This week I was asked to join Renmin University’s Qinduo Xu and the good folks at Press TV’s Economic Divide where we discussed the emerging new China-led financial architecture, how it is tied to the BRICS+, SCO, and the oncoming petro Yuan. How does this new emerging financial system differ from the sort of behavior that has become hegemonic under the Wall Street-London axis and should the patriots of the USA see this as a threat or opportunity?
NO NO NO.
It really makes no difference what currency oil trades settle in.
It makes little difference how you settle them (except for very weak countries under US pressure like Venezuela or Syria.)
It does matter what currency oil is priced in – most oil trades are 3 to 6 months in advance. I can’t see Saudi taking Yuan currency risk. The planned futures for oil in Yuan contracts will be to allow Chinese consumers to buy oil in Yuan prices but the currency risk will simply be hedged by large oil traders and Chinese banks.
The likelihood of Saudi taking Yuan risk is zero.
If you want to hurt the dollar it is the short term currency deposit market you have to offer alternatives in. Where can a Saudi Sheik, international drug dealer, multi-national business place money in lots of $ billion worth in single trades? At low risk, and easy access? That is why people keep their money in dollars. To threaten the dollar China needs to develop its Yuan money markets, not its oil trading systems.
The Petro dollar market and the Eurodollar market were never FX markets for trade, they were always money markets where ME and later Europeans could place big amounts of money securely during European / ME trading hours.