Peak Oil is You
Donate Bitcoins ;-) or Paypal :-)
Page added on June 8, 2014
90% Of Gazprom Clients Have “De-Dollarized”, Will Transact In Euro & Renminbi
Following Obama and Putin’s “caught on tape” meeting Vine’d by the French President, we can’t help but wonder if the Russian leaders comments were something akin to “this is not over yet.” With “De-Dollarization” efforts already broadly under discussion, ITAR-TASS reports that Gazprom had signed additional agreements for clients to switch from dollars to euros and renminbi, “nine of ten consumer had agreed to switch.”
Via ITAR-TASS,
Gazprom Neft had signed additional agreements with consumers on a possible switch from dollars to euros for payments under contracts, the oil company’s head Alexander Dyukov told a press conference.
“Additional agreements of Gazprom Neft on the possibility to switch contracts from dollars to euros are signed. With Belarus, payments in roubles are agreed on,” he said.
Dyukov said nine of ten consumers had agreed to switch to euros.
ITAR-TASS reported earlier that Gazprom Neft considered the possibility to make payments in roubles under contracts. Some contracting parties agree to switch from dollars to euros and Yuans.
“The so-called Plan B is already partially worked out. The switch of dollar contracts to euros and Yuans is agreed on with some of our contracting parties. Under consideration is the possibility to switch contracts to roubles,” Dyukov said at the St. Petersburg International Economic Forum.
And as we have explained repeatedly in the past, the further the west antagonizes Russia, and the more economic sanctions it lobs at it, the more Russia will be forced away from a USD-denominated trading system and into one which faces China and India.
20 Comments on "90% Of Gazprom Clients Have “De-Dollarized”, Will Transact In Euro & Renminbi"
Davy, Hermann, MO on Sun, 8th Jun 2014 7:18 am
Gazprom revenue $153BIL. Dollars in circulation $4TRIL. That should tell you the dollar is a long way from dead. A move away from the dollar in these trade deals is smart and should be pursued. The trend in finance is always to better returns and increased margins. There is a limit to bilateral trade deals. The complexity of global trade makes these deals problematic. I for one believe this movement away from the US dollar is a good thing and a good thing for the US main street. Main Street US needs to see a return to a regional economy. If imports go up in price more will be produced here at home. The dire predictions of loss of purchasing power of the US of 40% is typical propaganda from jokes like Mak here on this board. If a country as important and interconnected as the US would suffer such a shock then there goes the global economy. Currencies do not exist in a vacuum. They function in relation to others. Do not expect much change in the global arrangement until the global system begins to fail then and only then will we see strange resulting conditions that are dysfunctional and irrational. In the meantime the global system is brittle and unable to change. With every change there are consequences and unintended consequences. These actions have a tendency to wipe out the swings to regain equilibrium. Until the world organizes a new global reserve currency with the participation of the US the end of the dollar is a pipedream.
I will repost a post Pops here on this board posted a few weeks back:
Pops on Thu, 15th May 2014 12:38 pm
I’ve said this before, there is not enough currency in circulation from any other country to replace the dollar, that’s number one.
Number 2 is no one is going to hold a manipulated currency as a reserve. Russia said they would let the Ruble float next year but it began to crash so I doubt that will happen, China won’t let the Yuan float outside the range they set.
No 3 is China and Russia are both acting really aggressive toward their neighbors, I doubt other countries will be looking forward to holding their cash.
No 4 I don’t know about Russia but china is holding lots of dollars and they aren’t going to just burn that value willey nilley.
The US$ may not stay the standard forever but I’m pretty sure it won’t go away overnight as every gold & gorp dealer wants you to believe.
poaecdotcom on Sun, 8th Jun 2014 8:56 am
“If imports go up in price more will be produced here at home.”
Remember that the US is a MASSIVE NET importer of energy. You need energy for EVERYTHING.
“and a good thing for the US main street”
I disagree wholeheartedly. Main street USA has been built on the petrodollar’s ability to obtain cheap oil.
Main Street USA is more accurately termed Suburbia USA and is wholly dependent on the petrodollar.
The purchasing power of the US consumer is disproportionally more a function of oil price than pretty much anywhere.
