The PetroYuan Cometh: China Docks Navy Destroyer In Iran's Strait Of Hormuz Port

Tyler Durden's picture

Since China fired its first 'official' shot across the Petrodollar bow a year ago, there has been an increasing groundswell of de-dollarization across the world's energy trade (despite Washington's exclamations of 'isolated' non-dollar transactors). The rise of the PetroYuan has not been far from our headlines in the last year, with China increasingly leveraging its rise as an economic power and as the most important incremental market for hydrocarbon exporters, in the Persian Gulf and the former Soviet Union, to circumscribe dollar dominance in global energy - with potentially profound ramifications for America’s strategic position. And now, as AP reports, for the first time in history, China has docked a Navy Destroyer in the Southern Iranian port of Bandar-Abbas - right across the Straits of Hormuz from 'US stronghold-for-now' Bahrain and UAE.

 

The rise of the PetroYuan has not been far from our headlines in the last year:

China Fires Shot Across Petrodollar Bow: Shanghai Futures Exchange May Price Crude Oil Futures In Yuan

 

Guest Post: From PetroDollar To PetroYuan – The Coming Proxy Wars

 

The Rise Of The Petroyuan And The Slow Erosion Of Dollar Hegemony

And now, as AP reports, for the first time in history, China has docked a Navy Destroyer in a Southern Iranian port of Bandar-Abbas - right across the Straits of Hormuz from 'US stronghold-for-now' Bahrain and UAE.

Adm. Hossein Azad, naval base chief in the southern port of Bandar Abbas, said the four-day visit that began Saturday saw the two navies sharing expertise in the field of marine rescue.

 

"On the last day of their visit while leaving Iran, the Chinese warships will stage a joint drill in line with mutual collaboration, and exchange of marine and technical information particularly in the field of aid and rescue," said Azad.

 

The report said the destroyer was accompanied by a logistics ship, and that both were on their way to the Gulf of Aden as a part of an international mission to combat piracy.

 

...

 

Last year a Russian naval group docked in the same port on its way back from a Pacific Ocean mission.

 

The move is also seen part of off efforts by Iran to strike a balance among foreign navies present in the area near the strategic Strait of Hormuz, the passageway at the mouth of the Persian Gulf through which a fifth of the world's oil is shipped.

U.S. Navy's 5th Fleet is based in nearby Bahrain, on the southern coast of the Gulf.

*  *  *

Here's why it matters...

 

*  *  *

As we concluded previously,

History and logic caution that current practices are not set in stone. With the rise of the “petroyuan,” movement towards a less dollar-centric currency regime in international energy markets—with potentially serious implications for the dollar’s broader standing—is already underway.

 

As China has emerged as a major player on the global energy scene, it has also embarked on an extended campaign to internationalise its currency. A rising share of China’s external trade is being denominated and settled in renminbi; issuance of renminbi-denominated financial instruments is growing. China is pursuing a protracted process of capital account liberalisation essential to full renminbi internationalisation, and is allowing more exchange rate flexibility for the yuan. The People’s Bank of China (PBOC) now has swap arrangements with over thirty other central banks—meaning that renminbi already effectively functions as a reserve currency.

 

Chinese policymakers appreciate the “advantages of incumbency” the dollar enjoys; their aim is not for renminbi to replace dollars, but to position the yuan alongside the greenback as a transactional and reserve currency. Besides economic benefits (e.g., lowering Chinese businesses’ foreign exchange costs), Beijing wants—for strategic reasons—to slow further growth of its enormous dollar reserves. China has watched America’s increasing propensity to cut off countries from the U.S. financial system as a foreign policy tool, and worries about Washington trying to leverage it this way; renminbi internationalisation can mitigate such vulnerability. More broadly, Beijing understands the importance of dollar dominance to American power; by chipping away at it, China can contain excessive U.S. unilateralism.     

 

China has long incorporated financial instruments into its efforts to access foreign hydrocarbons. Now Beijing wants major energy producers to accept renminbi as a transactional currency—including to settle Chinese hydrocarbon purchases—and incorporate renminbi in their central bank reserves. Producers have reason to be receptive. China is, for the vastly foreseeable future, the main incremental market for hydrocarbon producers in the Persian Gulf and former Soviet Union. Widespread expectations of long-term yuan appreciation make accumulating renminbi reserves a “no brainer” in terms of portfolio diversification. And, as America is increasingly viewed as a hegemon in relative decline, China is seen as the preeminent rising power. Even for Gulf Arab states long reliant on Washington as their ultimate security guarantor, this makes closer ties to Beijing an imperative strategic hedge. For Russia, deteriorating relations with the United States impel deeper cooperation with China, against what both Moscow and Beijing consider a declining, yet still dangerously flailing and over-reactive, America.

