Russia and China Declare All Out War on US Petrodollar — Prepare for Exclusive Trade in Gold

By Jay Syrmopoulos

The formation of a BRICS gold marketplace, which could bypass the U.S. Petrodollar in bilateral trade, continues to take shape as Russia’s largest bank, state-owned Sberbank, announced this week that its Swiss subsidiary had begun trading in gold on the Shanghai Gold Exchange.

Russian officials have repeatedly signaled that they plan to conduct transactions with China using gold as a means of marginalizing the power of the dollar in bilateral trade between the geopolitically powerful nations. This latest movement is quite simply the manifestation of a larger geopolitical game afoot between great powers.

According to a report published by Reuters:

Sberbank was granted international membership of the Shanghai exchange in September last year and in July completed a pilot transaction with 200 kg of gold kilobars sold to local financial institutions, the bank said.

Sberbank plans to expand its presence on the Chinese precious metals market and anticipates total delivery of 5-6 tonnes of gold to China in the remaining months of 2017.

Gold bars will be delivered directly to the official importers in China as well as through the exchange, Sberbank said.

Russia’s second-largest bank VTB is also a member of the Shanghai Gold Exchange.

To be clear, there is a revolutionary transformation of the entire global monetary system currently underway, being driven by an almost perfect storm. The implications of this transformation are extremely profound for U.S. policy in the Middle East, which for nearly the past half century has been underpinned by its strategic relationship with Saudi Arabia.

THE RISE & FALL OF THE PETRODOLLAR

The dollar was established as the global reserve currency in 1944 with the Bretton Woods agreement, commonly referred to as the gold standard. The U.S. leveraged itself into this power position by holding the largest reserve of gold in the world. The dollar was pegged at $35 an ounce — and freely exchangeable into gold.

By the 1960s, a surplus of U.S. dollars caused by foreign aid, military spending, and foreign investment threatened this system, as the U.S. did not have enough gold to cover the volume of dollars in worldwide circulation at the rate of $35 per ounce; as a result, the dollar was overvalued.

America temporarily embraced a new paradigm in 1971, as the dollar became a pure fiat currency (decoupled from any physical store of value), until the petrodollar agreement was concluded by President Nixon in 1973.

The quid pro quo was that Saudi Arabia would denominate all oil trades in U.S. dollars, and in return, the U.S. would agree to sell Saudi Arabia military hardware and guarantee the defense of the Kingdom.

A report by the Centre for Research on Globalization clarifies the implications of these most recent moves by the Russians and the Chinese in an ongoing drive to replace the US petrodollar as the global reserve currency:

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Fast forward to March 2017; the Russian Central Bank opened its first overseas office in Beijing as an early step in phasing in a gold-backed standard of trade. This would be done by finalizing the issuance of the first federal loan bonds denominated in Chinese yuan and to allow gold imports from Russia.

The Chinese government wishes to internationalize the yuan, and conduct trade in yuan as it has been doing, and is beginning to increase trade with Russia. They’ve been taking these steps with bilateral trading, native trading systems and so on. However, when Russia and China agreed on their bilateral US$400 billion pipeline deal, China wished to, and did, pay for the pipeline with yuan treasury bonds, and then later for Russian oil in yuan.

This evasion of, and unprecedented breakaway from, the reign of the US dollar monetary system is taking many forms, but one of the most threatening is the Russians trading Chinese yuan for gold. The Russians are already taking Chinese yuan, made from the sales of their oil to China, back to the Shanghai Gold Exchange to then buy gold with yuan-denominated gold futures contracts – basically a barter system or trade.

The Chinese are hoping that by starting to assimilate the yuan futures contract for oil, facilitating the payment of oil in yuan, the hedging of which will be done in Shanghai, it will allow the yuan to be perceived as a primary currency for trading oil. The world’s top importer (China) and exporter (Russia) are taking steps to convert payments into gold. This is known. So, who would be the greatest asset to lure into trading oil for yuan? The Saudis, of course.

