With Russia actively dumping US dollars and buying gold at the fastest paced in decades, the writing is on the wall when it comes to what the Kremlin thinks of any possibility for a detente in the painfully strained US-Russian relations.
And with Russia now clearly seeking to end monetary ties with a dollar-denominated “west”, there is just one alternative – China. Which is why it will probably not come as a surprise that several Russian banks joined the China International Payments System (CIPS) also known as China’s “SWIFT”, to ease operations between the two countries, according to a senior official at the Central Bank of Russia (CBR).
“As for the cooperation on payment systems, a range of banks are already connected to CIPS, allowing to facilitate payments routing procedure,” Vladimir Shapovalov, who heads a division dealing with foreign regulators at the CBR’s international cooperation department, said earlier this week during the international Russian-Chinese forum.
Meanwhile, as RT writes, the regulator hopes that in turn, Chinese counterparts will pay more attention to Russia’s own SWIFT alternative, the SPFS (System for Transfer of Financial Messages), as “it can further boost bilateral trade”, the official added.
As RT adds, Russia has been actively demonstrating the SPFS network, which was created in 2014 in response US threats of disconnecting Russia from SWIFT, to foreign partners, including China after its export version was finished late last year. The first system transaction involving a non-bank enterprise, was made by Russian oil major Rosneft in December 2017. Some 500 participants, with major Russian financial institutions and companies, have already joined. And with Europe contemplating alternatives to SWIFT in order to keep funding the Iran regime in light of its exclusion from the dollar-based monetary system following Trump’s reimposition of Iranian sanctions, it would land a major blow to the US Dollar’s reserve status if Brussels announced that it, too, would be joining either the Chinese or Russian alternative to dollar hegemony, a process which based on reserve managers’ declining allocations to US dollars…
The Central Bank of Russia has moved further away from reliance on the US dollar and has axed its share in the country’s foreign reserves to a historic low, transferring about $100 billion into euro, Japanese yen and Chinese yuan.
The Central Bank of Russia has moved further away from reliance on the US dollar and has axed its share in the country’s foreign reserves to a historic low, transferring about $100 billion into euro, Japanese yen and Chinese yuan.
The share of the US currency in Russia’s international reserves portfolio has dramatically decreased in just three months between March and June 2018, from 43.7 percent to a new low of 21.9 percent, according to the Central Bank’s latest quarterly report, which is issued with a six-month lag.
Also on rt.comRussia getting rid of US dollar matter of national security – PutinThe money pulled from the dollar reserves was redistributed to increase the share of the euro to 32 percent and the share of Chinese yuan to 14.7 percent. Another 14.7 percent of the portfolio was invested in other currencies, including the British pound (6.3 percent), Japanese yen (4.5 percent), as well as Canadian (2.3 percent) and Australian (1 percent) dollars.
The Central Bank’s total assets in foreign currencies and gold increased by $40.4 billion from July 2017 to June 2018, reaching $458.1 billion.
Russia began its unprecedented dumping of US Treasury bonds in April and May of last year, amid a rise in tensions between the United States and Russia. The massive $81 billion spring sell-off coincided with the US’s sanctioning of Russian businessmen, companies and government officials.
Russian President Vladimir Putin supports weaning the country’s financial sector off the US dollar, VTB Bank head Andrey Kostin told RIA Novosti. He added the move doesn’t mean the complete phasing-out of the American currency.
The idea of de-dollarizing the Russian economy has been actively discussed in the country lately due to the tightening of US sanctions.
In July, Kostin, who is president and chairman of the management board of Russia’s second largest bank VTB, submitted a suite of proposals to move away from the greenback and further promote the Russian ruble in international settlements. His plan consists of four major steps.
First, it assumes an accelerated transition to payments in other currencies when carrying out export-import transactions with foreign countries. The alternative currencies include the euro, Chinese yuan and the ruble.
The second step is the re-registration of the largest holdings in the Russian jurisdiction. The plan also envisages the placement of Eurobonds through the Russian depositary; and the licensing of all stock market participants so that they can act by the same rules.
