Addressing the Russian Parliament following his inauguration, Vladimir Putin observed the necessity of increasing Russia’s economic sovereignty and independence from the petrodollar system, stressing that the West is boosting this process through its economic bullying in the form of sanctions.
“We used to behave naïvely, but now we see that the WTO [the World Trade organization] rules are all too often broken, the restrictions are imposed for political reasons, which they call sanctions. "
"Plus more and more of them are imposed to secure its favorite competitive advantages,” Putin said.
“We need to increase the level of our economic sovereignty but this is not a straightforward decision,” the head of state said.
“Oil is traded in dollars on the exchange,” Putin said.
“Certainly, we are thinking about what we need to do in order to get free of this burden. Furthermore, our partners are helping us by introducing all these unlawful restrictions and violating principles of the global trade, because the whole world sees the dollar monopoly is unreliable; it is dangerous for many, not only for us,” he added.
As The Duran's Frank Sellers notes, generally speaking, any country that wants to buy oil needs to buy dollars first, with which to accomplish the commodity purchase, which is a major aspect of the dollar’s global hegemony in international trade.
The US, in attempting to maintain this, has been resorting to international bullying in its sanctions and financial practices, which, continuing down this path, is only ensuring America’s eventual irrelevance on the global economical stage.
We have seen how this is happening around the world, with China’s introduction of the Petroyuan, Venezuela’s petro, and with bilateral trade deals and banks being erected so as to side step both the dollar and American economic sanctions. Putin cites Russia’s gold and foreign currency reserves, and his intention to do something about Russia’s dependence on the American dollar backed oil system.
“This is not merely a separation from the dollar; this refers to the need of strengthening our economic sovereignty,” Putin said.
“Our gold and foreign currency reserves undergo diversification and we will continue to do it,” he added.
As Sputnik News reports, Putin's latest announcement came less than two months after China launched yuan-denominated oil futures on the Shanghai International Energy Exchange, thus challenging the dominance of the Brent and West Texas Intermediate (WTI) benchmarks. Incidentally, in 2017 China emerged as the largest oil buyer, surpassing the United States. According to the US Energy Information Administration (EIA), in 2017 China imported 8.4 million barrels of crude per day, half a million more than the US.
Russia is ready to support the Chinese contracts, as Sputnik contributor Igor Naumov wrote, citing a source close to the top management of the Saint-Petersburg Stock Exchange (SPBEX).
"Currently, the US dollar is used as the contract currency in the global hydrocarbon trading system, as well as for other commodities," the journalist explained. "This is what largely provides the dollar with its status as the world's leading reserve currency. [However], the yuan is seeking to dislodge the American [petrodollar] from one of the fastest growing oil markets in the world."
As we noted previously, Russia bought another 300,000 troy ounces of gold in March bringing Russia's total gold reserves to 1,891 tonnes or 60.8 million troy ounces as of the start of April, the central bank announced loudly at the weekend.
The continuing robust and steady accumulation of gold reserves continues (for the 37th straight month)...
The build-up of gold reserves by non-Western countries is something which could end up tipping the scales of the global order.
Many believe that should bad relations continue between the US and these nations then US-denominated assets currently held in forex holdings by the relevant central banks, could be dumped for alternatives. Nations may opt to diversify into the Chinese yuan (in the case of Russia) but also gold. Most likely it would just take either Russia or China to do this, before many others followed suit.
We know from recent comments by the likes of Erdogan and Putin that this is a possibility not far from their minds:
“With the dollar the world is always under exchange rate pressure. We should save states and nations from this exchange rate pressure. Gold has never been a tool of oppression throughout history.” Turkish PM Erdogan, April 2018