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China will begin to drop the dollar from the pedestal tomorrow

China will begin to drop the dollar from the pedestal tomorrow

Tags: China, Economy, USA, Analytics, Oil, Money

Will the US survive the beginning of the destruction of the foundations of its economic and military-political might?

Tomorrow comes a fateful day for the world economy - China launches futures trading oil for yuan. China, the world's largest buyer of oil, is on the verge of opening the domestic futures trading market. This will happen on 18 January 2018. Trades will be held at the Shanghai International Energy Exchange, which is a division of the Shanghai Futures Exchange and will be held under the acronym INE. This will allow Chinese buyers to fix the price of oil in RMB and pay for it in Chinese currency.

In addition, foreign traders will also be allowed to invest in China's first commodity market, because the exchange is registered in the free trade zone of Shanghai. Of course, this event will have great consequences not only for the entire world oil market, but, first of all, for the US dollar playing the main role in oil trade - currently it carries out about 90-95% of all oil deals in the world.

Let me remind you that two previous attempts to launch similar things - by Iraq of Saddam Hussein and Libya Muammar Gaddafi ended pitifully - the leaders were demonstratively killed, the countries were destroyed and looted, deprived of territorial integrity, and the peoples plunged into poverty.

However, China is neither Iraq nor Libya, and the Chinese leadership can not be reproached for adventurism. Beijing has its own well-armed army and has serious economic leverage over the US in the form of the same state short-term bonds, 15% of which it has shown in the past few years.

In addition, in my opinion, there is an implicit deal between Moscow and Beijing: Moscow defends China with its nuclear umbrella so that it has time to build up economic and military muscles, launch the One-One-Way Project, compatible with the Eurasian Economic Union, and Beijing - Russia in the form of readiness to insure, if necessary, Russian gold reserves if they are hit. Let me remind you that at the end of the 2015 year, when the ruble rate collapsed, the official representative of the National Bank of China made a statement that Beijing is ready to support the Russian ruble with its reserves, and even gave an assessment of the course that it is ready to support.

It is difficult to predict the number of transactions in petrojuans by international traders. However, the fact that all Chinese companies will switch to petroleum-it's beyond question. In addition, with the help of petroleum wells, Beijing will be able to support the economies of those oil-producing countries that will switch to trading their oil with China in yuan. Such currency diversification will be useful for Russia, Iran, and Venezuela.

Despite the fact that Western experts, in particular Bloomberg columnist David Fikling, understandably argue that China "has almost no influence on the oil market necessary for such a coup", in our view, given that China is now time is the largest oil market, the outflow of the dollar from oil trade will be palpable. Following the results of 2018, it is possible to forecast about 10-15% at least.

A special role in this will be played by the factor of whether the Saudi authorities will give consent to the entry of Chinese capitals into their oil pearl, Saudi Aramco. The argument is that the Chinese side has a reinforced concrete - if Riyadh does not switch to petroleum, then Beijing will simply close part of its market for Saudi oil. If the Saudis move at least partially (for example, in the volume of their oil trade with Beijing) to the yuan, this will be a serious blow not only at the positions of the petrodollar, but also in the world political hegemony of the United States.

Given the scale of the game started by Beijing, those bets that are at stake are also becoming visible. Therefore, it is by no means a coincidence that Beijing has recently paid considerable attention to its Armed Forces.

So, in early January, there were two loud statements from China. According to the first one, made by the Secretary-General of the Central Committee of the CPC, Chairman of the PRC, Chairman of the Central Election Commission of China Xi Jinping at the solemn mobilization meeting on the occasion of the beginning of 2018 combat training, the Chinese armed forces must intensively engage in military training as close to real combat operations.

At the same time, Xi Jinping noted that "the confrontation between the United States and North Korea has reached the point, behind which there are military actions of a global scale. Therefore, the Chinese People's Liberation Army must be ready for any orders. " According to the Secretary-General of the Communist Party of China, the preparation for war should take a maximum of time for servicemen: "Combat skills are forged in peacetime and used without hesitation."

Undoubtedly, these are high-profile statements that were not peculiar to the leaders of China, and they should be closely watched. But the stakes in this game for Beijing are higher than ever.

Yuri Baranchik
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