Russia has been seeking ways of decreasing its dependence on the US currency after Washington and its allies imposed sanctions against the country in 2014. In May, President Putin said Russia can no longer trust the US dollar-dominated financial system since America is imposing unilateral sanctions and violating World Trade Organization (WTO) rules. Putin added that the dollar monopoly is unsafe and dangerous for the global economy.
Discussions on the need to de-dollarize the Russian economy intensified after a bill was introduced to Congress in August with a whole range measures targeting Russian financial institutions.
The Russian Ministry of Finance has already supported Kostin’s plan, with the head of the Ministry of Economic Development and Trade, Maxim Oreshkin, noting that the role of the US currency is already actively diminishing. The Central Bank of Russia is already pursuing a de-dollarization policy and said it will continue.
For a brief period earlier this year, it appeared that Beijing had finally had enough of supporting its “ideological allies” in Caracas when it decided to limit its “exposure” to Venezuela after the country struggled to make interest payments on a $19 billion loan. But in the wake of reports that the US nearly supported a military uprising against the socialist government of Venezuelan President Nicolas Maduro, the Chinese Communist Party has apparently changed its mind. Instead of tightening the leash, Beijing has offered a $5 billion loan to the struggling socialist “republic” as Maduro prepares to travel to Beijing to grovel before the Party bosses, according to a Bloomberg report.
Venezuelan Finance Minister Simon Zerpa told Bloomberg News on Thursday that the country would pay back the loan with either cash or oil. The countries were expected to sign what Zerpa described as a strategic alliance on gold mining.
“Venezuela has a great alliance with China,” Zerpa said.
The finance minister was speaking in Beijing ahead of a state visit by Maduro, who’s seeking greater Chinese support to weather a financial crisis that has led to unrest, assassination attempts and the collapse of the country’s currency. Maduro has halted most payments on Venezuela’s foreign debt and owes more than $6 billion to bondholders, cutting off most sources of new financing.
Amusingly, Geng specified that the financing agreement would be “in line with international norms” (though, last time we checked, offering refinancing after refinancing with only promises of future oil shipments as a security is hardly ‘standard’ in global capital markets).
China and Venezuela are finalizing agreements and would release details in a timely manner, Chinese foreign ministry spokesman Geng Shuang told reporters in Beijing on Thursday. Any financing cooperation would be in line with international norms, he said.
“The domestic situation is getting better and Venezuela’s government is actively promoting economic and financial reform,” Geng told reporters.
Zerpa said he met with Chinese Vice President Wang Qishan, as well as various ministers, while in Beijing. Venezuela “continues to look for a mutually agreed upon solution” with foreign bondholders, Zerpa said.
The Trump administration, which is engaged in a trade war with China, had considered military action to end the long-running crisis in Venezuela. The U.S. held at least three meetings meetings with Venezuelan military officers before deciding not to help them overthrow Maduro, the New York Times reported Saturday.
As we pointed out earlier this year, China likely sees much more upside than risk in Venezuela. Even during the boom years, China has been Venezuela’s largest lender, having tolerated several debt “restructurings.” Of course, given China’s aggressive desire to expand its global economic footprint, the world’s second-largest economy may see potential in a broad Venezuelan bailout package – one that could include the country formally adopting the yuan. It’s also interesting that China is upping its support – even pledging a military intervention if Maduro’s many enemies again try to topple his regime via an uprising or assassination attempt.
The Shanghai debut of China’s first yuan-denominated crude futures trading market on Monday proved a great success, with major domestic and foreign traders displaying active interest. Total turnover amounted to 18.3 billion yuan ($2.9 billion) on the first trading day.
The market’s better-than-expected performance is believed to have significantly contributed to the recent strength of the yuan on global currency markets.
As China largely depends on crude imports, price volatility in the commodity market is a major impediment. It launched the crude futures market to address the problem and also to gain more pricing power over the crucial commodity.
An important move by Beijing to open up its financial sector, the new crude benchmark has garnered increasing attention, because it challenges the current dollar-dominated pricing scheme of crude oil markets – commonly known as the petrodollar system – which helps underpin the dollar’s status as the major international reserve currency.