 

For several years, China has paid for some of its oil imports from Iran with renminbi; in 2012, the PBOC and the UAE Central Bank set up a $5.5 billion currency swap, setting the stage for settling Chinese oil imports from Abu Dhabi in renminbi—an important expansion of petroyuan use in the Persian Gulf. The $400 billion Sino-Russian gas deal that was concluded this year apparently provides for settling Chinese purchases of Russian gas in renminbi; if fully realised, this would mean an appreciable role for renminbi in transnational gas transactions.

Looking ahead, use of renminbi to settle international hydrocarbon sales will surely increase, accelerating the decline of American influence in key energy-producing regions. It will also make it marginally harder for Washington to finance what China and other rising powers consider overly interventionist foreign policies—a prospect America’s political class has hardly begun to ponder.

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FreeMktFisherMN's picture

What I don't get is why the Chinese people don't demand a de-peg from the dollar and a dump of UST and dollar holdings and quit with the mercantilism. Production is a means to consumption ultimately. 

ekm1's picture

Because if they dump USTs then they will get USD in exchange

 

What is the difference?

They are stuck with USDs which world is rejecting now, because there's too much.

 

They want to dump those USDs and get real stuff in exchange, like oil, gold, arable land, geo strategic position etc

 

Issues is: Who accepts those USD?

Answer: Not many. There's just too much of them

Pinto Currency's picture

 

 

Much of the Yuan oil trade will be settled in gold at the Shanghai FTZ gold exchange.

The trade is oil for gold.

ekm1's picture

They want to get rid of $3 trillion they have accumulated giving USA and EU real stuff.

Nobody wants them.

Hence they are buying real estate around the world and moving factories to Ethiopia

 

Nobody, meaning, mines, oil wells etc

Mineral-Invest's picture

Real stuff... are you stooopid?

knukles's picture

The Dear Leaders of the World's Progressive Peace, Love, Diversity and Inclusiveness Party asked specifically for All World Powers to Come Together in Harmony and Fealty to Engage in an Effort to Defeat Terrorism and Piracy on the High Seas. 

So This is Exactly what They Got!
Exactly What They Asked For!

The Chinese are Merely Adhering to El Primrose's Desires.

 

Don't ask for what you might not want because you just might get it good and hard.

 

Another Good Thought.
If the Federalies want the uninvited to live here, why not have some live "there"?

http://dailycaller.com/2014/09/20/petition-urges-obama-to-let-border-jum...

Latina Lover's picture

I wonder how you say, Fuck You NWO, in Mandarin?

MontgomeryScott's picture

?????????

OR,

????????? I tried to cut and paste traditional versus simplified scripts from the computer translator, but it ended up with a bunch of question marks. How about 'FUCK YOU, NEW WORLD ORDER' with an accent?
y3maxx's picture

..Blocking or blowing up the Straight of Hormuz...Brilliant.

Who called this move?

...YOURS TRULY CALLED THIS MOVE.

Will make Russian & Iranian Oil & Gas the only game in town.

Russia, China & Iran have each others back on this one.

F*ck the USSA, UK and Europe

Son of Loki's picture

a la Venezuela: Wake up one Monday moring to a fiat dollar 50% less in value, and see all the prices essentially doubled overnight; gas $8/gal, and so on.

 

It's no wonder Indians, Pakis, Chinese and so on buy as much gold as they can afford as a "storage of value."

SoilMyselfRotten's picture

Damn, silver again taken to the woodshed. People are dumping their paper fast. Last one out is a rotten Yellen.

markmotive's picture

The Petrodollar system is getting attacked from all sides. I believe ISIS's ultimate goal is to destroy the dollar.

http://www.planbeconomics.com/2014/09/isis-ambition-may-kill-petrodollar...

The Doofus's picture

The Petro Yuan?  You guys must be crazy.  Do you think America is going to sit back and let that happen?  What planet are you from?  King Dollar is going to rule for a long long time.

surfsup's picture

Without artifical (contrived) scarcity all this childishness would be impossible...  

