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https://www.wsj.com/articles/russia-turns-to-chinas-yuan-in-effort-to-ditch-the-dollar-a8111457 https://www.wsj.com/articles/russia-turns-to-chinas-yuan-in-...

kasey_junk 4y ago
Russia _has_ to use the yuan but that’s a far cry from “everyone”. China just paid for their first boat of yuan settled LG on the open market 20 days ago. After 6 years of offering it on their exchange. Their meeting with the Saudi’s last month came with non-committal statements, again, 6 years after they first started. I think the yuan becoming more involved in the energy trade is inevitable, they are the largest energy importer in the world and a major economy. It may have even been accelerated by the sanctions on Iran and Russia. But to say that “no one is paying for oil in dollars anymore” is a ludicrous statement (probably one that comes from the posters hopes not the facts). And adding the petroyuan to the mix is more dangerous to the Chinese currency than to the dollar. It immediately becomes imminently arbitrage-able in ways it can’t be currently due to currency controls. The Chinese government has been de-liberalizing their currency because they are worried what the markets will do to it. That’s not to mention their treasury exposure, trade surpluses and the Middle Eastern states currency pegs. A de-dollarization of the energy market will make it less efficient and may cause some rebalancing of currency reserves, but it will drive all settlement currencies to free market parity which is good for western currencies and bad for Chinese and Russian ones.
- andreygrehov 4y ago
  I agree that "no one is paying for oil in dollars anymore" is an overblown statement. However, the de-dollarization process was started in 2014 and will keep getting stronger. This matches the recent leaks (as well as the video confirmation by François Hollande - the former President of France), that the 2014 coup in Ukraine was staged and sponsored by the US. As a Ukrainian, I tend to believe that a good portion of the conflict between Russia and Ukraine is driven by the de-dollarization fears of the US. The global superpower country is basically losing its main leverage, which is, in my personal opinion, a huge deal. While the mainstream media keeps it all super positive, I think the US did a lot of miscalculations within the past several years. And honestly, something tells me that Putin will outplay them all. The guy is extremely smart and it's foolish to downplay him and say he is not. We shall see.
  - kasey_junk 4y ago
    I’m not going to comment on your other opinions as I don’t have relevant experience. But de-dollarization was a common refrain in my field (finance) going back to before I was involved in it (2001). I’ve seen everything from Nixon in China to the current Russian sanctions being used as reasons for it. I suspect the real reason it will happen is that people can make more money trading in yuan (or rupee) than in usd. Sadly, Russia and Ukraine just aren’t important enough to make a dent. My personal opinion is that the dollar is the reserve currency (and thus the petro currency) is due to much less conspiratorial reasons. It spends all over the world. It isn’t debased frequently and it isn’t volatile. China could introduce a currency that had all those properties tomorrow. That they haven’t is an indictment of using the yuan as a reserve currency. It would take a significant change to Chinese economics to make that true. But! If China did that it wouldn’t save Russia. Modern currencies hate autocracy and despotism because it runs counter to their premise. It doesn’t help Russia for China to liberalize, the only thing that helps them is their own liberalization.
    - andreygrehov 4y ago
      Thanks for the common sense response. > My personal opinion is that the dollar is the reserve currency (and thus the petro currency) is due to much less conspiratorial reasons. Agreed. There is zero conspiracy around that, which is why I believe the US loosing the natural power of the Dollar is a logical fear. > It would take a significant change to Chinese economics to make that true. ..which is what BRICS aiming for? If that is one of their goals, nothing is going to stop them. And honestly, that's a good goal to have. Putting all the negative narrative around Russia/China aside and abstracting away from the US, why should a single country's currency dominate over the entire world? That's simply not fair. > If China did that it wouldn’t save Russia I somewhat disagree. Russia is not looking to be saved by anyone. Putin's interest is a mutually beneficial partnership. He's a businessman. He's cool with yuan (or any other currency) being the new reserve currency. On the other hand, he is not cool with the US pushing to be the superpower dictating the rules, which obviously goes against the United States' goals and ambitions. I could be wrong, but that's my understanding of things.

