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Page added on August 7, 2014
Petrodollar Under Threat As Russia And Iran Sign Historic 500,000 Barrel A Day Oil Deal
Russia Delivers Blow To Petrodollar In Historic $20 Billion Iran Oil Deal
Russia signed a historic $20 billion oil deal with Iran to bypass both western sanctions and the dollar based western monetary system yesterday.
President Putin Admire Gold Bar (London Gold Delivery Bar)
Currency wars are set to escalate as the petro dollar’s decline continues.
Russian Energy Minister Alexander Novak and his Iranian counterpart Bijan Zanganeh signed a five-year memorandum of understanding in Moscow, which included cooperation in the oil sector.
“Based on Iran’s proposal, we will participate in arranging shipments of crude oil, including to the Russian market,” Novak was quoted as saying.
The five year accord will see Russia help Iran “organise oil sales” as well as “cooperate in the oil-gas industry, construction of power plants, grids, supply of machinery, consumer goods and agriculture products”, according to a statement by the Energy Ministry in Moscow.
The deal could see Russia buying 500,000 barrels of Iranian oil a day, the Moscow-based Kommersant newspaper has previously reported. Under the proposed deal Russia would buy up to 500,000 barrels a day or a third of Iranian oil exports in exchange for Russian equipment and goods.
The Russian government withdrew the statement regarding the deal last night, but said it would issue a new statement today.
In January, Russia said that they were negotiating an oil-for-goods swap worth $1.5 billion a month that would enable Iran to lift oil exports substantially to Russia, undermining Western sanctions.
Yesterday, the Russian President told regional leaders that “the political tools of economic pressure are unacceptable and run counter to all norms and rules.” He said in response to western sanctions he had given orders to boost domestic manufacturers at the expense of non-Russian ones.
The White House has previously said that reports of talks between Russia and Iran were a matter of “serious concern”.
Reserve Currencies In History – Dollar’s Demise Continues
“If the reports are true, such a deal would raise serious concerns as it would be inconsistent with the terms of the agreement with Iran,” Caitlin Hayden, spokeswoman for the White House National Security Council, said in January.
U.S. and European Union sanctions against Russia threaten to hasten a move away from the petro dollar that’s been slowly occurring since the global financial crisis.
See important guide to Currency Wars here Currency Wars: Bye, Bye Petrodollar – Buy, Buy Gold
26 Comments on "Petrodollar Under Threat As Russia And Iran Sign Historic 500,000 Barrel A Day Oil Deal"
Davy on Thu, 7th Aug 2014 7:48 am
I like zerohedge but they are bent on an anti-American economic meme. I do see them include some good articles on systematic collapse including Gail Tverberg. The balanced view of this topic must include the consequences and unintended consequences of these actions. A trade war will destroy BAU leaving collapse on all entities. The hyper complex interconnected global BAU cannot decouple from the US economy without a collapse. A collapse in the US means a collapse with the entire global system. Food is the primary driver in a collapsing BAU and the US is the world’s largest food exporter. The US is also has a residual superpower military already highly connected to BAU armed to the teeth with everything from small arms to NUK WMD. The US manufacturing industries and service industries are vital to global BAU. My opinion is we need a managed diminishment of the dollar for some much needed global monetary resilience for a few years until all the many predicaments overwhelm BAU and collapse begins. I want to see the US go isolationist and decline economically to prepare for the end of BAU. The sooner we have and economic crisis the sooner this can proceed with all the attitude, lifestyle, and economic changes that go along with decline. We need manage decline in a functioning BAU. The alternative is a bifurcating collapse with chaos and destruction of infrastructure both physical and organizational.
The issues on the dollar are many most notable are these describe by “POPS” a member on this forum:
I’ve said this before, there is not enough currency in circulation from any other country to replace the dollar, that’s number one.
Number 2 is no one is going to hold a manipulated currency as a reserve. Russia said they would let the Ruble float next year but it began to crash so I doubt that will happen, China won’t let the Yuan float outside the range they set.
No 3 is China and Russia are both acting really aggressive toward their neighbors, I doubt other countries will be looking forward to holding their cash.
No 4 I don’t know about Russia but china is holding lots of dollars and they aren’t going to just burn that value willey nilley.
