De-Dollarization Accelerates As Russia Nears Launch Of Ruble-Priced Oil Trading Platform

Tyler Durden's picture

It appears Russia is close to taking the next big step towards de-dollarization and killing the petro-dollar as Vladimir Putin's "dream" of ruble-based pricing of its domestically-produced oil is on the verge of realization. SPIMEX (The St. Petersburg International Mercantile Exchange) is actively courting international oil traders to join its emerging futures market, which as Bloomberg reports, is designed "to create a system where Russian oil is priced and traded in a fair and straightforward way."

Step-by-step Russia, China and other emerging economies are taking measures to reduce their dependence on the US dollar, and as SputnikNews detailed, F. William Engdahl warns - referring to Russia's crude oil benchmark initiative - this move could deal a dramatic blow to the "petrodollar's" dominance.

Russia has taken a significant step which will undermine the current Wall Street oil price monopoly: Russia's own crude oil benchmark futures contract will price oil in rubles and no longer in US dollars, American-German researcher, historian and strategic risk consultant F. William Engdahl remarks.

 

"The move is part of a longer-term strategy of decoupling Russia's economy and especially its very significant export of oil, from the US dollar, today the Achilles Heel of the Russian economy… It is part of a de-dollarization move that Russia, China and a growing number of other countries have quietly begun," the American researcher writes in his recent article for New Eastern Outlook.

 

He explains that the setting of an oil benchmark price is a cornerstone of the method used by omnipotent Wall Street bankers to control world oil prices. "Oil is the world's largest commodity in dollar terms," the historian stresses.

 

Engdahl focuses attention on the fact that the sale of oil denominated in US dollars is essential for the support of the American currency's leading role. Indeed, the US dollar's status as world's major reserve currency is one of two pillars of Washington's hegemony since the end of the Second World War (the other one is the US military supremacy), the historian emphasizes.

 

"Today, prices for Russian oil exports are set according to the Brent price in as traded London and New York. With the launch of Russia's benchmark trading, that is due to change, likely very dramatically. The new contract for Russian crude in rubles, not dollars, will trade on the St. Petersburg International Mercantile Exchange (SPIMEX)."

And, as Bloomberg reports, it appears that day is getting close...

The nation’s largest commodity exchange, whose chairman is Putin ally Igor Sechin, is courting international oil traders to join its emerging futures market. The goal is to increase revenue from Urals crude by disconnecting the price-setting mechanism from the world’s most-used Brent oil benchmark. Another aim is to move away from quoting petroleum in U.S. dollars.

 

If Russia is going to attract international participation in Russian-based pricing, the Kremlin will need to persuade traders it’s not simply trying to push prices up, some energy analysts said. The government is dependent on oil revenue to fund its budgets.

 

“The goal is to create a system where Russian oil is priced and traded in a fair and straightforward way,” said Alexei Rybnikov, president of the St. Petersburg International Mercantile Exchange, or Spimex, in a phone interview.

 

Russia, which exports about half its crude, has long complained about the size of the discounts for lower quality Urals oil compared to North Sea Brent prices, which are assessed by the Platts agency. With world oil prices down by half in the past two years and Russia facing the prospect of its worst budget deficit as a percentage of its economic output since 2010, it needs every dollar of petroleum revenue it can get. Having its own futures market would improve Russian oil price discovery as well as help domestic companies generate extra revenue from trading, said Rybnikov.

Not everyone is excited about the prospect of a Russia-controlled oil benchmark, as one can well imagine...

“The reality is that the Kremlin is always likely to be heavily involved in the Russian oil industry,” said Richard Mallinson, an analyst at Energy Aspects Ltd. “That creates the concern that the proposals might be structured to try to achieve higher prices, which is not consistent with efficient price discovery.”

Moscow is not alone in its push to change global oil pricing. China, which vies with the U.S. as the world’s biggest crude importer, has spent two decades trying to introduce its own oil futures contact, now expected this year. Iran and Venezuela, members of the Organization of Petroleum Exporting Countries, have called for trading oil in other currencies than U.S. dollars.

The Kremlin plan echoes the New York Mercantile Exchange’s efforts to offer Russian export oil futures in late 2006. Nymex, now part of CME Group Inc., discontinued the contract six years later because it wasn’t popular among traders, JBC Energy GmbH said.

