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China And Iran To Bypass Dollar, Plan Oil Barter System, And A Deeper Dive Into The Iranian Oil Bourse
One of the more notable events in the past week was the previously discussed reopening of the Iranian Oil Bourse, an attempt by Iran to launch a venue that bypasses US sanctions against Iran which has prevented payment in the world's reserve currency for Iranian goods. "Big deal", some will say, this is not the first time Iran has attempt to upstage the Great Satan. Well, true, although as OilPrice said last week, "what it would take for Iran’s new exchange to survive and flourish are some heavy-duty customers that Washington would be wary of picking a fight with, and Tehran already has one – China... China, the world's largest buyer of Iranian crude oil, has renewed its annual import pacts for 2011. In 2010 Iran supplied about 12 percent of China's total crude imports. According to the latest report of the China Customs Organization, Iran's total oil exports to China stood at 8.549 million tons between January and April 2011, up 32 percent compared with the same period last year. Iran is currently China's third largest supplier of crude oil, providing China with nearly one million barrels per day." Still, the perceived provocation to Uncle Sam should China go ahead and slap America in the face by accepting the existence of the Kish exchange, would echo around the world. Which is why many don't think much if anything will happen. Until today, that is: according to the FT, China has decided to commence an barter system in which Iranian oil is exchanged directly for Chinese exports. The net result: not only a slap for the US Dollar, but implicitly for all fiat intermediaries, as Iran and China are about to prove that when it comes to exchanging hard resources for critical Chinese goods and services, the world's so called reserve currency is completely irrelevant. The implications of this are momentous, especially for US debt, whose indomitability is only predicated upon the continued acceptance of the currency it backs as a global reserve. If China is now openly admitting to the world that it does not need US monetary intermediation, and by implication, the "debt" backing said intermediation, what then? And who will follow China next?
Tehran and Beijing are in talks about using a barter system to exchange Iranian oil for Chinese goods and services, as US financial sanctions have blocked China from paying at least $20bn for oil imports.
The US sanctions against Iran, which make it extremely difficult to conduct dollar-denominated business, mean that China could owe the oil-rich nation as much as $30bn, according to people familiar with the problem.
They said the unpaid oil bills had built up over the past two years and the governments, which are in early-stage talks, were looking at how to “offset” the debt.
Some Iranian officials are growing increasingly angry about the inability of the country’s largest oil customers to pay cash, a problem that has contributed to a shortage of hard currency and has hindered the central bank from defending the Iranian rial, which has been sharply devalued over the past month.
China and India together buy about one-third of Iran’s oil, the country’s economic lifeblood. China’s oil imports from Iran have risen 49 per cent this year, according to Reuters.
While Iran can do without India, it needs China:
Iran last week threatened to cut off oil exports to India, which owes $5bn for oil but has not been able to move the money out of an escrow account to Tehran.
Unlike India, which exports almost nothing to Iran, China is dominant in Iranian business and could use a barter system to balance trade between the two countries. Beijing is involved in everything from building tunnels to exporting toys and has been expanding into Iran’s oil sector, where European companies such as Shell and Total have been deterred by the difficulties of operating without contravening sanctions.
China and Iran’s bilateral trade totaled $29.3bn last year, up almost 40 per cent from 2009. The two countries this month signed several infrastructure and trade collaboration agreements that would see Chinese companies invest in big infrastructure projects in Iran, while Iran would export large quantities of chrome ore to China, according to local reports.
“Both China and India are happy to keep Iran’s money in their banks and try to get Iran involved in barter deals to sell their junk, or give yuan and rupees instead of hard currencies,” said one Iranian former official, on condition of anonymity. Iran had not yet accepted the alternatives, he added.
While Iran would have very little use for a non-convertible Yuan (for now), direct barter is something that will be far more useful to the resource-rich country. Yet, as Isaac Newton once cautioned, "in order to measure, you must define your unit." What will China and Iran agree on as the unit of exchange, if not monetary intermediate, especially in those cases when there is no preset barter agreement?
If said neutral monetary "hard asset" ends up being a precious metal, look out US Dollar.
And for those curious to learn some more about the Iranian Oil Bourse, here is Grant Williams with his latest "Things that make you go hmmm."
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PenGun
If you are not learning, then teach.
Nice avatar and name. /s
OK, so China is going to "barter" USD 100,000,000 EVERY DAY with Iran- (oil USD 100 bbl/1,000,000/day).
Iran only has 70 million people & the majority of those don't have a pot to piss in.
