relationship continues unabated. While this theory has been rejected previously by mainstream commentators, the effect of the U.S. dollars’ stranglehold over the world market should not be understated.
As far back as 1989, writing in his book The Roaring ‘80s, former Rhodes Scholar, Emmy Award-winning TV host, and Wall Street insider Adam Smith theorized on why the bubble hasn’t popped yet:
“First, we have a large reservoir of moral credit from our position as a world military leader and from our past as an investor and lender. Second, the dollar is the key currency. Dollars are what the world banks in, insures in, denominates. Before the dollar, it was the pound sterling, and the British got an extension on the tenure of their empire because the world hadn’t found another currency in which to denominate. If you operate in the key currency, it takes longer for the whistle to blow.” [emphasis his own]
Now things are changing as defiant states like Russia and China are seeking to challenge American dominance over the global financial system with the help of other entities such as Iran, Qatar, and Venezuela. For most of these countries, including (and especially) Russia, avoiding the effects of Washington-imposed sanctions is the key concern. But if these new arrangements help to bring down the power and might of the United States in the process, perhaps that is just a bonus and an outcome worth pursuing.
“The reign of the dollar must end,” Andrei Kostin, the head of state-controlled VTB, Russia’s second-largest bank, said in a speech last month in Moscow. “This whip that the Americans use in the form of the dollar would then, to a great extent, not have such a serious impact on the global financial system.”