“Some market participants might be wary of embracing the new futures contracts as a benchmark due to concerns about the Russian government’s high degree of involvement in the oil sector,” said Eugene Lindell an analyst at Vienna-based JBC. “It remains questionable as to what extent Spimex can provide a better overall trading framework.”
 

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samjam7's picture

Expect the Russophobia in western MSM to turn up a gear or two! This won't be tolerated!

Looney's picture

Oh my Goat! This is big!

There’s one “but”, though…

The Ruble can be easily manipulated, just like everything else. The only way to avoid any currency manipulation is to price the Russian Oil (and gas, for that matter) in GOLD.

Looney

38BWD22's picture

 

 

Russia is free to do as they so choose.

No fear.  It really makes no difference.

BRIC is no real threat to anyone.  Boo!

 

EDIT:

Looney, you got that right re gold.  Physical gold: immune to manipulation for over 5000 years.

Sages wife's picture

Oil priced in gold completely overhauls the financial world; levels the playing field. Saddam and Muammar paid the price for attempting it. A combined effort by Russia and China will be a different story.

thesonandheir's picture

@Sages

 

This is the prophecy Another spoke about back in the day.

Government needs you to pay taxes's picture

The US will ultimately benefit from a weaker dollar, including agricultural exports.  We know the shale industry can pump up production, so foreign oil becoming 2-4x more expensive really isnt a deal-breaker.  Plus, the Fed gets some inflationary pressure.  Everyone wins!

Very long term, the idea of backing a currency with real commodities is good for everyone . . . but Uncle Sam might tax/steal more of those from US citizens if they deem it 'strategic'.

HowdyDoody's picture

Meanwhile, Russia sets up a second military base at the military airfield on the outskirts of Palmyra. It is currently protected by the Pantsir S1 anti-aircraft missile system.

https://www.youtube.com/watch?v=wiQM_-JL9as

We are currently awaiting the wailing and gnashing of teeth from the Anglo-Zionists.

Arnold's picture

I wonder if they have the sophistication to run an honest market?

Ditto the chinks.

I know we do , but clearly choose not to do it,

There is no money in it.

datura's picture

If Russia has the sophistication to run an honest market?

I don't know, but I remember very well that Putin recently said, when asked if Russia should start printing money that: "No. Printing money is total nonsence. We need to develop the real economy, even if it is hard."

In the past I also heard him say that "Too low interest rates create bubbles and I hate bubbles. Will we not "loose the race" with USA in this way? We do not intend to get into any kind of race with anyone, we prefer to go slowly but consistently - yes of course it is harder that way, but how can you really know that USA will stay far ahead of us with the way they are doing things? You can't know that, perhaps they won't. In any case we are not going to get into any race with them, we need to go our own way"

and

"People should not borrow too much money, debts will reduce your independence" (said before 2008). 

So, most of his views definitely seem totally anti-globalist. 

philipat's picture

RUB was only ever manipulated by ONE party: Washington. WIth this new exchange and the fixed contract gas sales to Europe also in RUB, expect to see the RUB strengthen substantially (As customers sell EUR and USD to buy RUB to pay for Russian energy) and will be much more diificult to manipulate in the future. Gee, I wonder if that is why Russia did this or is it just coincidence?

Incidentally, Russia's total debt/GDP still stands at about 15% and what had become the largest consumer goods market in Europe remains closed to European exporters, Great thinking.....

golden kafir's picture

how many accounts do you have datura ? i can tell you have at least 5 i figure due to the consistent misuse of certain words, which spellcheck won't fix for you. dead give away. does zh employ people to post comments ? suspect yes.

Lea's picture

"Meanwhile, Russia sets up a second military base at the military airfield on the outskirts of Palmyra"

Third. You've forgotten the naval base of Tartus.

HowdyDoody's picture

Tartus is not a base. It is permitted docking facility.

HenryHall's picture

Few will want to spend their gold in order to buy oil when they can spend their dollars instead.

Q. Who wants to keep dollars when you can keep your gold instead?

A. No nation that actually has any gold wants to spend their gold before spending their dollars.

Paveway IV's picture

America: We had it ALL, and we blew it. It has to be the most colossal fuck-up in human history.