Once the yuan-denominated crude futures market is established as a major oil benchmark with active trading volume and significant domestic and global investor participation, the acceptance of the Chinese yuan as a mode of global transaction will rise.
Analysts expect sufficient demand for crude futures contracts from both industrial and financial clients, as they need a tool to manage risk and hedge against inflation. The market offers companies in the real economy a hedging tool that can better reflect market conditions in Asia.
The evident enthusiasm for the new yuan-denominated crude contracts in the past few days will have pleased the Shanghai International Energy Exchange (INE) and China’s regulators. They aim to establish a third global crude benchmark in the country.
There is no reason why the INE contract should not take its place alongside the UK’s Brent and the US’ West Texas Intermediate (WTI). It is a far more useful marker for China and for the rest of the economically fast-growing Asia, given that the seven grades of crude accepted for delivery on the INE are heavier and more sour than the light grades that make up Brent and the WTI.
Some have warned that the growing clout of China’s currency in international financial markets could gradually erode the primacy of the US dollar. But at the current stage, nobody knows for sure what impact China’s new benchmark will pose to the oil hegemony the dollar has held since the 1970s.
With few exceptions, any country wishing to purchase oil must first obtain US dollars, creating a significant demand for the currency in international financial markets. As a result, the petrodollar mechanism has played a critical role in generating global confidence in the greenback, which has benefited the US economy a great deal.
The widespread pricing and trading of crude oil in the yuan, or the “petroyuan,” is likely to shake people’s confidence in the US dollar, and theoretically back up the value of China’s yuan in the global market place.
One clear objective for China’s regulators is to seek ways to internationalize its currency to boost its own economic prominence and reduce its longstanding reliance on the dollar.
As the world’s largest crude oil importer, China would naturally benefit from using its own currency over that of an economic rival and strategic competitor.
At the same time, China’s Belt and Road initiative, which seeks to create trade networks across the Eurasian continent, the Middle East and Africa, will almost certainly invigorate the yuan’s march toward wider usage and the currency’s globalization.
However, the dollar will not cede its present dominance in oil markets any time soon. Instead, China is likely to build confidence in the yuan gradually, through steady measures of reform and opening-up, more robust economic growth, proactive foreign engagement and liberalization of its monetary policy.
The collapse of the petrodollar has been predicted and delayed as much as possible. The resurrection of the gold standard, on the other hand, is coupled with the rise of a basket of sovereign currencies that are backed up, not by wars of coercion, but by tangible sovereign assets.
All of these were mixed with the epic downfall of the Deep State controlled countries’ reputation abroad that serves as the primary catalyst of the decisive rise of PetroYuan.
Enough time has already been given as the first open talk about the global reset happened a decade ago, or in the immediate aftermath of the WTC false flag, which purposely deterred the announcement of the recovery of the Asian Global Accounts that had been backing up the financial system of the West.
Today, we are just mere days from its inauguration, but the Shanghai Futures Exchange is evidently up to a good start that is sending jitters across the US and EU, which explains their bad behavior as of late.
We are now in the final phase of the global effort to rid of the warmongering cabal that has been having its heyday for half a millennia, at least.
Although it has the potential to be chaotic as it unfolds, but the impending US economic collapse is the necessary trigger that would force the armed militias to take over their government and reestablish their once lost American Republic.
In order to gauge how bad the situation is beginning to be, here’s the MIT president Rafael Reif greeting his generous benefactor.
According to the Guardian,
“Last weekend, while media attention was focused on the March for Our Lives protests across America, a militarised police force blocked the road leading up to the Massachusetts Institute of Technology (MIT) Media Lab, one of the university’s most famous laboratories, for a special guest. The guest – the crown prince of Saudi Arabia, Mohammed bin Salman – visited both Harvard and MIT on his first official tour of the US. Saudi officials boasted about the visit, posting photos of Bin Salman with both Harvard provost Alan Garber and MIT president Rafael Reif on social media.
Yet both universities have been remarkably silent about the prince’s presence. Neither university publicly announced his visit in advance, and steps were even taken to cover it up. For instance, the Media Lab’s students were sent an email informing them that access to the lab would be restricted, with metal detectors – with no mention as to why. A small protest staged by an anti-war group was the only public indication of Bin Salman’s visit to campus. MIT and Harvard only acknowledged it had taken place afterwards, in response to inquiries by student newspapers and through a press release that didn’t adequately explain the implications of the partnership.”
