The Demise of the Dollar
By Robert Fisk, Independent UK
26 January 12

n the most profound financial change in recent Middle East history, Gulf 
Arabs are planning - along with China, Russia, Japan and France - to 
end dollar dealings for oil, moving instead to a basket of currencies 
including the Japanese yen and Chinese yuan, the euro, gold and a new, 
unified currency planned for nations in the Gulf Co-operation Council, 
including Saudi Arabia, Abu Dhabi, Kuwait and Qatar.
Secret meetings have already been held by finance 
ministers and central bank governors in Russia, China, Japan and 
Brazil to work on the scheme, which will mean that oil will no longer be priced in dollars.
The plans, confirmed to The Independent by both Gulf 
Arab and Chinese banking sources in Hong Kong, may help to explain 
the sudden rise in gold prices, but it also augurs an extraordinary 
transition from dollar markets within nine years.
The Americans, who are aware the meetings have taken 
place - although they have not discovered the details - are sure to 
fight this international cabal which will include hitherto loyal 
allies Japan and the Gulf Arabs. Against the background to these 
currency meetings, Sun Bigan, China's former special envoy to the 
Middle East, has warned there is a risk of deepening divisions 
between China and the US over influence and oil in the Middle East. 
"Bilateral quarrels and clashes are unavoidable," he told the Asia 
and Africa Review. "We cannot lower vigilance against hostility in 
the Middle East over energy interests and security."
This sounds like a dangerous prediction of a future 
economic war between the US and China over Middle East oil - yet 
again turning the region's conflicts into a battle for great power 
supremacy. China uses more oil incrementally than the US because its 
growth is less energy efficient. The transitional currency in the 
move away from dollars, according to Chinese banking sources, may well be gold. An indication of the huge amounts involved can be gained from the wealth of Abu Dhabi, Saudi Arabia, Kuwait and Qatar who together hold an estimated $2.1 trillion in dollar reserves.
The decline of American economic power linked to the 
current global recession was implicitly acknowledged by the World 
Bank president Robert Zoellick. "One of the legacies of this crisis 
may be a recognition of changed economic power relations," he said in Istanbul ahead of meetings this week of the IMF and World Bank. But 
it is China's extraordinary new financial power - along with past 
anger among oil-producing and oil-consuming nations at America's 
power to interfere in the international financial system - which has 
prompted the latest discussions involving the Gulf states.
Brazil has shown interest in collaborating in 
non-dollar oil payments, along with India. Indeed, China appears to 
be the most enthusiastic of all the financial powers involved, not 
least because of its enormous trade with the Middle East.
China imports 60 per cent of its oil, much of it from 
the Middle East and Russia. The Chinese have oil production 
concessions in Iraq - blocked by the US until this year - and since 
2008 have held an $8bn agreement with Iran to develop refining 
capacity and gas resources. China has oil deals in Sudan (where it 
has substituted for US interests) and has been negotiating for oil 
concessions with Libya, where all such contracts are joint ventures.
Furthermore, Chinese exports to the region now account for no fewer than 10 per cent of the imports of every country in the Middle East, including a huge range of products from cars to weapon 
systems, food, clothes, even dolls. In a clear sign of China's 
growing financial muscle, the president of the European Central Bank, Jean-Claude Trichet, yesterday pleaded with Beijing to let the yuan 
appreciate against a sliding dollar and, by extension, loosen China's 
reliance on US monetary policy, to help rebalance the world economy 
and ease upward pressure on the euro.
Ever since the Bretton Woods agreements - the accords 
after the Second World War which bequeathed the architecture for the 
modern international financial system - America's trading partners 
have been left to cope with the impact of Washington's control and, 
in more recent years, the hegemony of the dollar as the dominant 
global reserve currency.
The Chinese believe, for example, that the Americans 
persuaded Britain to stay out of the euro in order to prevent an 
earlier move away from the dollar. But Chinese banking sources say 
their discussions have gone too far to be blocked now. "The Russians 
will eventually bring in the rouble to the basket of currencies," a 
prominent Hong Kong broker told The Independent. "The Brits are stuck in the middle and will come into the euro. They have no choice 
because they won't be able to use the US dollar."
Chinese financial sources believe President Barack 
Obama is too busy fixing the US economy to concentrate on the 
extraordinary implications of the transition from the dollar in nine 
years' time. The current deadline for the currency transition is 
2018.
The US discussed the trend briefly at the G20 summit 
in Pittsburgh; the Chinese Central Bank governor and other officials 
have been worrying aloud about the dollar for years. Their problem is that much of their national wealth is tied up in dollar assets.
"These plans will change the face of international 
financial transactions," one Chinese banker said. "America and 
Britain must be very worried. You will know how worried by the 
thunder of denials this news will generate."
Iran announced late last month that its foreign 
currency reserves would henceforth be held in euros rather than 
dollars. Bankers remember, of course, what happened to the last 
Middle East oil producer to sell its oil in euros rather than dollars. A few months after Saddam Hussein trumpeted his decision, the 
Americans and British invaded Iraq.

http://www.readersupportednews.org/news-section2/320-80/9635-focus-the-demise-of-the-dollar