How can you argue that the REAL increase in the cost of oil imports visa vie a depreciating dollar will be good for USA? It is a dangerous fantasy to imply that the current trend of nations moving away from the current reserve, albeit incrementally, is good news for the issuer of the reserve.
Being able to print energy (via the petrodollar) is clearly not a luxury that can continue indefinitely.
The US would be very wise to acknowledge her privileged position since Bretton Woods and to prepare for a more competitively priced global energy market.
noobtube on Sun, 8th Jun 2014 9:08 am
Even on a site called PeakOil, Americans still can’t deal with the reality that they totally screwed up the advantage they had.
Instead of being a force for good in the world, they spent their entire reserve status causing as much destruction and hell on Earth as they possibly could.
Now, that the American Century is over, they keep rationalizing that the world needs their stupidity, waste, and war.
Despite the fact the world/Earth is getting mighty sick of Americans, they refuse to accept any responsibility for their actions nor are they willing to accept that their empire is ending (unless that means everyone else suffers too).
When an empire dies, everyone else benefits. But, in the mind of the pompous, arrogant, self-important, childish, pretentious, petty, condescending American, the rules don’t apply to them.
Well, guess what Americans, the rules apply to everyone. Get ready to be punished.
rockman on Sun, 8th Jun 2014 9:16 am
Again I question the practical significance. China pays Russia in their currency instead of doing so with a portion of their $3 TRILLION foreign currency account. And the Russians use that currency to buy Chinese imports that they used to pay in rubles.
So the amount of US currency over seas remains the same and continues to be traded between countries. Germany buys Saudi crude and swaps Marks digitally at the bank for US $’s and those are transferred digitally to the Saudi bank account.
Perhaps there are some subtle changes in the dynamics but I don’t how the US dollar is “being destroyed” by these changes.
Davey on Sun, 8th Jun 2014 9:32 am
Poa, we differ in points of view. You are still following a BAU mentality. That is fine. I am looking at post BAU and the sooner we get to post BAU the better. This line of thought seeing increasing price of imports as a good thing in the push for changes. The increase in energy prices will not be that much relative to the rest of the world or the whole system collapses. What the US needs now is hardship to force necessary changes. Let us hope these forced changes are on the mild side so the contraction is slow. This will be a global event so any impact on the dollar impacts the rest of the globe. There is no decoupling.
Davey on Sun, 8th Jun 2014 9:40 am
Rock, bilateral deals have limited effect and usefulness. A global reserve currency has a value over and above the currency value to the global system. It allows efficient trade and exchange. BilAteral deals are cumbersome and inefficient except in focus trade deals. Until nations come together to create an alternative to the dollar the best way for the 100 plus trading nations to trade is through the accepted reserve currency in use today. Any effort at alternatives will only play a small role in world trade. The dollars demise is linked to the global systems demise.
poaecdotcom on Sun, 8th Jun 2014 9:48 am
practical significance??
Zero intrinsic pieces of “paper” have been pulled out of thin air and traded for a ‘once in a species’ supply of energy, underpinning the entire edifice of western capitalism.
ENERGY IS EVERYTHING.
It is not about one or two deals but trends. The trend of power transfer from the petrodollar (Ponzi) to the ENERGY exporters is insidious and continuous.
The endgame of this trend has practical significance that is “non-negotiable” to the American way of life and ALL deficit spending, energy importers.
poaecdotcom on Sun, 8th Jun 2014 10:00 am
“You are still following a BAU mentality”
I am commenting on the article which is concerned with GAZPROM and currency.
This thread is clearly following the BAU mentality.
With that said, I agree with you that, but rarely vocalize it, that “the sooner we get to post BAU the better”.
BAU = Bio-sphere attack under!!
To come full circle. This article should serve as one of many WAKE UP CALLS that we should prepare for Energy independence, i.e. an economy and social system that is independent of global trade
Go Local ;o) – contract now and avoid the rush!
rockman on Sun, 8th Jun 2014 11:01 am
Davey – “…best way for the 100 plus trading nations to trade is through the accepted reserve currency in use today. Any effort at alternatives will only play a small role in world trade.” Seems like the Russians, Saudis, Brazilians, et al are more than satisfied to not accept the US $ as THE reserve currency. But again a simple question: what is the significant impact on the US $ by these other nations excluding the $ from their transactions? Other then some folks saying it’s important I still don’t catch any reason why. Macroeconomic isn’t my thing so that’s why I ask what I’m missing.
poaecdotcom on Sun, 8th Jun 2014 11:21 am
Historically, a primary reason that Sovereigns have held the reserve currency (dollar) is to purchase oil.