On March 26, the petrodollar will begin its funeral march to oblivion as the Shanghai International Energy Exchange allows any Chinese and foreign traders to trade oil in local currencies other than the dollar. This is very significant considering that China is the world’s largest oil consumer as of last year.
A statement from the Shanghai International Energy Exchange says,
“Approved by the China Securities Regulatory Commission (“the CSRC”), the Shanghai International Energy Exchange Co., Ltd., or INE, is an international exchange that is jointly initiated and established by relevant entities including the Shanghai Futures Exchange, and open to global futures participants. As a self-regulated entity, INE discharges its duties pursuant to the Company Law, the Regulations on the Administration of Futures Trading and relevant rules and regulations prescribed by the CSRC.
Registered in the China (Shanghai) Pilot Free Trade Zone on November 6th, 2013, INE operates the listing, clearing and delivery of energy derivatives including crude oil, natural gas, petrochemicals, etc., formulates business rules, implements self-regulation, publishes market information, and provides technology, venue and facility services.
Based on the principles of “openness, fairness and impartiality”, INE is devoted to establishing a global trading platform for energy derivatives that is “internationalized, market-oriented, rules by law and professionalized” to objectively reflect the energy supply-demand conditions, provide a tool in price discovery, risk management and asset management for energy producers, distributors, consumers and investors, so as to facilitate the optimal allocation of energy resources and promote the economic development.”
Superimposing this in the context of what China has been doing in the South China Sea, Latin America and in the Middle East, this means that any deliberate disruption of the market by way of instigated conflict, or mere speculative attacks against the INE, will never be allowed.
How China Is About to Shake Up the Oil Futures Market
By Sungwoo Park | February 9, 2018, 4:29 PM GMT+8
China, the world’s biggest oil buyer, is opening a domestic market to trade futures contracts. It’s been planning one for years, only to encounter delays. The Shanghai International Energy Exchange, a unit of Shanghai Futures Exchange, will be known by the acronym INE and will allow Chinese buyers to lock in oil prices and pay in local currency. Also, foreign traders will be allowed to invest — a first for China’s commodities markets — because the exchange is registered in Shanghai’s free trade zone. There are implications for the U.S. dollar’s well-established role as the global currency of the oil market.
When will trading begin?
From March 26. Multiple rounds of testing have been carried out and all listing requirements met. The push for oil futures gained impetus in 2017 when China surpassed the U.S. as the world’s biggest crude importer. The Asian nation’s purchases reached a record high last month.
Top Oil Buyer: China surpasses U.S. as world’s biggest crude importer
Why is this important for China?
Futures trading would wrest some control over pricing from the main international benchmarks, which are based on dollars. Denominating oil contracts in yuan would promote the use of China’s currency in global trade, one of the country’s key long-term goals. And China would benefit from having a benchmark that reflects the grades of oil that are mostly consumed by local refineries and differ from those underpinning Western contracts.
How do oil futures work?
Futures contracts fix prices today for delivery at a later date. Consumers use them to protect against higher prices down the line; speculators use them to bet on where prices are headed. In 2017, oil futures contracts in New York and London outstripped physical trading by a factor of 23. Crude oil is among the most actively traded commodities, with two key benchmarks: West Texas Intermediate, or WTI, which trades on the New York Mercantile Exchange, and Brent crude, which trades on ICE Futures Europe in London.
Late last year, China’s Xi Jinping said it was time for the nation to “take center stage in the world.” There are many ways for China to do this, including promoting globalization, boosting foreign aid, and developing advanced technologies. Another critical step in taking “center stage” is to be at the center of the global economy. To achieve this, China is, among other things, trying to internationalize its currency.
For the past 70 years, the US dollar has been the world’s dominant currency. Two-thirds of the world’s $6.9 trillion allocated foreign exchange reserves are held in US dollars. The yuan took a major step towards broader international adoption in 2016 when the IMF decided to include it in the basket of currencies that make up the Special Drawing Right, an alternative reserve asset to the dollar.
