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.
Now, the article was written by Robert Fisk, and the oil states involved have denied that the talks took place:
Big oil producing nations denied a British newspaper report on Tuesday that Gulf Arab states were in secret talks with Russia, China, Japan and France to replace the U.S. dollar with a basket of currencies in trading oil.
However, the wider debate on the dollar is very much a reality:
The report coincides with a wider debate on the role of the dollar as the world’s reserve currency, which has come under question. For most of this decade, the United States has struggled to maintain the dollar’s value.
It would take the support of the Saudis in order to replace the dollar:
Russia has in the past raised the idea of shifting its oil trade away from the dollar, which has been undermined by the U.S. trade and budget deficits. China has suggested that in the long term, the dollar should lose its role as the globe’s top reserve currency.
But strong political links between Gulf nations and the United States, as well as the lack of convertibility for many Gulf currencies and the yuan top the list of practical hurdles to replacing the dollar.
But, as the US government insists on preventing itself from exploiting its own energy resources, continues to expand its dependency on foreign oil, and the government’s disastrous financial policy persists, the specter of losing the dollar as the trading currency will loom large.
We are witnessing the makings of a perfect storm: ruinous domestic economic policy, disastrous diplomatic and foreign policy, and defeatist military policy. Richard Fernandez looks at the track of the storm and how the administration is ignoring it:
The important point is not to talk about problems openly, because it’s a bummer. General McChrystal has been told to shut up over Afghanistan. And in an action as symbolic of the White House as anything else, white coats were handed out to doctors who were photographed with the President as evidence of their support for his health care reform. Those who can’t escape the new dawn can join in the fun of destruction. Don’t worry: the Wall Street Journal says it OK to break things. It’s government policy to destroy perfectly good things.
Richard adds,
people can position themselves for the time when things touch bottom.
No wonder Phyllis was asking if we are dancing at the edge of the cliff.
