Petrodollar Endgame Moves Even Closer

I’ll be the first to admit that two of the main themes on this blog – the United States’ sovereign debt crisis and the deterioration of the petrodollar – have been extraordinarily slow-moving theses.

In both cases, there have been developments that stand at odds with my contentions. For example, US stock indices continue to move higher, despite our economy grinding to a halt, and the BRIC nations have not developed and put forth their own reserve currency to combat the dollar, as I have suggested may happen. They also haven’t backed any of their sovereign currencies with gold, as I have also suggested. While the timing hasn’t proven me right as quickly as I would like, it doesn’t mean that things aren’t ticking forward for both of these forthcoming realities.

And, in the case of the death of the petrodollar, there was a huge development in late November that was under-reported and unnoticed by the market.

The death of the petrodollar is one of the key waypoints in the US dollar losing reserve currency status, as I have written about at length in the past. And while the US dollar used to be the only currency that foreign nations would trade oil in, that has now come to a screeching halt.

Not only is Saudi Arabia trading oil in other currencies than the dollar (notably the Yuan), it now appears the UAE is also strategically shifting away from the US dollar in its oil transactions, marking a significant change in the global financial landscape.

This move, involving potential deals with up to 15 countries including China, Russia, and Egypt, is part of the de-dollarization trend I have predicted, led by the oil sector. Led by the BRICS alliance, the move is redefining global economics and challenging the US dollar’s dominance in international trade.

When you take this into account alongside the fact that Russia is strengthening its ties with China and Saudi Arabia, it is tough to think anything but that we are still solidly on the path to global de-dollarization. Just yesterday it was reported that Russia was working closely with Saudi Arabia and OPEC — who has many member nations in the BRICS consortium — on oil cuts.

Shortly after Russian President Vladimir Putin’s unexpected visit to Riyadh to meet with Saudi Crown Prince Mohammed bin Salman, a joint statement from Russia and Saudi Arabia was released. OPEC along with Russia and other allies, agreed to voluntary cuts totaling about 2.2 million barrels per day, predominantly led by Saudi Arabia and Russia maintaining their 1.3 million bpd cuts.

I asked my friend Andy Schectman of Miles Franklin Precious Metals for his exclusive take on the situation for my Fringe Finance readers. He’s one of the smartest people I know when it comes to understanding the dollar globally — and he’s all but predicted the exact scenario that’s taking place.

“The OPEC members decided in 1973/4 to price all oil sales in US dollars and invest any excess in US Treasury bonds in exchange for US military protection. This is how the petrodollar system got its start, and for the last 50 years, due to this arrangement has created a ‘synthetic’ demand for the dollar, and established the US dollar as the benchmark for oil trade globally,” he explained to me.

He continued: “The US Government has done more to destroy this country in the previous few years than any external enemy could have ever done. By using sanctions and other forms of coercion, we have turned the US currency and the SWIFT system into weapons that has forced out a large portion of the global population creating a global backlash that is accelerating.”

“Without a doubt, the deliberate emergence of new cooperating powers is causing a significant global power shift that the world is currently experiencing. The emergence of the BRICS in my mind is the most notable example. Six more strategically important nations were added to the group in August: Argentina, Saudi Arabia, Egypt, Ethiopia, United Arab Emirates, and Iran,” Andy said.

When I asked Andy why it’s important that people take the BRICS nations seriously, he told me: “With over 40 more countries showing interest in joining the BRICS group of countries and reports of many more expressing interest growing daily, it appears that this growing union is gaining legitimacy and serious traction.”
“Together with their new members, the BRICS countries currently control two of the three largest nuclear weapons arsenals on the planet, most of the world’s strategic commodities, oil production capacity, enormously expanding reserves of precious metals, and, surprise, the majority of rare earth metals required for the production of batteries and other green and renewable energy applications.”

He also talked about the importance of Saudi Arabia’s role when asked about Putin’s recent trip to visit MBS: “In recent years, Saudi Arabia, the cornerstone of the dollar hegemony, has joined the exponentially expanding Belt Road Initiative alongside all the other OPEC members. The Saudi’s have also joined the BRICS, the Shanghai Cooperation Organization which is the largest regional financial and military organization in the world, and the BRICS New Development Bank.”

“The west is receiving a very clear message from this progression,” Andy told me. “But if that wasn’t clear enough, Saudi Arabia’s finance minister made it quite apparent at the 2023 World Economic Forum in January that the Kingdom is open to dealing in currencies other than the US dollar for the first time in 48 years.”

When I asked him about the UAE no longer taking dollars for oil, he told me: “While it may not be as quite as dramatic as Saudi Arabia and the rest of OPEC doing the same thing, don’t kid yourself, this is a hugely significant event. The ramifications become far more concerning when viewed in the light of the growing progression of global de-dollarization and large number of unilateral trade deals usurping the dollar and the SWIFT system.”

“Consider this,” Andy told me.
“This shocking announcement was made on November 28, just two days prior to the annual 2 week long UN Climate Change Summit currently being held in Dubai.
The Summit has representatives from over 200 countries attending and ironically, the conference is being presided over by Sultan al-Jaber, the head of the UAE state-owned oil business.”

“What’ll really be frightening,” he said, “is what happens when Saudi Arabia and the rest of OPEC follow suit and move officially away from the dollar as sole settlement for oil, as I have been predicting for 4 years in over 1,200 YouTube videos.”

“Imagine what the world would look like if all the nations that have been forced to hoard dollars for the past 50 years in order to buy oil suddenly had no reason to do so and were dumping dollars. The immediate horrific economic ramifications to the United States is precisely the thing that should worry every American to no end. It worries me, does it worry you? It should!”

As I noted in a post a couple of months ago, timing is everything, but I think Andy is on the right track.

Meanwhile, moves in the gold market of late have been encouraging for my long-held thesis that miners will perform well and are my favorite thing to own — and that the dollar is going to come under severe pressure in the future. But while gold has danced around all-time highs, it still feels as though it is climbing a proverbial wall of worry. Any more definitive steps toward de-dollarization and that climb could wind up with a rocket up its ass.

And as long as separation from the US dollar appears as though it’s continuing globally, I believe not only is it likely, but it is completely unavoidable, that the yellow precious metal winds up continuing to appreciate in value.

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