The Chinese yuan hit a two-year high against the US dollar this week, after the German Bundesbank said that it would include the yuan in its reserves for the first time. “The notable development from the European point of view over the past few years has been the growing international role of the renminbi in global financial markets,” Andreas Dombret, a member of the central bank’s executive board, reportedly said at a conference in Hong Kong (paywall). The decision was made last year and no investments have been made yet, as preparations are still in process. The French central bank then revealed that it already held some reserves in yuan.
Pull the plug China. Americans are letting their elites loot them. The American government is waging unwanted wars all over the planet instead of fixing their decaying infrastructure. 45% of Americans are on food stamps. Half of them are on antidepressants. Pull the plug on this once great nation and put it out of its misery.
(ZHE) — In its latest reminder that China is a (for now) happy holder of some $1.2 trillion in US Treasurys, Chinese credit rating agency Dagong downgraded US sovereign ratings from A- to BBB+ overnight, citing “deficiencies in US political ecology” and tax cuts that “directly reduce the federal government’s sources of debt repayment” weakening the base of the government’s debt repayment.
Oh, and just to make sure the message is heard loud and clear, the ratings, which are now level with those of Peru, Colombia and Turkmenistan on the Beijing-based agency’s scale of creditworthiness, have also been put on a negative outlook.
In a statement on Tuesday, Dagong warned that the United States’ increasing reliance on debt to drive development would erode its solvency. Quoted by Reuters, Dagong made specific reference to President Donald Trump’s tax package, which is estimated to add $1.4 trillion over a decade to the $20 trillion national debt burden.
“Deficiencies in the current U.S. political ecology make it difficult for the efficient administration of the federal government, so the national economic development derails from the right track,” Dagong said adding that “Massive tax cuts directly reduce the federal government’s sources of debt repayment, therefore further weaken the base of government’s debt repayment.”
Projecting US funding needs in the coming years, Dagong said a deterioration in the government’s fiscal revenue-to-debt ratio to 12.1% in 2022 from 14.9% and 14.2% in 2018 and 2019, respectively, would demand frequent increases in the government’s debt ceiling.
“The virtual solvency of the federal government would be likely to become the detonator of the next financial crisis,” the Chinese ratings firm said.
* * *
In a preemptive shot across the bow in the coming trade wars, last week Bloomberg reported that Beijing officials reviewing China’s vast foreign exchange holdings had recommended slowing or halting purchases of U.S. Treasury bonds. That warning spooked investors worried that sharp swings in China’s massive holdings of U.S. Treasuries would trigger a selloff in bond and equity markets globally. The report sent U.S. Treasury yields to 10-month highs and the dollar lower, although China’s foreign exchange regulator has since dismissed the report as “fake news.”
Still, Dagong was quick to point out that not much would be needed to crush the public’s confidence in the value of US Treasurys:
“The market’s reversing recognition of the value of U.S. Treasury bonds and U.S. dollar will be a powerful force in destroying the fragile debt chain of the federal government,” Dagong said.
* * *
To be sure, China’s move is far more political than objectively economic, and is meant to send another shot across the bow as the Trump administration prepares to launch a trade war with Beijing in the coming weeks. Still, while both Fitch and Moody’s give the United States their top AAA ratings (and the S&P is the only agency to infamously downgrade the US to AA+ in 2011), US raters have also expressed concerns similar to Dagong‘s. From Reuters:
S&P Global said last month’s proposed U.S. tax cuts would increase the federal deficit and looser fiscal policy could prompt negative action on U.S. credit ratings if Washington failed to address long-term fiscal issues.
In November, Fitch said the tax cuts would give a short-lived boost to the economy, but add significantly to the federal debt burden. It warned that the United States was the most indebted AAA-rated country and ran the loosest fiscal policies.
Moody’s said in September any missed debt payment as a result of disagreement over lifting the debt ceiling, a perennial point of partisan contention in Washington, would result in the United States losing its top-notch rating.
China is rated A+ by S&P Global and Fitch and A1 by Moody‘s, with the three agencies citing risks mainly related to corporate debt, which is estimated at 1.6 times the size of the economy and mostly attributed to state-owned firms.
