Monday , 17 June 2024

Would Major Sanctions Against Russia Hasten End of USD As World’s Reserve Currency?

As it tries to punish Russia for the latter’s dismemberment of Ukraine, the West is discovering that the Gold-bars-on-100-and-50-dollar-billbalance of power isn’t what it used to be. Russia is a huge supplier of oil and gas — traded in US dollars — which gives it both leverage over near-term energy flows and, far more ominous for the U.S., the ability to threaten the USD’s reign as the world’s reserve currency – and it’s taking some big, active steps towards that goal.

So says John Rubino ( in edited excerpts from his original article* entitled Welcome to the Currency War, Part 14: Russia, China, India Bypass the Petrodollar.

The following article is presented by Lorimer Wilson, editor of (Your Key to Making Money!), the FREE Market Intelligence Report newsletter (sample here; register here) and (A site for sore eyes and inquisitive minds) and has been edited, abridged and/or reformatted (some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. This paragraph must be included in any article re-posting to avoid copyright infringement.

Rubino goes on to say in further edited excerpts:

As Zero Hedge has noted [in edited excerpts from an article entitled] Russia Prepares Mega-Deal With India After Locking Up China With “Holy Grail” Gas Deal:

…[W]hile the West is busy alienating Russia in every diplomatic way possible, without of course exposing its crushing over-reliance on Russian energy exports to keep European industries alive, Russia is just as busy:

  • cementing its ties with China, in this case courtesy of Europe’s most important company, Gazprom, which is preparing to announce the completion of a “holy grail” natural gas supply deal to Beijing and
  • Rosneft, the world’s top listed oil producer by output, may join forces with Indian state-run Oil and Natural Gas Corp to supply oil to India over the long term….

We just have one question: will payment for crude and LNG be made in Rubles or Rupees – or in gold – because it certainly won’t be in dollars?…

While the U.S. is bumbling every possible foreign policy move in Ukraine…Russia is aggressively cementing the next, biggest (certainly in terms of population and natural resources), and most important New Normal geopolitical Eurasian axis: China – Russia – India. There is only one country missing – Germany – because, while diplomatically Germany is ideologically as close to the U.S. as can be, its economy is far more reliant on China and Russia, something the two nations realize all too well. The second the German industrialists make it clear they are shifting their allegiance to the Eurasian Axis and away from the Group of 6 (ex Germany) most insolvent countries in the world, that will be the moment the days of the current reserve petrocurrency will be numbered.

The U.S. Dollar Will Collapse When This Upcoming Event Happens

To understand why trade deals between Russia, China and India are potentially huge, a little history is useful:

  • Back in the 1970s, the U.S. cut a deal with Saudi Arabia — at the time the world’s biggest oil producer — calling for the U.S. to prop up the kingdom’s corrupt monarchy in return for a Saudi pledge that it would accept only USDs in return for oil.
  • The “petrodollar” became the currency in which oil and most other goods were traded internationally, requiring every central bank and major corporation to hold a lot of dollars and cementing the greenback’s status as the world’s reserve currency.
  • This in turn has allowed the U.S. to build a global military empire, a cradle-to-grave entitlement system, and a credit-based consumer culture, without having to worry about where to find the funds. We just borrow from a world voracious for dollars.

…[I]f Russia, China and India decide to start trading oil in their own currencies, [however,] — or, as Zero Hedge speculates, in gold — then the petrodollar becomes just one of several major currencies [which would cause:]

  • Central banks and trading firms, that now hold 60% of their reserves in dollar-denominated bonds, to have to re-balance by converting dollars to those other currencies. Trillions of dollars would be dumped on the global market in a very short time, which would:
    • lower the dollar’s foreign exchange value in a disruptive rather than advantageous way,
    • raise domestic U.S. interest rates and
    • make it vastly harder for us to bully the rest of the world economically or militarily.

The West seems not to have grasped just how vulnerable it was when it got involved in this latest backyard squabble but it may be about to find out [because] it could end up being an absolute “win-win” for Russia, China and India…whose

  • currencies would gain prestige, giving their governments more political and military muscle (while that of the U.S. is diminished) and
  • the gold and silver they’ve vacuumed up in recent years would rise in value more than enough to offset their depreciating Treasury bonds.
Editor’s Note: The author’s views and conclusions in the above article are unaltered and no personal comments have been included to maintain the integrity of the original post. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.

* (Copyright ©

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