There is some very interesting analysis emerging from two viable sources that shows that the ending of the petrodollar, along with the introduction of a gold backed Chinese currency, could be intrinsically tied to Saudi Arabia’s planned IPO of their Aramco oil conglomerate.
On July 30, economist and statistician Dr. Jim Willie wrote in his monthly newsletter that the upcoming public offering of a stake in Saudi Arabia’s Aramco oil conglomerate looks very likely to be the vehicle for China to get a toehold into the Middle Eastern oil trade, and from there have the impetus to ‘encourage’ the rest of the Middle East and OPEC to either begin or fully invest in selling their oil in Chinese RMB rather than U.S. dollars.
The Chinese are always opportunistic. They invest in trade and structural placements, in the hope of winning commercial partners and friends. They do not wage war to win their way. The Chinese are observing the ARAMCO deal and its massive snag. They might hand to the Saudis an over-valued offer on a gilded platter. China has stayed away from any direct involvement in the Yemen War. However, they might be the supplier of some missiles used in Yemen by the native defenders, delivered by the Iran Military. China might over-pay for a stake in the ARAMCO company for two reasons. First, they want a toe-hold in the kingdom, in order to win other trade deals with a degree of exclusivity. They would become a favorite foreign son in the process, especially if other Western financial houses refuse to invest in the bloated over-valued petro-chemical firm.
Second, the Chinese would then be in a position to demand that oil sales to China be paid in Yuan currency, in RMB terms. The ARAMCO investment, large or small, would serve as leverage to fracture the Petro-Dollar at its home base, within Saudi Arabia. The shock waves would be heard around the financial world.
Once the Chinese win the privilege to buy Saudi oil in RMB terms, the other Gulf Arab oil producers will match the offer of selling oil to the Chinese in their own currency, and NOT in the USDollar. The Petro-Dollar defacto standard is about to suffer multiple coffin nails. The rival Gulf Arabs will not wish to lose market share to the Saudis. They will permit the Chinese payment terms in RMB, a no-brainer. – Goldseek
Once China has a controlling interest in the Middle Eastern oil trade, and pushes OPEC into accepting the RMB for oil and natural gas purchases, the next step in their plans is to back these trade contracts with gold, and usher in a return to a form of the gold standard through its own currency.
As I also said in my last interview, I believe that while gold already has bottomed, the real marker – the sign it’s ready to embark on an explosive uptrend – will come once the Chinese start trading oil based on an Eastern benchmark – perhaps initially denominated in renminbi and then in some combination of renminbi and gold.
The Chinese, burned in 2008 by the West-engendered financial crisis, view the dollar with abiding distrust, and in conjunction with ever scarcer oil see relying on it as a recipe for disaster. If oil starts spiking, they will stop it by making sure oil trading no longer is done solely in dollars, and that the bulk of it is backed by other currencies, especially gold. I don’t think this is imminent, but I also think an oil spike could happen a lot faster than most people think.
So the statistic I’m watching most closely is the price of oil. If black gold starts running, I want to own yellow gold, lots of it, as the currency that will be able to buy oil. – Stephen Leeb via King World News
Source: The Daily Economist