kasey_junk 4y ago

Russia _has_ to use the yuan but that’s a far cry from “everyone”. China just paid for their first boat of yuan settled LG on the open market 20 days ago. After 6 years of offering it on their exchange. Their meeting with the Saudi’s last month came with non-committal statements, again, 6 years after they first started. I think the yuan becoming more involved in the energy trade is inevitable, they are the largest energy importer in the world and a major economy. It may have even been accelerated by the sanctions on Iran and Russia. But to say that “no one is paying for oil in dollars anymore” is a ludicrous statement (probably one that comes from the posters hopes not the facts). And adding the petroyuan to the mix is more dangerous to the Chinese currency than to the dollar. It immediately becomes imminently arbitrage-able in ways it can’t be currently due to currency controls. The Chinese government has been de-liberalizing their currency because they are worried what the markets will do to it. That’s not to mention their treasury exposure, trade surpluses and the Middle Eastern states currency pegs. A de-dollarization of the energy market will make it less efficient and may cause some rebalancing of currency reserves, but it will drive all settlement currencies to free market parity which is good for western currencies and bad for Chinese and Russian ones.

andreygrehov 4y ago
I agree that "no one is paying for oil in dollars anymore" is an overblown statement. However, the de-dollarization process was started in 2014 and will keep getting stronger. This matches the recent leaks (as well as the video confirmation by François Hollande - the former President of France), that the 2014 coup in Ukraine was staged and sponsored by the US. As a Ukrainian, I tend to believe that a good portion of the conflict between Russia and Ukraine is driven by the de-dollarization fears of the US. The global superpower country is basically losing its main leverage, which is, in my personal opinion, a huge deal. While the mainstream media keeps it all super positive, I think the US did a lot of miscalculations within the past several years. And honestly, something tells me that Putin will outplay them all. The guy is extremely smart and it's foolish to downplay him and say he is not. We shall see.
- kasey_junk 4y ago
  I’m not going to comment on your other opinions as I don’t have relevant experience. But de-dollarization was a common refrain in my field (finance) going back to before I was involved in it (2001). I’ve seen everything from Nixon in China to the current Russian sanctions being used as reasons for it. I suspect the real reason it will happen is that people can make more money trading in yuan (or rupee) than in usd. Sadly, Russia and Ukraine just aren’t important enough to make a dent. My personal opinion is that the dollar is the reserve currency (and thus the petro currency) is due to much less conspiratorial reasons. It spends all over the world. It isn’t debased frequently and it isn’t volatile. China could introduce a currency that had all those properties tomorrow. That they haven’t is an indictment of using the yuan as a reserve currency. It would take a significant change to Chinese economics to make that true. But! If China did that it wouldn’t save Russia. Modern currencies hate autocracy and despotism because it runs counter to their premise. It doesn’t help Russia for China to liberalize, the only thing that helps them is their own liberalization.
  - andreygrehov 4y ago
    Thanks for the common sense response. > My personal opinion is that the dollar is the reserve currency (and thus the petro currency) is due to much less conspiratorial reasons. Agreed. There is zero conspiracy around that, which is why I believe the US loosing the natural power of the Dollar is a logical fear. > It would take a significant change to Chinese economics to make that true. ..which is what BRICS aiming for? If that is one of their goals, nothing is going to stop them. And honestly, that's a good goal to have. Putting all the negative narrative around Russia/China aside and abstracting away from the US, why should a single country's currency dominate over the entire world? That's simply not fair. > If China did that it wouldn’t save Russia I somewhat disagree. Russia is not looking to be saved by anyone. Putin's interest is a mutually beneficial partnership. He's a businessman. He's cool with yuan (or any other currency) being the new reserve currency. On the other hand, he is not cool with the US pushing to be the superpower dictating the rules, which obviously goes against the United States' goals and ambitions. I could be wrong, but that's my understanding of things.