All the Chinese need is for the Saudis to sell China oil in exchange for yuan. If the House of Saud decides to pursue that exchange, the Gulf petro-monarchies will follow suit, and then Nigeria, and so on. This will fundamentally threaten the petrodollar.

According to a report by the Russian government media, significant progress has been made in promoting bilateral trade in yuan, between the two nations, as the first step towards an even more ambitious plan—using gold to make transactions:

One measure under consideration is the joint organization of trade in gold. In recent years, China and Russia have been the world’s most active buyers of the precious metal.

On a visit to China last year, deputy head of the Russian Central Bank Sergey Shvetsov said that the two countries want to facilitate more transactions in gold between the two countries.

In April, Sberbank expressed interest in financing the direct import of gold to India—also a BRICS member. Make no mistake that a BRICS gold marketplace could be used to bypass the dollar in bilateral trade, and undermine the hegemonic control enjoyed by the US petrodollar as the global reserve currency.

“In 2014 Russia and China signed two mammoth 30-year contracts for Russian gas to China. The contracts specified that the exchange would be done in Renminbi [yuan] and Russian rubles, not in dollars. That was the beginning of an accelerating process of de-dollarization that is underway today,” according to strategic risk consultant F. William Engdahl.

Russia and China are now creating a new paradigm for the world economy and paving the way for a global de-dollarization.

“A Russian-Chinese alternative to the dollar in the form of a gold-backed ruble and gold-backed Renminbi or yuan, could start a snowball exit from the US dollar, and with it, a severe decline in America’s ability to use the reserve dollar role to finance her wars with other peoples’ money,” Engdahl concludes.

Jay Syrmopoulos is an geopolitical analyst, freethinker, and ardent opponent of authoritarianism. He is currently a graduate student at the University of Denver pursuing a masters in Global Affairs and holds a BA in International Relations. Jay’s writing has been featured on both mainstream and independent media – and has been viewed tens of millions of times. You can follow him on Twitter @SirMetropolis and on Facebook at SirMetropolis. You can support his work at Patreon. This article first appeared at The Free Thought Project.

Image Credit: The Anti-Media


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23 Comments on "Russia and China Declare All Out War on US Petrodollar — Prepare for Exclusive Trade in Gold"

  1. If the US were to lose this capacity to use other people’s money to finance perpetual warfare, this could usher in a period of truce or even peace between the world’s nations. What’s not to like?

    • Why would they use other peoples money when they own the printing press and can make any amount of the world’s reserve currency they want at any time?? The Federal Reserve are the enablers to all this war making and warmongering and as soon as they stop all this warmongering will to. It really is that simple.

      • We had seven decades of free banking in this country, and each of them had a major recession of 2008 levels. You can call a central bank if you like, but it’s a necessary one.

        • phicrappazappa | July 18, 2017 at 3:12 pm | Reply

          Smedley Butler – all wars are for the bankers. Usery interest does not equate to “free banking”. Evil is not a necessity.

          • Nerdsamwich | July 18, 2017 at 9:37 pm |

            What does that have to with the thrust of the conversation? You’re all about tangents.

      • By printing money, they are consuming your hard-earned dollars, kiddo.

  2. Russia and China and many other countries that look favorably on gold are tired of the criminal US banksters using phony futures contracts to manipulate down the price of gold and silver in the commodities markets. Soon as the price discovery moves to the far & middle east (Dubai, “Chindia” and Russia) which is where most of the gold is now at (as Fort Knox is for all intents and purposes EMPTY of gold), these criminal banksters won’t be able to play their rigged price games with precious metals any longer. And that’s what they really fear….losing control of the REAL price discovery of gold and silver which should be multitudes higher than it is today and all their criminal activities will further come into the light of day. Once that happens jail cells for these long time criminals won’t be far behind.