I add this to it:
The Euro region is in default by normal measure.
China has a long list of economic and environmental predicaments that are converging into what will amount to collapsing growth.
The Brics are for the most part basket cases unable to assume a global role.
The emerging markets are fragile and dependent on stability. A collapsing dollar will cause loss of confidence in all investments especially emerging markets.
A collapsing US economy will bring down the rest of the global economy being TBTF.
steve on Thu, 7th Aug 2014 9:27 am
Yes I am afraid this is wishful thinking….so many people believe everything they read these days. They are swayed by a particular idea they have in their head then they search for support for that idea. You don’t have very far to look to find someone who fits that than Makati….whom I am sure will be here soon gloating about this article….Things are going to change so fast soon that I believe you have to have an open mind to anything to see the real truth, not just believing someone because they know how to do bar graphs. I like Gails work but I don’t believe it is the Gospel, she has a lot of supporters that will defend her if her ideas are questioned.. That being said I am more nervous about what just happened in Gaza than anything else. So much suffering….I believe that the U.S will receive blow back for that.
Norm on Thu, 7th Aug 2014 10:05 am
Why does everybody have to be so intellectually dishonest? The article text says ‘signed a memorandum of understanding’. However the headline says ‘signed oil deal’. A memorandum of understanding, is not a deal.
But who cares. The USA went down the tubes when society split apart into the Mitt Romney’s and the Beevis & Butthead’s in trailers. Its already toast and has been, since the dominant national species is a Rush Limbaugh Republican who walks down the street to buy energy drinks & cigarettes with his food stamps.
Who cares if the Russians & the Iranians go direct, it was time to change the channel anyway. But per this article, they did not anyway.
Makati1 on Thu, 7th Aug 2014 10:45 am
Laugh at it all you want. Denial does not change real facts. The list of anti-dollar trade countries is growing daily, and now includes the UK, Switzerland, France, Brazil, India, Russia, China, South Africa, Iran, and others I cannot recall at the moment. It represents over half of the people on this planet and most of the countries that still have real growth.
The big corporations are also lining up to circumvent the dollar in trade as it would be more profit and less hassle. It also keeps the US out of their affairs. You will see the list grow exponentially soon. Wait and see. Everyone is, or will be, abandoning the sinking USS Dollar.
Plantagenet on Thu, 7th Aug 2014 11:07 am
Obama has imposed sanctions against both Russia and Iran. It should surprise no one that this tends to drive Russia and Iran to trade with each other as both seek ways to evade the US sanctions.
marmico on Thu, 7th Aug 2014 11:17 am
U.S. international trade in 2013 (imports + exports) is ~$4 trillion annually. $20 billion is bupkis.
BTW, there are more €s (at $ market exchange rates) in circulation than $s.
Arthur on Thu, 7th Aug 2014 11:42 am
Marmico, that is true, because there are more Europeans with euro (and increasing to finally max. 500 million), than Americans with dollar (330 million). But in international trade the dollar volumes are still much larger.
David Fabick on Thu, 7th Aug 2014 11:50 am
M, that is currency. Pops and I were referring to dollars in reserve with the US having 60% and Europe 24%. I was sloppy in my wording.
M, like you say Russia, China, and the Brics are yet nothing more than ass pimple by comparison in regards to reserves. It will be beneficial if these countries diversify away from the dollar for resilience reasons. Contagions are better controlled through a diversified basket of currencies and exchange mechanisms. Yet, until there is broad based cooperation and other currencies that measure up to the criteria for a reserve currency not much will happen. Bilateral trade is a fancy way of saying financial barter. I disagree with the assumption that the US, having the reserve currency status, has benefited our country. Many of our consumption, debt, and outsourcing issues are related to the reserve currency status. This has benefited the 1%ers instead of the Mainstreeter’s. I welcome a diminished dollar and I welcome an economic crisis the sooner the better. When we are faced with tough necessary choices at some point that will allow the US to shape a continental economy as a step towards the end of globalism. We have leaped frogged other regions especially Asia that are perusing growth in the export sectors that will wither away soon. The US has already started its decline and will remain in decline despite what is preached by the economist and financial talking heads. The real economy is in decline not the debt and equity bubble spoken about so often.
