FROM PETROYUAN HEGEMONY to the DYING OF PETRODOLLAR
IS THIS TRUE? hard to believe .. it goes against news current .. but read it
Submitted by Tyler
Durden on 01/21/2016
HERE EXTRACTS OF THIS INTERESTING ARTICLE
As
we previously detailed, two topics we’ve deemed critically
important to a thorough understanding of both global finance and the shifting
geopolitical landscape are the death of the petrodollar
and the idea of yuan hegemony.
In November 2014, in “How
The Petrodollar Quietly Died And No One Noticed,” we said the following
about the slow motion demise of the system that has served to perpetuate
decades of dollar dominance:
Two years ago, the financial
world began discussing the end of the system that according to many has framed
and facilitated the US Dollar's reserve currency status: the Petrodollar, or
the world in which oil export countries would recycle the dollars they
received in exchange for their oil exports, by purchasing more USD-denominated
assets, boosting the financial strength of the reserve currency, leading to
even higher asset prices and even more USD-denominated purchases, and so forth,
in a virtuous (especially if one held US-denominated assets and printed US
currency) lopp.
The main trust for this shift away from the USD, if primarily in the
non-mainstream media, was that with Russia and China, as well as the rest of
the BRIC nations, increasingly seeking to distance themselves from the US-led,
"developed world" status quo spearheaded by the IMF, global trade
would increasingly take place through bilateral arrangements which bypass the
(Petro)dollar entirely. And sure enough, this has certainly been taking
place, as first Russia and China, together with Iran, and ever more developing
nations, have transacted among each other, bypassing the USD entirely, instead
engaging in bilateral trade arrangements.
Falling crude prices served to accelerate the petrodollar’s
demise and in 2014, OPEC nations drained
liquidity from financial markets for the first time in nearly two decades:
By Goldman’s estimates, a new oil price “equilibrium” (i.e.
a sustained downturn) could result in a net petrodollar drain of $24 billion
per month on the way to nearly $900 billion in total by 2018. The implications,
are far reaching: "...the end of the Petrodollar recycling chain is
said to impact everything from Russian geopolitics, to global capital market
liquidity, to safe-haven demand for Treasurys, to social tensions in developing
nations, to the Fed's exit strategy.”
Shifting to the idea of yuan hegemony, China is aggressively
pushing its Silk
Road Fund and Asian Infrastructure Investment Bank.
The $40 billion Silk Road Fund is backed by China’s FX
reserves, the Export-Import Bank of China, and China Development Bank and seeks
to increase ROIC for Chinese SOEs by investing in infrastructure projects
across the developing world. .. China will push for the yuan to play a
prominent role in the settlement of AIIB transactions and may look to establish
special reserves in both the AIIB and Silk Road fund to issue yuan-denominated
loans.
Earlier November, China and Russia indicated that going
forward, more trade between the two countries would be settled in yuan. From
Reuters, last
November:
Russia and China intend to
increase the amount of trade settled in the yuan, President Vladimir Putin said
in remarks that would be welcomed by Chinese authorities who want the currency
to be used more widely around the world.
Spurred on by their often testy
relations with the United States, Russia and China have long advocated reducing
the role of the dollar in international trade.
Curtailing the dollar's
influence fits well with China's ambitions to increase the influence of the
yuan and eventually turn it into a global reserve currency. With 32 percent of
its $4 trillion foreign exchange reserves invested in U.S. government debt,
China wants to curb investment risks in dollar.
The quest to limit the dollar’s
dominance became more urgent for Moscow this year when U.S. and European
governments imposed sanctions on Russia over its support for separatist rebels
in Ukraine.
"As part of our cooperation with this country (China),
we intend to use national currencies in mutual transactions.The initial deals
for rouble and yuan are taking place. I want to note that we are ready to
expand these opportunities in (our) energy resources trade," Putin
said at the time, suggesting that going forward, Russia may look to settle
sales of oil in yuan.
Sure enough, Gazprom has confirmed that since the beginning
of the year, all oil sales to China have been settled in renminbi. From FT:
Russia’s third-largest oil
producer, is now settling all of its crude sales to China in renminbi, in the
most clear sign yet that western sanctions have driven an increase in the use
of the Chinese currency by Russian companies..
Gazprom Neft, the oil arm of
state gas giant Gazprom, said on Friday that since the start of 2015 it had
been selling in renminbi all of its oil for export down the East Siberia
Pacific Ocean pipeline to China.
Russian companies’ crude exports
were largely settled in dollars until the summer of last year, when the US and
Europe imposed sanctions on the Russian energy sector over the Ukraine
crisis...
Gazprom Neft responded more
rapidly than most, with Alexander Dyukov, chief executive, announcing in April
last year that the company had secured agreement from 95 per cent of its
customers to settle transactions in euros rather than dollars, should the need
to do so arise.
Mr Dyukov later said the
company had started selling oil for export in roubles and renminbi, but he did
not specify whether the sales were significant in scale.
According to Gazprom Neft’s
first-quarter results issued last month, the East Siberian Pacific Ocean
pipeline accounted for 37.2 per cent of the company’s crude oil exports of 1.6m
tonnes in the three months to March 31.
With that, the "PetroYuan" has officially been born
and while FT notes that "other Russian energy groups have been
more reluctant to drop the dollar for settlement of oil sales," the fact
that Russian producers are now openly considering a shift at the same time that
officials in the US and Europe are openly discussing stepped up economic
sanctions suggests renminbi settlements may become more commonplace going
forward.
To understand why and to what extent this is significant in
the current environment, consider the following from WSJ:
Officials of the Organization of
the Petroleum Exporting Countries, which declined to cut oil production last
year, reasoned that maintaining high production levels would protect market
share in crucial importing nations.;
But Chinese customs data
released Friday show that China’s crude imports from some big OPEC nations
have plummeted, while imports from Russia surged 36% in 2014. Meanwhile,
imports from Saudi Arabia fell 8% and those from Venezuela dropped 11%.
To summarize: Western economic sanctions on Russia
have pushed domestic oil producers to settle crude exports to China in yuan
just as Russian oil is rising as a percentage of total Chinese crude imports.
Meanwhile, the collapse in crude prices led to the first net outflow of
petrodollars from financial markets in 18 years, and if Goldman's projections
prove correct, the net supply of petrodollars could fall by nearly $900 billion
over the next three years. All of this comes as China is making a concerted
push to settle loans from its newly-created infrastructure funds in renminbi.
Putting it all together, the
PetroYuan represents the intersection of a dying petrodollar and an ascendant
renminbi.
---
----
----
No hay comentarios:
Publicar un comentario