    • phicrappazappa | July 18, 2017 at 3:09 pm | Reply

      I totally agree with your insight as to the Pos, but jail time for any of these corrupt b*stards stands no more chance than jail time for the Clintons in our just-us system. Money and the ability to blackmail any politician is a “Get Out Of Jail Free” card. The Clintons and their subordinates have a strong box full.

  3. They can have their gold currency. Why would anyone want to pin their national trade medium to something as volatile as the commodities exchange? Gold is one of the worst offenders, too. Not to mention that there isn’t’ enough gold in the world by half to cover the US GDP.

    • apberusdisvet | July 17, 2017 at 1:49 pm | Reply

      There’s plenty of gold; it just needs to be revalued to $50k per ounce.

      • Well, sure, with fiat gold, anything’s possible! How are you going to afford to replace your computer, then? You do know what microchip circuitry is made out of, right?

      • makes sense. if there is a cataclysmic event, EVERYTHING would be revalued. . .a trickle down effect. . . .FDR did something of the sort , back in 1933. largest theft of personal wealth in the US, or so I’ve read.

      • phicrappazappa | July 18, 2017 at 3:16 pm | Reply

        Demonocracy. info there you will see

    • phicrappazappa | July 18, 2017 at 3:14 pm | Reply

      Nor is there enough silver to build the solar panels that the alarmists swear will save the world.

      • I’m all about diversity in electrical sources. Give me a distributed system any day. Wind, sun, water–why doesn’t every bridge have a couple of generators underneath?–tidal, piezoelectric, nuclear, even a limited amount of biomass. There are just so many ways to generate electricity and we use so very few of them. It’s a damn shame. You know some of the earliest solar power plants were arrays of mirrors that focused sunlight to boil water for a team turbine, right? There are still a few in Spain, and one in Arizona. We should build more.

    • have you done any research? on how much GOLD there is in the world if you have not done that please keep your IGNORANCE IN THE CLOSET.

      • All of the gold that has ever been mined in all of history has an approximate value of 8 trillion 2011 dollars. The US GDP that year was $18 trillion. It is estimated that we have mined about 75% of the Earth’s mineable gold. I’m going to leave the math as an exercise for the student.

  4. As a sentient being, the thought of economic collapse is frightening but also exciting. Frightening when I think of my wife and me suffering for the evil committed by others but exciting in the thought that it could well bring about the end of global, (thx to the west, sewer nation specifically), Jew control over nations. This is why, more so NOW than ever before, that the “Alt” media expose WHOM is responsible for the chaos as well AS the chaos.
    It’s very difficult for a culture to mount an offensive against an enemy they can’t name. For Sewer Nation’s idiot culture? Perhaps insurmountable… But once bled dry by the synagogue, Sewer nation will, in all likelihood go out with a whimper, not a roar bad for us, good for the balance of humanity world-wide.

  5. Louis Charles | July 17, 2017 at 1:37 pm | Reply

    while we screw around with dollarBased “bitcoin” and other CRYPTOcurrency, real free market capitalism is taking place WHERE?????????????? UNREAL. Who would have predicted this 20 years ago? Once the Chinese and Russian people get a taste of this sort of enterprise, and gird themselves with personal asset piles, they will clamor for their governments to become bound. BRICS in English means “Jews not welcome here”.

  6. Louis Charles | July 17, 2017 at 1:38 pm | Reply

    while we screw around with dollarBased “bitcoin” and other
    CRYPTOcurrency, real free market capitalism is taking place
    WHERE?????????????? UNREAL. Who would have predicted this 20 years
    ago? Once the Chinese and Russian people get a taste of this sort of
    enterprise, and gird themselves with personal asset piles, they will
    clamor for their governments to become bound. BRICS in English means
    “talmud thumpers not welcome here”. …edited just incase the disqus thought police censor me

  7. Louis Charles | July 17, 2017 at 1:39 pm | Reply

    can you believe it? I used the “J” word and got into the censor bank. WOw.

  8. Finally an economic and financial way of stopping the endless wars..

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