Ever since Henry Kissinger forged the global petro-dollar agreement with Saudi Arabia and OPEC in 1973, the U.S. currency has remained the singular global reserve for over 40 years. However, on June 9 that sole monetary reign has come to an end as Russian gas giant Gazprom is now officially selling all oil in Chinese Yuan, making the petro-Yuan a joint global reserve, and ending America’s sole control over the world’s reserve currency.
Less than two years ago, Russia and China forged an agreement where they would construct a platform to allow sales of oil and natural gas to be done in both Roubles and Yuan. However, in its early stages this was limited to transactions between both countries and a small number of trade partners. But with today’s confirmation of a fully functional petro-yuan system being implemented by Russia, the world no longer needs to accrue dollar reserves to purchase energy, and the beginning of the end of the petro-dollar is now underway.
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.
Russian executives have talked up the possibility of a shift from the US dollar to renminbi as the Kremlin launched a “pivot to Asia” foreign policy partly in response to the western sanctions against Moscow over its intervention in Ukraine, but until now there has been little clarity over how much trade is being settled in the Chinese currency.
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. – Zerohedge
In addition to oil sales, a new report has also verified that Russia is on course to settle nearly all of their trade in the Renminbi, creating a scenario where other countries can soon de-dollarize and no longer require American currency to purchase energy, or engage in bi-lateral trade.
As OPEC continues to use production quotas as a means to attack Russia and other energy producers, the Eurasian power is fighting back by using the petro-yuan as a lever to take away customers from Saudi Arabia, and to block potential ramifications from continued U.S. sanctions. And with China already prepared for an eventual floating of the RMB as it constructs its Belt and Road (Silk Road) initiative, the final battle over control of the next global reserve currency is now front and center, and the singular reign of the petro-dollar is now at an end.