Petro yuan

• And war economics

China in preparing to launch yuan-denominated oils futures contracts. According to some news agencies it may be allowing yuan-based oil contracts in Shanghai Stock Exchange as early as March this year. The move has consequences going far beyond the economic domain. Hitherto, the US dollar has had the monopoly over oil contracts as it enjoyed the status of the only currency in which major oil contracts could be made. This meant that US could get away by having a 20 thousand billion dollars budget deficit as it could print the dollars backed by “black gold”. What does it mean to challenge America by competing against the ultimate economic tool, the petro-dollar?

As the prospect of petro-yuan becomes a reality, China will, in effect, be making a claim to global oil reserves. That would definitely be against American interests as the “black gold” has been practically backing the US dollar as well as humungous US debt. Globally, if you needed oil you definitely needed to have dollar reserves. These dollar reserves could never be materialised unless goods and services made it to American economy or in some cases through expats sending foreign exchange to their home nations. Most global dollar reserves depend on export from dollar starved nations to American consumers. These reserves would always land back in American economy through the banking system. Again, the same dollar would have to be competed for globally by offering goods and services to American consumer as the world is in perpetual need of oil for most of its energy needs. That means that all the economies have to be constantly running for dollar while the US could print at ease in the name of national and foreign debt.

China sits in a comfortable position as it owns almost 1,200 billion dollars of American debt. It, therefore, does not have to fret about launching the petro-yuan, as, at-least in its initial stages, practically the petro-yuan will itself be backed by the American debt owned by China. On the other hand, Russia has been ever more willing to back the idea of global trade independent of the dollar. Also, the initiative of BRICS alliance already targeted the dollar-heavy world of trade and economics. While Russia and China have stepped up their alliance to a level where the Russian ruble is an acceptable tender at many places in China, many other countries sitting on oil reserves are naturally averse of petro-dollar. Among these nations Iran and Venezuela are those who have to constantly battle sanctions hurled at them from the cross-Atlantic “moral” police. These sanctions limit the trade potential of these oil rich nations. As a result these countries face constant currency depreciation while an America whose extravagance far exceeds its inland oil output and depends on global oil reserves for its huge debt has got its currency-power dictating sanctions on these countries. Both Iran and Venezuela could have a great economic outlook had it not been for the petro-dollar and the power of hindering other nations’ claim to their own resources it has bestowed upon US. While Iran and Venezuela don’t enjoy the independence to live within their own “means”, America reserves the right to live beyond its while putting the burden of its lavish spending on global economy courtesy petro-dollar.

To delay or halt its economic death, America has every reason to trigger a war in Syria, for example, whose oil industry was well penetrated by Russia before American backed militants stepped in to essentially protect the American lust for oil

Therefore, Iran and Venezuela shall be happy participants in petro-yuan’s success and shall also have an opportunity to avoid the oppressive sanctions they are subjected to banning on them their own natural wealth. Would this practically mean putting a stop to American economic tyranny? Has the petro-dollar been potentially checkmated? We are far from that I believe. If the dragon is “sanctioned” from the tool that has propped up its belly, at the expense of others’ appetite, it may leash out brute force against the competition. Since petro-dollar is not a moral tool in global economic competition, we don’t expect it to be defended and protected in a moral way. To delay or halt its economic death, America has every reason to trigger a war in Syria, for example, whose oil industry was well penetrated by Russia before American backed militants stepped in to essentially protect the American lust for oil. This western agenda has been pushed so explicitly that while Bashar-al-Assad had to face the European Union import ban on oil and petroleum products in September 2011, in April 2013 the same European Union would decide that member states could support the Syrian opposition by buying oil from militant controlled areas; Hence, the birth of petro-terrorists to protect the petro-dollar. If that is the depth of immorality that Europe and America can go to protect their oppressive economic hold on the world it would take more than petro-yuan to thwart their malicious agenda. When it comes to the “black gold”, western bloc will be ready to engage any power by attacking its global interests be it through a false flag operation through ISIS and a “reaction” thereafter, or by pushing North-Korea or Syria against the wall.