Islamabad (GPA) – Following condemnations by several members of the Trump Regime, Pakistan has decided they’ve taken enough western abuse and have dropped the US dollar.
Several months ago when US President Donald Trump announced his strategy for the Afghan war, he also uttered similar platitudes to past presidents about reforming the alliance between the US and their regional partner Pakistan. In that speech, similar to Obama and Bush, Trump made comments complaining about Pakistan’s tendency to give “safe haven to agents of chaos, violence, and terror.” And pointed out that “The threat is worse because Pakistan and India are two nuclear-armed states whose tense relations threaten to spiral into conflict.”
While none of this rhetoric was new to the US Foreign policy establishment, tensions reached a new level following a tweet by Trump on New Year’s Day. In the tweet, Trump lamented that “The United States has foolishly given Pakistan more than 33 billion dollars in aid over the last 15 years, and they have given us nothing but lies & deceit, thinking of our leaders as fools.” He also reiterated his point that “They give safe haven to the terrorists we hunt in Afghanistan, with little help. No more!”
Following this tweet, Pakistani Foreign Minister Khawaja Asif denounced Trump’s comments as political theater. Theater or not, however, Pakistani officials still summoned the US ambassador, David Hale, to meet with his counterparts in Islamabad to explain Trump’s comments.
This meeting didn’t change anything and shortly after it concluded, US ambassador to the United Nations, Nikki Haley, also made comments at the UN, accusing Pakistan of playing a “double game” for years. “There are clear reasons for this. Pakistan has played a double game for years,” she said, claiming that “[Pakistan works] with us at times, and they also harbor the terrorists that attack our troops in Afghanistan.”
Following these events, both Trump and Haley have embarked on a PR campaign of demonizing Pakistan and threatening to cut off US aid to the country. Pakistan’s UN ambassador, Maleeha Lodhi, did offer a rebuttal to these comments, saying her country was never motivated by aid but instead by “our national interests and principles.”
Lodhi also pointed out that “We have contributed and sacrificed the most in fighting international terrorism and carried out the largest counter-terrorism operation anywhere in the world. Lodhi then criticized Washington, telling them to “not shift the blame for [its] own mistakes and failures onto others.”
Washington’s new attitude is, of course, being cheered on by the long list of Pakistan’s enemies, including other regional countries, and most importantly, Pakistan’s top adversary India. As usual, this has left Pakistan extremely isolated in the region except for one crucial player who did defend the nation from US slander – China.
China, which already provides massive aid to Pakistan to offset pressure from India and also views the country as a crucial member of the Belt and Road initiative, stepped up to defend their ally. This position was expressed by Chinese foreign ministry spokesman Geng Shuang in a press conference when he told reporters that: “Pakistan has made enormous efforts and sacrifice for the fight against terrorism and has made very outstanding contribution to the global cause of counter-terrorism. The international community should acknowledge that.”
While a Trump supporter may view this as some sort of bullshit “transactional politics,” China’s overtures towards Pakistan now appear to be leading to an outcome that will benefit both Islamabad and Beijing.
In a surprising move, Pakistan has now ditched the dollar as their base currency in deals with China and has instead opted to use the Chinese yuan. This new system will now result in the flow of billions of yuan in cross-border transactions in both trade and investment.
While this may not seem like much, perhaps the world should thank Trump, as it looks like he’s now helped lay another cornerstone in the construction of Belt and Road. Pakistan is already home to nearly $60 billion in Chinese infrastructure investment, and working in the framework of the bilateral China-Pakistan Economic Corridor agreement. This latest change in the economic cooperation between the two nations is just another step is crushing US financial control over Pakistan and helping launch the Chinese model of global commerce.
Update: Following Pakistan’s announcement to switch to the Yuan, the Trump Regime has added the country to its list of nations that “violate religious freedoms.”
“Our citizens should know the urgent facts…but they don’t because our media serves imperial, not popular interests. They lie, deceive, connive and suppress what everyone needs to know, substituting managed news misinformation and rubbish for hard truths…”—Oliver Stone