As the global oil trade trends towards other currencies, there will be less and less reason to hold dollars.
What can you do with dollars?
Spend them in the US, blowing bubbles in US assets, real estate, Treasuries, Stocks etc. and
Drum roll – inflating the price of oil in dollars.
Our society (U.S.A.) is over leveraged on oil and oil prices have a HUGE impact on the US economy.
Again, the endgame is that the US will no longer be able to ‘print oil’.
Greece cannot print oil either…..
bobinget on Sun, 8th Jun 2014 11:50 am
Getting round sanctions, using Chinese and Russian banks instead of captive American ones works for trade. India with its newly elected right wing PM, I’m guessing plays hard ball. While there certainly is not sufficient currency in any single nation to match USD , ChinIndia & Russia combined combining buying power could prove worthy competitors.
By 2020 India will have 1.5 billion people, China 1.3,
Russia, control of world oil markets, smaller population.
Davy, Hermann, MO on Sun, 8th Jun 2014 12:01 pm
Bob, a point I am trying to make it is precisely the competition in our integrated global financial system that is dangerous “IF” this turn into a global trade civil war. The global economic system cannot stomach more than some friendly competition. If this becomes a serious battle of economies the global system will unravel and the financial system with it. There is far too much debt, counterparty risk, and cross boarder investment for a trade war. A healthy dose of competition is one thing a trade war another.
DMyers on Sun, 8th Jun 2014 2:01 pm
I see at least two important considerations in this subject. One is what I’ll call “meta-expectations” surrounding the dollar, and the other, “meta-investment” in the dollar. These cover two issues; the status of the $ as a fiat currency, and the relationship of $ as a fiat currency with $ as reserve currency.
Meta-expectations have to do with what is sometimes called faith in the currency. The $ no doubt benefits in this respect from status as reserve. I would propose that movement away from the dollar will reduce faith in, and alter meta-expectations of, the $ (downward).
Clearly, the world has huge investment in $ as a matter of course, as over the years the $ has been a necessary ingredient of exchange, especially in energy, per the current discussion. I believe that is the main source of $ buoyancy at the moment. Everyone has an investment in $ value, in their own interests.
A move away from $ as exchange unit will reduce, incrementally, that meta-investment in $. At the point where perception of damage to one’s own economy is less than the benefit to one’s economy from kicking the dollar, then the dollar will be kicked. [This is, of course, related to the obvious continuance of dollar value destruction through money supply enhancement by the FED and federal government deficit spending.] As such a development were to gain momentum, then that, in turn, would affect meta-expectations surrounding the $. With the combined occurrence of falling meta-investment and falling meta-expectations, there would be a likely collapse of the $.
A short treatment of a long subject. The use of “meta” here is to imply that we are dealing with phenomena that are abstract. Faith, expectations, self-interest, etc., are outside the physical realm. For that reason, even though they may be manipulable to a certain extent, they are also capable of assuming their own forms, rapidly, and causing damage in the real world, that no economic or political treatment can repair.
energy investor on Sun, 8th Jun 2014 4:26 pm
Guys, let’s separate out the two issues to understand them.
A global reserve currency needs both acceptance and liquidity. The Renminbi cannot be a reserve currency until it is regularly in use for trade (bi-lateral or otherwise). Many countries now have bi-lateral trade with China in their respective currencies (including NZ and Australia). What Russia is doing is reducing the liquidity base for the US dollar. The Euro has liquidity and acceptance (as long as they don’t indulge in too much NIRP and QE). What Vladimir (via Alexei Miller) is doing is saying, that folk can buy from Gazprom in Renminbi as if it were an accepted global reserve currency.
There is no question that the acceptance of the Renminbi by more countries for bi-lateral and multi-lateral trade diminishes the power of the dollar and it not only adds to the Renminbi’s global liquidity but also acceptance as a reserve currency.
Rosatom, Rosneft and Gazprom trade with a wide range of countries and when they all follow suit, then the relative power of the Renminbi against the dollar, the Yen, the British Pound and the Euro will be enhanced.