JuanP on Thu, 7th Aug 2014 11:53 am
Plant, I agree with your comment. This is an expected consequence of the sanctions imposed by the USA on both countries as the whole thing is basically an attempt to bypass the sanctions. This is another deal that was a long time coming and is being pushed forward by Putin as a reaction to recent sanctions. Iranians probably got the best side of the deal. I wonder how the USA would react if they ever effectively close this deal.
Northwest Resident on Thu, 7th Aug 2014 11:55 am
Norm — “…the dominant national species is a Rush Limbaugh Republican who walks down the street to buy energy drinks & cigarettes with his food stamps…”
Thanks for the laugh. Very picturesque! Except I think you got it wrong. They don’t “walk”, they climb into their 4×4 pickup trucks to make those convenience store (and McD’s) round trips. Walk?! You gotta be kidding me!
marmico on Thu, 7th Aug 2014 12:30 pm
Well Arthur, zero hedge misses the point. The Iran-Russia “deal” bypasses the sanctions which puts another 0.5 mb/d of crude into the global market.
If your position is that 500 million Euros with lower mean incomes hold more cash than 320 million Americans, run with it. I think that Bulgarians hold more cash relative to their incomes than North Carolinians because they are tax cheats.
mike on Thu, 7th Aug 2014 12:50 pm
The list of anti-dollar trade countries is growing daily, and now includes the UK, Switzerland, France…..Makati
Makati – you are talking crap. Total bollocks. Where do you get this bizarre idea? UK anti dollar trade country ????? Evidence? France???? Evidence? Switzerland? You are talking out of your arse.
Makati1 on Thu, 7th Aug 2014 8:58 pm
Mike … The UK just opened a swap office with China to use Renminbi and whatever the UK uses for money these days. Is it still pounds? Or Euros? Ditto for France and Switzerland. They are preparing to trade in other currencies, especially in Renminbi, taking the USD out of the loop. As the US sues foreign banks, more and more will bail out of the dollar or move their transaction to other currencies.
It is only a matter of time until the Euro countries also take the dollar out of their inter-EU euro trade. Now, tell me that it is meaningless when the largest money centers in the world are opening exchange offices with China. And questions are being asked in Europe about why EU countries should use the dollar in trade with other EU countries.
dissident on Thu, 7th Aug 2014 9:10 pm
Through its sheer size, China can steer the global currency flow in the direction it wants. This is why the UK is being forced to deal with the Chinese currency and cannot insist on dollars.
It’s still a long way to go for de-dollarization, but it has started.
David Loughrey on Thu, 7th Aug 2014 10:37 pm
Let’s make something clear, the US controls the dollar. Yes, China owns trillions, but they are not in control. Obama continues to dilute the dollar making the ones the Chinese own worth less everyday. Russia needs oil as much as China needs elderly. If sanctions prevent Russia from helping Iran sell oil then it is simply a drain on the Russian economy. Now that Russia has shown its true position China will not choose cheap oil for the short run over a strong dollar in the long run. Sanctions on Iran will isolate the two trouble makers. Forget about BRICS without China it’s over. The US couldn’t set this up any better if they wanted to.
mike on Thu, 7th Aug 2014 11:24 pm
I agree with Makati to a point. The BRIC nations have not created a currency representing them as a dominant force yet. Notice I said yet? Right now these countries still operate in the petro market but if you look at the spread of some of these currencies held like the GBP,CFH,and Euro you see a continual decline of the dollar. It will only continue to get worse. That is why Obama had African leaders here. He sees the decline of the dollar and knows the end results are going to be here while he is still in office.
Norm on Fri, 8th Aug 2014 12:17 am
Hi NWR, well, if the monster truck broke down, they too stupid to fix, then they walk. Or wait til gas hits $ 9 a gallon, the far right minimum wagers on food stamps, they will walk.
kart tar on Fri, 8th Aug 2014 4:25 am
The entire problem has being with the U.S politicians who have neglected the sufferings of the world to sanction everybody in the world. You may view the U.K as the best friends you have, but they have policies that would easily shift them from the dollars to somewhere. They are more open minded than the restrictions U.S politicians continue to place on citizens.