All we had to do was be fair an honest - that's it. Instead, we let ourselves be led by dishonest, greedy psychopaths and bullies, and that's what America means to the rest of the world today. 

People will look back on the U.S. centuries from now and wonder just what the fuck we were thinking this whole time. I know how they will feel.

philipat's picture

That is an excellent summary Paveway. Once corruption sets in and the moral high ground is surrendered, it's a long slippery slope downhill. Such slopes accelerate very quickly into oblivion.

As a non-American, I loved America for what it represented, Hard work, honesty, decency, fairness and equality. And such a wonderful Constitution and Bill of Rights unequalled in the history of mankind. All just memories now, and so quickly lost. Very, very sad.

Mountainview's picture

They should dare to go to a gold standard. For the benefit of honestly working people on this planet.

Jacksons Ghost's picture

War would be started immediately.

Mountainview's picture

With the objective to occupy Russia? Others tried it before!

Arnold's picture

You wish.

Isolate would be closer to the mark.

Beowulf55's picture

 

 

How dare they! 

 

TIME TO INVADE RUSSIA TO SPREAD DEMOCRACY...!

Rubicon727's picture

Maybe 10% of the American public are even aware of US hegemony and how it will take any measures to destroy Russia and China, or any nation that dares to deviate away from its lynchpin hallmark: the US $$$$$.

Given Clinton's relationships with Wall Street and other powerful entities, if she becomes president, then it's inevitable US threats against Russia and China will increase exponentially.

 

 

Winston Churchill's picture

You think they are going to wait for Hitlary to be coronated ?

I would'nt if I was in their place.

We live in interesting times.

conscious being's picture

I think Cankles is toast. Bluffdale is flashing warning signs. And Winston, re. waiting - who's they? The Russians trading Rubles for oil. Or the NeoCon cabal launching WWIII?

anonnn's picture

Lynchpin US power is fraud.

 

The "lynchpin" is freedom to bribe with unlimited USDollars and freedom to assassinate/manipulate others via covert operations, financed simply by creating "valuable" USD from thin air.

 

The US defaulted in 1971 by violating Bretton Woods System which was based on guaranteed convertibility of USD into gold.

 

The Bretton Woods System was a trap, understood by all 45 participants to enable the US to be the single, overwhelming superpower. How's that?

 

Because among the participants of expert economists and finance ministers, everyone knew that the BWS had no provision for future default on the guaranteed convertibility. Thus, if/when a default-to-convert occurred, the participating nations would be stuck with paper-USD fiat which those nations accumulated as good-as-gold bank reserves. Being "stuck" with unbacked paper reserves, the nations would be forced to submit to Big-Brother US hegemony and its overwhelming influence.

 

And here we are.

 

 

 

 

 

 

 

 

 

Kaiser Sousa's picture

its never a fun time as a bully when everyone else you've fucked with on the playground starts punching you in your fucking face AT THE SAME TIME....

bye bye USD!

HRH of Aquitaine's picture
HRH of Aquitaine (not verified) May 7, 2016 12:34 PM

The days of the USD as the world reserve currency are growing short. Good for Russia. The petrodollar was a globablists wet dream cooked up by Kissinger et al. Fuck them.

HoserF16's picture

Jewish Banksters/Rothschilds can all go FUCK THEMSELVES! Our Kenyan-Faggot-White House-Squatter can go shove a dildo up his and Michaels Ass too! Now that the US military is beeing infiltrated with Homo's/Lwsbians & Transgenders, you're starting to see China/Russia/Iran/NK/Etc... flexing their muscles around the globe. They're doing a good job to say the least. Average American is about to get a wake-up call of epic proportions...

Hypocritease's picture

The dollar is also used to price airliners and aero-engines, as well as oil.

How do you get dollars? Simple, you give cash to the US and they give you paper with which to buy your oil, aeroplanes, engines.

The US then buys masses of arms and uses these to hold the world to ransome to maintain the dollar hedgemony.

The British and other US poodles also buy masses of overpriced arms to keep the US sweet in return for 'protection'.......

 

Hypocritease's picture

The dollar is also used to price airliners and aero-engines, as well as oil.

How do you get dollars? Simple, you give cash to the US and they give you paper with which to buy your oil, aeroplanes, engines.

The US then buys masses of arms and uses these to hold the world to ransome to maintain the dollar hedgemony.

