by Jason
The latest news about oil-rich Arab states conspiring with other rich nations such as France, China, Russia, and Japan to move away from dealing in dollars for the price of oil. This is in stark contrast to the often repeated claims that the dollar was safe due to the lack of any suitable currencies. Of course, other economic commentators warned that the dollar’s grip on the world’s economy was already loosening.
This looks like the first shots fired in a new and upcoming economic war in the Middle East, where strong American influence and hegemony has long been despised by aspiring powers. Iran has especially tried to increase the phasing out of the America dollar by trading in Yen with Japan. (Forbes says the news is a bit over blown).
Independent | The Demise of the Dollar
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.
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.
Commentary
- Another Black Conservative
- The Moderate Voice
- The Corner
- Global Economic Analysis
- Legal Insurrection
This is our future in the U.S. until our leadership puts the future of the dollar over the political careers.
Guess Michelle Bachman isn’t so “nuts” after all.
I’ll believe this when someone can show me a true alternative. America has a disproportional lead on the world’s output. That is significant even if the dollar and the markets are imperfect.
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