Wake me up when the monkeys leave the reigns of current seats of (contrived) power and reasonable adults take the healm.... 

 

 

old naughty's picture

how you say...in mandarin...

who is your audience? NWO doesn't care for / know mandarin; chinese doesn't care for / know NWO, no?

except this: http://rense.com/general77/chinsec.htm

 

old naughty's picture

"artificial scarcity..."

IS, Iran, BRIC all for oil (and gas) scarcity...and China is on Iran's side, no (hummmm.)?

Them and us, only.

Jambo Mambo Bill's picture

Yes and No

"Do you think America is going to sit back and let that happen?  What planet are you from? " - CORRECT !

"King Dollar is going to rule for a long long time." - I don't think so...

the amount of debt hanging the dollar down is humongous, either way we will have a big reset, now if later on the planet's trade will be done using a digital currency, a golden Yuan or wood sticks is another matter.

tarabel's picture

 

 

"..Blocking or blowing up the Straight of Hormuz...Brilliant.   

Who called this move?

...YOURS TRULY CALLED THIS MOVE.

Will make Russian & Iranian Oil & Gas the only game in town."

 

Okay, Magellan, find the Iranian oil terminal of Bandar Abbas on a map and get back to us with your brilliant plan. And while you're at it, find the way the Russians get gas to China right now and get back to us twice with your brilliant plan.

stonecoldbrokeinthemiddleofthewinter's picture

Online translator of "????????" put out

"FUCK YOU BERNANKE!"

 

 

surfsup's picture

Nary a single ZH thread goes by without the above comment....  

detached.amusement's picture

It just needs to be stressed that often

Bay Area Guy's picture

I've heard (phonetically typed) " dyu lay lo mo" which roughly translates, I'm told, to "fuck your old mother". Not sure if it's Mandarin or Cantonese as my in-laws use both dialects.

lincolnsteffens's picture

40 years ago in my high school one of the kids was from Hong Kong. He said," Doo nay, doo nay la moi yah!" Amazing what we remember.

 

Joenobody12's picture

"Due nay Lo mo hi "  is cantonese

" Chow ne ma " is Mandarin.

" Fuck you" is French... I meant English. 

FlyinHigh's picture

 

 

 

     ,,l,,  = Mandarin

 

 

DFCtomm's picture

China is a communist country with the standard 5 guys who run everything. They aren't against a NWO. They intend to be the NWO.

NidStyles's picture

There's nothing anyone can do about it, so get used to it. It wasn't us that sold the US down the river.

willwork4food's picture

 

 

In pinyin. Pronounced like this: "Nee ta ma dasu gwo".

Tall Tom's picture

So This is Exactly what They Got!
Exactly What They Asked For!

 

Knucks...Dey jus gotz ya by tha glots, man.

 

They be sure that ye heart and mind will follow.

 

Good word...glots

DFCtomm's picture

Yes, because colonizing Africa has worked out so well for everyone that has did it before.

CHX's picture

Should that happen, gold will trade many multiples higher, possibly order(s) of magnitude higher, and the US empire would be finished, or rather enganged in WW3. It could happen that way. 

tarabel's picture

 

 

Complete logical fail. Why would the Chinese be moronic enough to trade off gold for oil, when their announced mission in life is to elevate the renminbi to reserve currency status?

 

Hmmm, let's see now...

 

I can give you this worthless hocked-to-the-hilt picture of Mao for a tank of gas or I can give you this ingot of gold. Which one do I really want to keep for me and which one do I really want to give to you?

 

Think about the consequences of such a move. In a few years, China would be both gold-less and trying to buy oil with a currency even less desirable than old Legal Tender. Come on, people, stop sending postcards from the magical land of wish fulfillment. Not everything in the world is a smoothly running plot that is out to get you. 

CHX's picture

See, China has the gold now. All the Saudies (and Russia) have to do is say "gimme gold or no oil/NG" and it's all over in the blink of an eye. Brics countries will ultimately settle trade in gold, so yes, this may well happen. A gradual moment towards gold, the ultimate form of money. 

LostandFound's picture

PetroYuan only makes sense if it is going to be backed by gold. Otherwise what is the difference between the dollar and the Yuan? both have and continue to go through monetary inflation, which is the primary reason why the petrodollar is being dropped due to its ratio of purchasing power vs oil and the dollars addiction to low interest rates, the Yuan is and will be no different. 