J. Wario on Fri, 8th Aug 2014 4:28 am
USA is leading the planet earth down to the hell running here and there assuming herself as a global police. However, she couldn’t do anything valuable as she assumed it to be. Her deeds leading the world to the 3rd world war which is enevitable. Therefore, I advise USA to better focus on peaceful coexistence with countries that have equal power with her such as Russia, China, Iran etc. Running alone doesn’t produce results at this knowledge age in which everyone questions for a reason for every step of action anyone takes.
Makati1 on Fri, 8th Aug 2014 7:53 am
David, you need to look around. As of today, 28 or more Central Banks are starting to trade in Renmimbi, and put some in their reserves.
Countries are seeing that the Us is using the dollar trade to fine banks and businesses for big money. They also see the senseless sanctions the US is putting on Russia now and maybe China in the future. THAT alone will make many corporations and countries think about moving their money out of the US controls.
No, the USD may not be replaced, but it will lose it’s value as it is used less and less in world trade. That will lead to a depression in the US and high inflation. The US is in a corner and there is no way out but war.
frank ventimiglia on Fri, 8th Aug 2014 8:53 am
Davey you are sooooo naive. There isn’t enough currency in the world to replace the US dollar? India, China, Russia, et all are buying gold and silver like there is no tomorrow. No one wants or will want our fiat currency backed by absolutely nothing but the US military’s war machine and let’s see how long that lasts once we are cut off by the BRIC’S and their 177 country financial consortium.
Davey the very reason that their are too many
dollars in the world….doesn’t that tell you something? Dollars are debt instruments not
valued hard assets. As Voltaire said, ” all fiat curency ends ultimately with the same value as when it started which is zero”.
The world is tired iof war and debt and US hegenomy. The power will shift ifv we don’t change and maybe it is too late for that.
Read Dr. Paul Craig Roberts, Assistant Secy of the Treasure under Ronald Reagan, NY Times Ediorial Board, Harvard Professor, etc. to get an idea on what is going on. Also it wouldn’t hurt to read LT. General Smedely Butlers book, “War is a Racket” to get a perspective on things. We only lead finacially because we have the strongest army. That will soon change when the dollar loses value nd collaspes and then we are left with trillions in debt and no way to print our way out of it!
radon1 on Fri, 8th Aug 2014 12:16 pm
All these oil deals, swaps etc. is just another way to trade in dollars, because the settlements will be made by reference to the dollar prices. The difference is just that all these “structuring arrangements” to “by-pass” the dollar are burdened with additional administrative and transactional costs, and various intermediaries who are going to take their slice.
Anyway, why de-dollarisers are so obsessed with de-dollarisation? De-dollarization for the sake of de-dollarization does not make much sense.
Too bad that stupid politics stand on the way of normal economic development. Sanctions-shmanctions.
Robert on Fri, 8th Aug 2014 7:11 pm
Unfortunately for the U.S. dollar, the continuous threats and boycott of numerous countries by the U.S.A. is not helping the dollar.
Countries and well to do individuals are diminishing
their savings in U.S. banks, as they fear that for political reasons they will see their funds been withheld.
Right now it appears, that the recent political disagreements with Russia is going to hurt us more
on the long run. The recent support of Coup by a Ukraine military of a democratically elected government is hurting us and we pray it will not lead us to another cold war.
We can not continue to spend dollars as if there was
no limit. How many trillions of dollars can we spend
before it begins to loose it’s value.
Jerry on Fri, 8th Aug 2014 8:45 pm
This is the most informative intellectual discussion I have ever read on the internet. All points of view cannot be correct, but so many have a some truth.
I think one conclusion can be drawn, most of the world is tired of the U.S. being “policeman of the world, & sanctions of a nature that promote distrust & destroy trade are destructive to all & if continued long enough will destroy the world economy. All currencies today are “fiat” & as such are difficult to determine their true value in relation to each other. China does not want their currency to be the world currency, they are holding too many dollars. What the whole world would like to see is more acceptability of all currencies for trade purposes & stop using destabilizing sanctions to promote the hegemony of the U.S. “policeman”.
Mikhael on Sat, 9th Aug 2014 1:18 am
BS!!!!
Jerry on Sat, 9th Aug 2014 1:32 pm
Mikhael, The shallowness of your comment shows your lack of understanding of the current world situation in regards to international trade, finance, & currency.