[Concerned]

$this->bbcode_second_pass_quote('DantesPeak', 'I')t has begun.

[lutherquick]

You ain't seen nothing yet...
This is just the begining...

[greenworm]

Putin always appeared to be a little crafty. More so than the US administration.

[Novus]

I see a massive transfer of wealth about to go to Russia. A new economic super power was born today. If you wanted oil in the past the only choice was to buy dollars and trade the dollars for oil. Now you can do that with Rubles. Russia is one country the US can't use its military to bully around and stop such economic coups.

This is a huge turn of events. The dollar will be falling and this alone could produce $100 oil. Hold onto your nose, I smell a shit storm coming.

[Gazzatrone]

So the Markets seem to be putting up a fight with the price per barrel falling.

So much for Demand Deconstruction. Could this be that rising prices were an inflated myth and with a new currency in play the world will fight over who can sell it the cheapest in order to keep interest in the petrodollar.

And with Russia being an exporter they have every right to under cut the petrodollar.

Its a plane crashing on full throttle if you ask me.

[DantesPeak]

Russian foreign exchange reserves are building up very fast, with an offical estimate made Tuesday that they will grow $5 to $6 billion (US) per month.

But they don't plan on keeping all those dollars:

$this->bbcode_second_pass_quote('', 'R')ussia shift fx reserves from dollar
By Steve Johnson
Published: June 8 2006 17:28 | Last updated: June 8 2006 17:28

Russia became the latest country to shift a chunk of its central bank reserves out of the dollar, further eroding the standing of the greenback as the world’s de facto reserve currency.


Sergei Ignatyev, chairman of the central bank, said 50 per cent of its forex reserves were now held in dollars, with 40 per cent in euros and the remainder in sterling. Previously it was believed that just 25-30 per cent of the reserves were in euros, with virtually all the remainder in dollars.

[perdition79]

This is the exact moment in America's history when the s--t hit the fan. Remember it well.

[Kingcoal]

Is it to early to start complaining about ruble hegemony? Actually, maybe it's a good thing; we can start blaming Russia for everything wrong in the world.

[Petrodollar]

Anyone have the figure for Russia's current oil exports in mb/d?

I know that total oil production is around 9.2 mb/d (circa late 2005), but I was curious what their export numbers are. I seem to recall approx. 5.1 mb/d, but I think that is 2004 CIA-sourced data.

So, here's some quick math. The projected drop in demand for dolllars/petrodollars at today's $70 per barrel would be approx:

5,100,000 mb/d X $70 dollars = $357,000,000 x 45 days (contract life) = $16,065,000,000 per cycle of Russian oil exports.

Now, assuming approx. 250 trading days per year (5.5 cycles) = $88,357,500,000 per year in Russian petrodollar sales. (for the decimally impaired, that's $88 billion per year)

So, we can deduct that ultimately (when Russia's oil is traded via this new exchange - assuming roubles are the unit of account and transaction currency) that customer's of Russia's oil exports (i.e. principally the EU) will not need those $88 billion petrodollars which they are currently using for those transactions.

Will Russia attempt to price its Urals against the dollar-based Brent crude or will they attempt to follow the euro's more stable valuation? I predict the euro due to its overwhelming stabilty and relative value over the dollar, and Russia has already stated its intentions:

$this->bbcode_second_pass_quote('', '[')b]Russia ends de facto dollar peg and moves to align rouble with euro
By Steve Johnson in London (sourced from the Financial Times)
Published: February 5, 2005

[roel]

Well, there is a power grab somewhere, and countries smelling US blood and reacting like natural predators. Even the UN's 2nd man took a swipe yesterday, unimaginable 5 years ago.
But it's also self-protection: there is serious talk of readjusting the US dollar by as much as 50% on international markets, as well as the option of one party, let's say China, dumping greenbacks, which would hurt all other parties that hold them.
If you're Putin, you want your biggest deals, read EU, to be in a stable currency, read Euros. July 1 is the date set for full conversion. And the dollar will be the emperor's new money?!

[Leanan]

$this->bbcode_second_pass_quote('', 'F')rom now on, the price of Russian oil will not be determined only in New York.

[mekrob]

So this is only for the Ural oil. How much is produced in the region? How much is exported?

[Kingcoal]

Mr. Petrodollar, what do you think the US will do if you are correct? What does the US have to hock? Will we have to force our women into prostitution to pay for our debts?

[LadyRuby]

I don't really understand this oil trading business, but this report suggests that they're not actually selling oil, it's just a "financial instrument."

Anyone have any clue what that means?

Urals Oil Futures Begin Trading on RTS


$this->bbcode_second_pass_quote('', 'U')rals oil futures began trading Thursday on the RTS, marking the first time the country's top blend has traded on an exchange.

...

Although the Urals prices are quoted in dollars, the contracts are settled in rubles according to the Central Bank's exchange rate. Investors cannot get delivery of any physical oil through the exchange -- all contracts are cancelled and settled in cash.