This will enable Chinese Government to denominate its own offshore debt in Renminbi – if it wants – just as the others can.
Not yet does this damage the US Dollar. But it certainly will do so in time…more so if the Chinese decide to back the Renminbi with gold.
And why do you think the CCP are buying almost a thousand tins of gold per year?
Plantagenet on Sun, 8th Jun 2014 4:36 pm
Putin is shifting to Euros just as Mario Draghi, head of the EU bank, is seeking to devalue the Euro. Sure Putin…swap your dollars for rubles and then watch the Euro lose 20% of its value—sounds like another dumb move by Putin.
MKohnen on Sun, 8th Jun 2014 5:24 pm
Davy,
“Number 2 is no one is going to hold a manipulated currency as a reserve.” I agree with you, but I think that the USD is now the most manipulated currency on the planet. Isn’t that what all the efforts of the Fed are about? As such, I don’t think other countries will shift away from the USD as reserve because they really want to, the US dollar policy is forcing them to. Right now, the US is playing take-down with regards to any and all economies that are seen as competition or impediments. I believe that it was weaponizing the US economy to take down Iraq then Iran that really started this ball rolling. Obviously, a fiat currency is based on trust. When a country turns its economy into a weapon, then starts using that weapon rather indiscriminately, trust will be lost, ergo the value of the fiat currency will erode to nothing.
So quoting how many USD are presently in circulation is like walking into Wal-Mart with 10,000 Canadian Tire Dollars (how do you like that for blending the US/Canadian economies 🙂 and wanting to buy a flat screen TV. You could have a googleplex of Canadian Tire Dollars, and they won’t mean a thing. The Euro was made up out of fantasy, and now has an agreed upon value. Any currency can be made up, as long as the countries trading in it agree on its value. So some form of digital currency would work very well for this purpose.
A very large segment of Americans are going to have a big problem trying to shift out of borrow/consume mode. It’s like kicking teens off the games and sending them outside to “play.” There’s nothing to do out on the street, so they start making trouble. Thus, for America as a whole, losing the borrowing benefits of reserve currency will have a major impact. For people like you who are prepared (at least mentally, which to me is the most important thing) loss of reserve status could actually be life enhancing. But to those who aren’t prepared …
Welch on Sun, 8th Jun 2014 7:53 pm
When demand for US dollars drops, its value understandably does the same.
Makati1 on Sun, 8th Jun 2014 11:10 pm
Boob, so many on g=here are dollar-centric to a fault. They don’t see the avalanche forming in the rest of the world. Yes, China has a few trillion in USDs. but it is also spending them all over the world as fast as they can. They know they are only holding toilet paper, not real value in USDs. But, let the deniers keep thinking they can keep on living on printed energy. The day is coming fast when they will need that faith while they wait in the bread line, if there is any bread.
Plant, if you think those numbers you get from the US propaganda ministry are real, keep drinking the cool aid. It’s too late to save yourself. It’s about trade, not numbers on a board. It’s about clout/power, not how the ECB manipulates the numbers. It doesn’t matter how much NG costs in any currency, it’s who has it and who needs it. THAT is what Russia knows and China knows and the US ignores.
Davy, Hermann, MO on Mon, 9th Jun 2014 6:11 am
MK, what currency is not manipulated and monetized. The whole global system is being corrupted and manipulated. Being integrated and involved in counterparty arrangements the global system is so tied up and hypothecated that all currencies face a similar corruption from manipulation. What is going on in China is far worse than the US. The US we are seeing legalized theft, disregard for law, and legalized market manipulation. In China they are taking that financial environment a step further by disregard for accounting, larceny, blatant lies, and governmental looting. The Chinese commodity collateral crisis is a prime example of this.
MK, you are right about Americans facing a big adjustment with the end of barrow/consume conditions. Yet, Mk, is this not already happening. The American Middle class is being wiped off the map by the wealth transfer of the 1%’ers. I see the 1%er’s as facing the big change when the financial crisis hits and their portfolio and their businesses fail.
Davy, Hermann, MO on Mon, 9th Jun 2014 6:39 am
MK, now this is manipulation. Would you want to hold this currency? I would not!
http://www.zerohedge.com/news/2014-06-08/pboc-hits-panic-button-strengthens-currency-most-20-months