OK, so what has China got - That Iran wants - 100 million dollars worth of EVERY DAY - that China hasn't first PAID for in dollars?
Sounds like piss-pots for everyone would be a good start. :)
touche'... laughed hard at that one, prometheus!
Gold and manufactured goods for starters.
The U.S. is helpless against an attempt by Russia, Iran and China to do business in any unit they consider money since the United States NO LONGER MAKES ANYTHING. We have become so completely reliant upon China to make nearly every one of our goods that corps rely upon to sell to the U.S. Consumer that is loaded up with only Steroided Fed created Fiat that anyone of these nations that does produce actual goods such as oil, minerals and affordable IT services (India) can call the bluff of the United States.
Our clownshoes in the U.S. govt have presented ourselves as nothing more than bullies who wish to get around a days work like the rest of the world based solely on the only exports we have which is "Hollywood, Television, Apple & U.S. reserve currency counterfeiting". The moment the rest of the world no longer respects this undeserved vacation of shell passing for possesing nothing more than a military of never before seen proportions they will understand that all he have is nukes, subs and fiats. Hell we taught China how to make our Apple products.
We have already proven ourselves incapable of winning Wars in Iraq, Vietnam and Afghanistan do how do we propose to win a war against a unified globe that are bent on preventing the United States from skipping out on the check using fiat currency solely because we are the reserve? China & Russia know exactly what is occuring and no longer wish is to print currency since we have deabilited to just that in order to create the illiusion we have an economy.
All that is necessary is to step back, stop buying bonds, stop trading in Dollars and demand a gold/silver/commod basket of exchange and cease to trade their slaves for our imported dollars. It all ends without a single shot being fired since the inability to print and pretend would cause so much economic havoc we would be forced to unveil our mask as promoters of democracy and nothing more than the most successful counterfeiting ring in history. Yes it is true..China only receives their wealth from the sales to U.S. zombies and converting out fiat into buying out own debt and military expansion but we are quite reliant upon them to service this illusion by using their slave army to build your child's Barbie dolls.
The moment the credibility is lost and the U.S. homogeny challenged jointly we will see how quickly our allegiances with other selfish nations crumbles. We will be either forced into WW3 to give this stealth empire the push over the Rubicon and take all by military force or remove our crony puppets and return America to a nation that recalls that freedom does not come from what is preached but what is practiced by example. We do however have food and grain so the next decade should be unleash a war not before seen upon mankind fought along unseen technological, social and weaponry parallels.
What are we going to do arm all our "Allies" in the Middle East to fight our continental war in Asia? We cannot even prevent China from parking a Sub off of L.A. and firing a trident a day after QE2 was launched in order to show us that the status quo has changed. We are more vulnerable domestically than ever AND globally. All they need to do is push with a feather economically because of our actions after 9/11 and it all ends.
Excellent John, but "food and grain"? How long is that going to last without imported oil or massive subsidies to keep farming/food distribution going? There is gonna be a lot of starvation to go around for everyone. Unless people are willing or forced to do hard ag labor again, or, start growing a lot of their own food, I don't think we will have an advantage there either.
Good post except if you look at it closely you will see that it is the Anglo-American mafia that is forcing China and Russia into WWIII with our escapades in MENA.
Tuco Benedicto Pacifico Juan Maria Ramirez
Actually, I am seeing more Made in USA stuff, but we have a long way to go.
Whenever I can I point out the shitty quality of Made in China stuff to the store personel. Maybe if more people did this we could help turn this ship around.
Tuco Benedicto Pacifico Juan Maria Ramirez.....
otherwise known as "The Rat." ;)
Obviously, you are a connisseur of fine films Graucho!
"Let me tell you Blondie when they pull that rope you can feel the devil bite your ass!"
Tuco Benedicto Pacifico Juan Maria Ramirez
Some Iranian officials are growing increasingly angry about the inability of the country’s largest oil customers to pay cash, a problem that has contributed to a shortage of hard currency and has hindered the central bank from defending the Iranian rial, which has been sharply devalued over the past month.
Iran's currency mafia chief arrested http://www.presstv.ir/detail/190458.html These guys need to read or watch more or something becuase this info is old and incomplete at best.
http://www.youtube.com/watch?v=_mfMG66LtVU&feature=related
I've been talking about this for some time now.
China is helping nations move away from the US dollar, and they're well able to do it since they're the strongest manufacturing economy on the planet.
If Iran moves off the US dollar America will not retaliate militarily like they did when Iraq tried to do it. Attacking Iran would be attacking China.