"Oil companies are not involved in this -- it's just a financial instrument," said Valery Nesterov, oil analyst at Troika Dialog. Nesterov said the contracts would provide "more opportunities to ensure market stability and hedge against price fluctuations."

In the future, the exchange will begin trading refined oil products, according to an RTS spokeswoman.

Maxim Shein, head of research at BrokerKreditServis, said the Urals futures would accomplish three things. Besides giving the Urals blend a continual, transparent price, the new contracts will also help the convertibility of the ruble and slow the growth in gasoline prices, he said in a research note.

[snowhope]

This appears to be a major threat to the US$. Depending on how successful it becomes (and lets face it a lot of countries want to get out of the US$) it could be the start of the major US economic decline that most of us see coming.

I see no possible method to mitigate this decline other than a very major world changing event. I imagine this event would need to be at least an order of magnitude greater than 9/11 to have any appreciable impact or chance of stopping the impending depression.

In my opinion we should be very, very concerned about the next 6 months.

How did we (the West) dig a hole this deep.....

[parsifal]

But Russia still has problems of decling male population and an incubating HIV timebomb. Can a resurgent Ruble revers these trends?

[DantesPeak]

$this->bbcode_second_pass_quote('LadyRuby', 'I') don't really understand this oil trading business, but this report suggests that they're not actually selling oil, it's just a "financial instrument."

Anyone have any clue what that means?

Urals Oil Futures Begin Trading on RTS


$this->bbcode_second_pass_quote('', 'U')rals oil futures began trading Thursday on the RTS, marking the first time the country's top blend has traded on an exchange.

...

Although the Urals prices are quoted in dollars, the contracts are settled in rubles according to the Central Bank's exchange rate. Investors cannot get delivery of any physical oil through the exchange -- all contracts are cancelled and settled in cash.

"Oil companies are not involved in this -- it's just a financial instrument," said Valery Nesterov, oil analyst at Troika Dialog. Nesterov said the contracts would provide "more opportunities to ensure market stability and hedge against price fluctuations."

In the future, the exchange will begin trading refined oil products, according to an RTS spokeswoman.

Maxim Shein, head of research at BrokerKreditServis, said the Urals futures would accomplish three things. Besides giving the Urals blend a continual, transparent price, the new contracts will also help the convertibility of the ruble and slow the growth in gasoline prices, he said in a research note.

[JPL]

$this->bbcode_second_pass_quote('snowhope', 'T')his appears to be a major threat to the US$. Depending on how successful it becomes (and lets face it a lot of countries want to get out of the US$) it could be the start of the major US economic decline that most of us see coming.

[DantesPeak]

Well I did find something that indicates that, yes, they may be setting up a delivery point for oil:

$this->bbcode_second_pass_quote('', '6')/7/06 WPS: Russ. Oil & Gas Rep. (Pg. Unavail. Online)
2006 WLNR 9715418

Russian Oil and Gas Report
Copyright 2006 WPS Media Monitoring Agency

June 7, 2006

Issue 53

Section: INDUSTRY EVENTS

RUSSIA MAY CREATE A STRATEGIC OIL AND GAS RESERVE

Russian authorities propose creation of a strategic oil and gas reserve with a minimum size amounting to 5 million tons. According to Director of the Federal Reserve Agency Alexander Grigoryev, this is necessary for the state to be able to correct the market in case of high prices of petroleum products or fuel deficit inside of the country. In case of deficit of demand or supply on the oil exchange to be opened in 2007 raw materials from the reserve will be supplied to the market or, on the contrary, excessive quantity of oil will be supplied to the reserve.

The proposal of the Federal Reserve Agency is most likely aimed at creation of a mechanism that can offer a tool for influencing of excessive fluctuations of internal Russian oil prices to the state. In this case the matter is about reserves different from those created in case of war or natural disaster. Trade at the Russian oil exchange will begin in 2006 and starting from 2007 prices of Russian oil and petroleum products will be determined on this marketplace. Alexei Kuzmichev, co-owner of Alfa Group and ideologist of establishment of a Russian international oil exchange, explains, "When the exchange starts working there will be various interventions and other correcting actions on the part of the state. With assistance of the reserve mentioned by Grigoryev it is really possible to influence prices efficiently."

[snowhope]

Traditionally / historically I agree JPL and you make very good points. But we are in a fast changing geo-political world - who would have though even 5 years ago that countries such as Iran, Russia, and increasingly some West African countries would gain the power and influence they have now?

I presume until relatively recently the US$ would have been considered a stable currency and the Euro didn't emerge until 5 years ago! What currencies were stable in the recent past and are stable now has and is changing rapidly.

Putin is a clever man and I think they are planning long term - the axis of power is changing as we watch. Chindia have yet to play there hands and of course and the Iranians keep threating a Euro bourse. All of the above is a threat to the US$ and I can only see it going one way unfortunately. The question for me is how fast and deep will the crash be..... no wonder gold is popular.