The British and other US poodles also buy masses of overpriced arms to keep the US sweet in return for 'protection'.......

 

Lea's picture

"The petrodollar was a globablists wet dream cooked up by Kissinger et al. Fuck them"

It was cooked up to pay for the insane Vietnam war, which was sinking gazillions on top of killing people who had done nothing to the 'Murikans and don't know to this day why they were attacked by the USA.

And it made the USA's currency, hence economy, dependant on foreign oil (and the whims of the Saudis) ever since.

yogibear's picture

Even the Federal Reserve will not protect a US dollar free-falling. It will just QE and print more.

The US dollar falling in value is long overdue.

Nigger Rich's picture

There will be a new Eur-Asia trading zone that no longer needs USA and our slick nigger ways.

Seasmoke's picture

Think we might start seeing Russian passports near ruined buildings soon. Stay alert out there ZeroHedge !!!

Arnold's picture

Chechnyan, Sea, Chechnyan.

CrabbyR's picture

The big hoho for me was the comment about efficient price discovery

PPT Inc.'s picture
PPT Inc. (not verified) CrabbyR May 7, 2016 1:10 PM

Gargoyle translate of Mallinson: "But if no Jews are in the middle the price paid to producers will be higher and the price paid by consumers will be lower. Everyone will win except the moneychangers. This cannot stand."

me or you's picture

“Some market participants might be wary of embracing the new futures contracts as a benchmark due to concerns about the Russian government’s high degree of involvement in the oil sector.”  - Just like US government is deep involved right now. 

conscious being's picture

One reason, in fact the main reason all these countries hold dollars is that they can buy energy with it. Now they will have another option. Great for RUB.

krage_man's picture

Ok, so:

1) Settlement will be happening in rubles, this means traders/brokers must create accounts with Russian Central Bank

2) Ruble is free floating currency already 1.5 years, so no issue with exchange to dollars/euro

3) It could be profitable to trade arbitrage between russian and foreign exchnages in different currencies 

 

this means thia could be attractive offer for brave traders...

Absalon's picture

The Russians will have to accept a small discount for the currency risk.  The question is whether they will gain enough on having a targetted "urals benchmark" to make up for the currency discount.

 

What they should do is price the benchmark in US dollars or Euros and not suffer the currency discount.

krage_man's picture

Well, you see.. the ruble is mostly moved by the price of oil... which is what it is being price with... and yes there could be discount although likely minor one comparing with oil price movements

Space Animatoltipap's picture

It's simply part of the decentralisation of world politics. And the fed-jews can't do nothing about it. The UN and the World Bank neither. Funny. 

Consuelo's picture

Well, now you're touching at the meat-of-the-matter...

 

The PNAC/Wolfowitz Doctrine of 'containment' is predicated upon just such 'centralization'.   Likewise is the Ukrainian-Joo complex predicated upon hating ethnic Russians, and by extension, Putin himself.   The unhindered control of global finance hinges upon Joo hegemony of $USD movement about the trading sphere.   Independence thereof simply cannot and will not be tolerated.   Until of course, the heretofore 'supremacy' of U.S. foreign policy overreach is Bitch-slapped back to reality - which is coming sooner than most expect.

Absalon's picture

The point of this is to create liquidity and price discovery for a benchmark for "lower quality" Urals oil.

 

It simply does not matter what currency it is expressed in.  The F/X market will arbitrage away any exchange rate effects. 

 

Russia and China and Venezuela have always been free to buy and sell oil in any currency they chose.  If China wanted to pay for oil in renminbi all they had to do was say so - someone would have offered to supply them oil to be settled in renminbi at an  "appropriate" (cough) price.

NoWayJose's picture

Pricing oil in a certain currency hardens back to WWII - same as a global reserve currency or a gold fix. Communications were slow and because a price would change during the day it had to be 'fixed' or set so the people in the Phillipines knew the price of what traded that day in New York or London. Now it is all instantly priced across the globe.

The only way to fairly price a commodity is to require the buyer to take delivery - otherwise you get arbitrage, futures, and many other paper trades.

Quinvarius's picture

That the Russian government protects their oil industry, unlike how Obama treats our coal industry, is a bonus, not a problem.  This article contains a massive a mis-understanding of how the world actually works.