America won't go up against China. It would be catastropic for America. Our leaders know it.
Ultimately China and the rest of the (growing) SCO alliance will squeeze America into a corner ...and deliver the knockout punch.
It's just a matter of time now.
Deleted : should have gone in main thread!
cranky-old-geezer
China has a large Achilles Heel. They need to sell their crap to the U.S. and Europe.
Close down Wallmart and America will survive. Apple sales contribute fuckall to the U.S. economy.
But stop food exports and China goes back to the Stone Age.
And let us not forget Japan. Japan has nukes, but will never acknowledge them. Japan will not sit idly by while China sends war canoes into the South China Sea.
China has a large Achilles Heel. They need to sell their crap to the U.S. and Europe.
They already have a trade / currency deal with Russia and satellites.
They're firming up a trade / currency deal with the EU as we speak.
India will be next.
Japan won't go up against China. Japan will see where their future security is, and it's not with a crumbling America.
Before long China won't need US trade anymore. That's when they start squeezing America into a corner.
And China's not worried about food from America. Their desure to take America down far outweighs food concers.
It's just a matter of time now.
cog
I don't think you comprehend how much China and Japan loath each other.
While America is badly wounded, the American parasites are starting to lose their grip. and she will turn around.
China is a fucking mirage. The old Soviet Union with lipstick and fishnet stockings.
p.s. Do ya think the China train wreck was from a faulty Made in USA part ?
Japan is on the disabled list. They can't do shit.
If i were china i would be looking to use korea as soon as the usa is busy elsewhere, once the us has a cvbg there china can present a fait accompli exercise in spratleys and negotiate from position of strength with USA.
Remember when the chinese got that Wuhan sub within 5 miles of the US carrier?
If they can do it in the pacific they can def do it in the spratleys.
Pirates and Emperors (from SchoolHouse Rock makers of How a Bill becomes a law)
http://www.youtube.com/watch?v=mEO3RWnHb4E&feature=related
http://www.youtube.com/watch?v=p0LmYEjXNIg&feature=related
Kings = American banksters who gamble away oil wealth
Globalisation gone wild. Can't let petodollar's reach $40/b. Our entire ponzi scheme depends on you. Let the the joystick drone games begin.
http://www.newyorkfed.org/research/current_issues/ci12-9/ci12-9.html
"Who will follow China next?"
EVERYONE, including Americans if they have any sense. Why do you think Americans are buying gold and silver in droves?
I don't quite understand the adversarial tone of the article that feed the emotions of the weak minded and the usual dribbling suspects. Are Americans buying PMs to start a conflict with the US government? Are they doing it to deliberately collapse their own currency? No, we are all hedging against the worthless greenback, not out of hate or greed, but because of NEED. So blaming nations (There are a lot more than China and Iran in the same game) who are coming to terms with the new reality is hardly justifiable.
Why do stupid people always externalise blame? I've watched and read all kinds of lies and utterly contemptible half-truths for years now - all designed to divide people, incite hate, and create an atmosphere of fear. I hope it never happens, but if a nutjob armed to the teeth goes into Chinatown in SF, NY, or any big metropolis and guns down fellow Americans - people whose ancestors built the continental railroad and enriched the tapestry of American history - because of all the overwhelming and completely unjustified hatred towards them in the media, I will know precisely who to blame. The fuckwits and morons who utter this kind of gibberish to satisfy their own warped views to empower their inadequate little lives with group-think hatred, instead of seeing the real issues: A corrupt and bankrupt system that has stolen the future of a generation of Americans.
I like you point of view.
that's a great rant YHC-FTSE, particularly the last paragraph. . . sadly, the "group-think hatred" can be stoked in a heartbeat, playing on misplaced "loyalty" to a nationstate that functions as a corporation enriching only those at the top.
to accept responsibility for willfully refusing to "see" the layered truths of the amrkn story will be a rough pill to swallow, and many will simply act out in tantrums, the only form of protest they know.
+1
<sigh> Sadly all too true mate.
Do you remember Bush's 'axis of evil' speech of late 2001? The NEOCONS and NEOLIBS have allowed things to come to a head, since then, Tyler.
TOO BAD we as a nation didn't listen to the Good Doctor, Ron Paul, during the Republican debates of 2007. A great crisis could have been averted:
http://www.youtube.com/watch?v=-HD9nO0c328&feature=related
Most are not aware that since this time (late 2007), Russia has opened up a vast untapped region of oil reserves in Eastern IRAN (in BARTER for nuclear technology), and China and India are buying these oil reserves...