From the frying pan into the fire?

My hedge is that gold will be involved.

StrikerMax's picture

Totally Agree,

 

If the USA gov is always intervening in the Dollar the Chine Communist Party does in an Even Greater Way ...

No one would ever trust the Chinese Communist Party, so the only chance they have is to return to the Gold ...not the Gold Standard ... just Gold.

Trusting the Chinese Central controlled Communist party for currency is like Way worst then Trusting Nixon when he "Temporarily" decouple the Dollar to Gold ... in the 70's ...

 

Regards.

tired1's picture

I have a question that's been bothering me for years:

Who monitors the owenership or possesion of UST's.

OK, say China has 3 T in UST's. Can someone track if these are being used in actual transactions as payment by sime sort of serial number registration? Are there clearing houses of some kind?

Thanks in advance for any input.

ekm1's picture

Wonder how Senate tracked down and blocked $100 billion belonging to Iran?

Easy peasy.

All electronic transactions are trackable.

Senate and US Treasury control the Fed and the SWIFT system in Brussels

Fed and Treasury know exactly who hold what and they can get to know withing a certain period

 

http://www.treasury.gov/about/organizational-structure/offices/Pages/Off...

This office does it

They employ 700 people

tired1's picture

Thanks for your reply, makes sense.

I still keep wondering about any plausable reason for the following event:

 

US government securities seized from Japanese nationals, not clear whether real or fake
Bonds worth US$ 134.5 billion are seized. This is the largest financial smuggling case in history. But are they real? Concern over ‘funny money’ or counterfeit securities is spreading in Asia. The international press is silent.

http://www.asianews.it/news-en/US-government-securities-seized-from-Japa...

Care to take a swing at it?

ekm1's picture

i don't know about that one

Normal thieves

OldPhart's picture

I remember that.  Funny, it pretty much disappeared from the news.  If they were fakes we would have heard about the prosecution and jail sentences.  If they were real...not heard a peep.

Steaming_Wookie_Doo's picture

The bit I heard was that there were no such bonds ever created. OK, but if you're a counterfeiter, would you try and print $7 bills? No, because they are non-negotiable, i.e. everybody knows there's no such bill. Why would someone go to the effort of creating a $1 billion bond if there are none in circulation? Doesn't make sense. And suggesting that it'd "dupe" someone, there's no one out there who deals in even remotely those figures who doesn't know exactly what bonds are legit, or be able to look them up online or within bank software.

And supposedly those guys were released soon after the escapade, but not under any claims of diplomatic immunity, etc. Just imagine what a little guy trying to pull that would get. I'll throw this in as well:

http://gizadeathstar.com/2013/11/9000000000000-scandals-problems/

There's been a few of these little "incidents". Who's sending messages to whom?

cheech_wizard's picture

So if we cut out the heart, does the body die? <insert evil laughter here>

StupidEarthlings's picture

Im pretty sure they're buying up 'assets' in the US and abroad..from fools who think theyre gettin a good deal right now.

Theyre not just at the US cash your worthless crap here window.

 

Chinas just been playin along..biding time until they have to just eat there losses..that time appears to be arriving.

ekm1's picture

real estate, yes.

But nothing major

Canada rejected them buying full ownership of oil assets.

agent default's picture

We would like to take delivery on all those gold and silver contracts you dumped at 3:00 AM in the GLOBEX.  And don't try any cash settlement crap on us or the US will know Chinese torture like no other.

Sincerely PRC.

Infinite QE's picture

Chinese people have about as much to say in this charade as the American people. They are under the Red Shield like the rest of us.

vyeung's picture

yes, but there is one difference. The government isn't trying to kill its citizens like the DC fascist/nazis in power. America needs to remove those mofo otherwise everyone gets screwed as they are using the US as the host.

MontgomeryScott's picture

"yes, but there is one difference. The government isn't trying to kill its citizens like the DC fascist/nazis in power.'

OMFG!

I guess you're right. FOXXCOM sets up 'suicide nets' so that the worker-slaves don't KILL THEMSELVES (before they've completed their indentured servitude).

PHHTH!

"The government isn't trying to kill its citizens"...

Yeah, it's like they don't even have to TRY ANYMORE (their citizens KILL THEMSELVES).

My FUCKING GOD! What a DOUCHE!