WE, as a nation, were too consumed with forcing Afghanistan to capitulate to our MIC 'request' to build the PIPELINE through their territory (talks broke off with the 'ruling party' known as the TALIBAN, in 2000), and the 'deadly' threat of a member of OPEC renigging in his agreement (Saddam Hussein) to sell OIL in DOLLARS ONLY...
NOW, we, a weak and debtor nation, are being forced to try to 'save face' by threatening a war with ALL of the great kings of the East (who own us, and supply us with TV's, technical support, and oil-for-dollars, AKA PETRODOLLARS).
They like our people in general, but HATE what we do as a nation (The MIC in DC), and the time is coming, soon, in which We will be DECIMATED.
Looks like the International Khazar Banking Cartel is perhaps WINNING this one...
Gee. Is it time to end the FED, yet?
NAW. let's raise the 'debt ceiling', borrow a few trillion more from CHINA (who is buying oil from Iran), and threaten Iran with U.N. sanctions again...oh, and keep smart-bombing LYBIA, after they found out about the Sovereign Wealth fund losses incurred by our masters at JPMORGUE...at least we'll keep the boys at TELEDYNE and Douglass employed a few months longer, until we figure out a way to deleverage this 'housing bubble burst' thingie, and put 'amerika' back to work, paying their mortgages to the FANNIEMAEFREDDIEMAC state-owned FEDERAL RESERVE BANKS!
16 TRILLION: The amount that the FED loaned out since 2008, to banks all around the world.
The LIFEBLOOD of This Nation:
GONE
A "SUPERCONGRESS":
PRICELESS
http://www.huffingtonpost.com/2011/07/23/super-congress-debt-ceiling_n_907887.html
Musical respite:
http://www.youtube.com/watch?v=zZeRwuN68VQ
Good luck.
MontgomeryScott
your post gave me hope when i know there is none. your...pain/outrage...is visceral.
I like it. we need more and more.
a lot of the people i ve never seen and recognize, with like over a year and 30 weeks tenure are speaking up lately i'm kinda noticing.
good.
the "community" is well cd.
RE: YHC comment mentioning why "externalized blame"?
Shifting frustrations and blame, often self-caused by iresponsible and self-defeating decisions are needing a resolution in the mind.
When you are not mature enough to realize most frustrations are my responsibility and my direct cause. You need someone else to blame, other than yourself, to resolve the issue in your mind.
The key to my success and happiness is my responsibility.
Exceptionalism, to me, means to stay far ahead of a crumbling system of banking and government spending. That's my goal. No one to blame but me, if I fail. That simple.
+1
Yep. Enough said.
does this mean we are going to bomb iran now? ugh
Not sure if anyone posted this, and it appears the headlines have slipped through the cracks as all eyes are on the politico, but Iran's president has openly stated on national TV that he is now pursuing nukes.....go figure. No one is paying attention, and that is the best time for them to pursue their dreams.
does neo-liberalism lead to nationalism or even hyper-nationalism?
Why did you ask that? Does dollar hegemony have anything to do with free trade?
dollar hegemony is the causa causans of "free trade" with the us mic the causa causata of dollar hegemony. I asked that because 40 years of neo-liberalism/globalization/free trade washington consensus doctrine has gotten the world to this precipice, nationalism and in some instances hyper-nationalism. all goes back to keeping the dollar the fiat reserve under the guise of "free trade".
What came immediately to my mind China and Iran are going to use gold as payent base. Since gold is seen by Bernanke as a commodity and not as money, then it cant be wrong to do so. Gold for oil the perfect barter system but only if one has gold at hand. And China is the biggest producer of gold and is even importing gold since a while. So maybe this would make sense.
The Chinese store the Iranian gold in Shanghai or where ever the new bullion bourse in Chna is located. This sounds much better to me than some billion US $ in an escrow account. Maybe that expalins in part the unstoppable rise of gold during the last weeks.
What came immediately to my mind China and Iran are going to use gold as payent base. Since gold is seen by Bernanke as a commodity and not as money, then it cant be wrong to do so. Gold for oil the perfect barter system but only if one has gold at hand. And China is the biggest producer of gold and is even importing gold since a while. So maybe this would make sense.
The Chinese store the Iranian gold in Shanghai or where ever the new bullion bourse in Chna is located. This sounds much better to me than some billion US $ in an escrow account. Maybe that expalins in part the unstoppable rise of gold during the last weeks.
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