The news on Tuesday that shook financial markets and drove up the price of gold to record levels came from Robert Fisk, the Beirut-based journalist with a rare sense of history who has devoted his life to reporting from the Middle East.  --  That Gulf Arabs are conspiring in secret with the Chinese, the Russians, the Japanese, and the French to free themselves of the need to price oil in dollars was quickly denied by all parties, but Fisk said a Chinese banker told him he'd "know how worried [America and Britain must be] by the thunder of denials this news will generate."  --  Fisk said that the development "augurs an extraordinary transition from dollar markets within nine years."[1]  --  Writing on the website, Justin Fox pointed out that "it's not the worst news in the world" becaue "[s]uch a change wouldn't be unmitigated bad news for Americans. . . . [I]t may well be in the long-run best interest of the U.S. to push for an orderly transition away from the current dollar-based global monetary system."[2]  --  French news reports by Le Monde and the business publication Les Affaires, translated below, mostly gave credence to the report.[3,4] ...


By Robert Fisk

** In a graphic illustration of the new world order, Arab states have launched secret moves with China, Russia and France to stop using the U.S. currency for oil trading **

Independent (London)
October 6, 2009

In 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 U.S. 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 U.S. 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 U.S. 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 U.S. 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 U.S. 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 U.S. 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 U.S. dollar."

Chinese financial sources believe President Barack Obama is too busy fixing the U.S. 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 U.S. 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.


The curious capitalist

By Justin Fox
October 6, 2009

Robert Fisk's report in the Independent that the Persian Gulf countries are planning to stop pricing oil in dollars by 2018 and start using a basket of currencies instead has caused quite the big stir today. Gold hit a new record of $1,043 an ounce as investors worried about the future of the dollar, and the Internets were aflame with the news (especially the right-wing Internets, apparently). Saudi and Kuwaiti officials immediately said there's no such move in the offing, but it's obviously something they've been thinking about. Just under two years ago there was a big flurry of discussion on the subject, including an OPEC vote to study switching to a currency basket.

If the Gulf countries stopped pricing oil in dollars, they would also presumably stop pegging their currencies to the dollar, a more significant development. And of course Chinese officials have been making noise for several years about the need to move away from a dollar-dominated world. The problem that both China and the oil exporters have is that they're holding gigantic stashes of dollars that would suddenly be worth a lot less if they started trying to sell them off. So we've got this impasse, where lots of people complain about the dollar's supremacy but nobody seems willing to do anything about it. In fact, a succession of U.S. Treasury Secretaries has trooped to Beijing trying to persuade the Chinese to do something about the dollar's supremacy by letting the yuan float or at least rise sharply against the dollar, and met with strong resistance.

It's the sense that this can't go on forever that keeps putting downward pressure on the dollar. And this shouldn't go on forever. The U.S. economy's share of global economic output has been declining and will almost certainly continue to decline as formerly poor countries get richer. With that, the dollar's role will need to change.

Such a change wouldn't be unmitigated bad news for Americans. As I've written before, having the dollar as the world's currency has been a mixed blessing. The dollar's global role inflates its value, for example, which makes imports cheaper for consumers here but also makes U.S products less competitive globally. Dollar supremacy also allows the U.S. government (and until recently the private sector) to get away with wildly unbalanced budgets without paying an immediate penalty in higher interest rates, which can be nice for a while but tends to end in trouble. The global capital-flow imbalances that many economists now say were at the root of the financial crisis are in significant part a product of the dollar's outsized role.

All of this means that it may well be in the long-run best interest of the U.S. to push for an orderly transition away from the current dollar-based global monetary system and toward one built around currency baskets, the International Monetary Fund's special drawing rights, the bancor, gold or whatever other measure of value we can all agree on. In other words, it's not the worst news in the world that the Persian Gulf countries are talking about moving away from the dollar. Even if they say they aren't.


By and Reuters

Le Monde (Paris)
October 6, 2009

Original source: Le Monde

"Gulf Arabs are planning -- along with China, Russia, Japan, and France -- to end dollar dealings for oil," the Independent announced on Tuesday, October 6, after investigations into the currency "war" in the oil markets.

According to journalist Robert Fisk, the finance ministeres and central bank governors of the countries involves have met several times to establish a basket of currencies including the yuan, the yen, the euro, gold, and a common currency of the Gulf States. These revelations confirm the intention of several world powers to turn their backs on "King Dollar." Brazil and India would also support "non-payment in dollars."

The Independent's investigation caused the greenback's value to plummet Tuesday morning, Bloomberg reports, and risks accelerating its decline vis-à-vis the euro in exchange markets that are already destabilized. Reuters, for its part, tempered the announcement by emphasizing that the desire to abandon the dollar has been seen on several previous occasions, but getting international commitment to a new exchange currency is always a perilous undertaking.

"The report is false," declared the spokesperson for the Saudi central bank. The Algerian minister of finance said that he saw no need for a new currency for oil transactions. On the currency exchanges, the dollar rebounded after the Saudi denial

Translated by Mark K. Jensen
Associate Professor of French
Department of Languages and Literatures
Pacific Lutheran University
Tacoma, WA 98447-0003
Phone: 253-535-7219
Email: This email address is being protected from spambots. You need JavaScript enabled to view it.


[Translated from Les Affaires (Paris)]

By Olivier Schmouker

Les Affaires (Paris)
October 6, 2009

Several Arab Gulf States are planning, with China, Russia, Japan, and France, to abandon the U.S. dollar in the oil exchanges.

At least this is what the Independent is saying. "Secret meetings have been held by the finance ministers and central bank governors in Russia, China, Japan, and Brazil, to work on this project, which would mean that the price of oil will no longer be quoted in dollars," the British daily writes, claiming to have this news through banking sources in Hong Kong.

What would replace the greenback? A basket of currencies including the yen, the yuan, the euro, gold, and a future common Gulf currency. In fact, in the six countries of the Gulf Cooperation Council (GCC) -- Saudi Arabia, Bahrein, Kuwait, Qatar, Oman, and the United Arab Emirates -- would like to launch a single currency in 2010, which would figure in the basket of currencies dethroning the American dollar.


The United States is said to know that these meetings are taking place, without having discovered the details, and "they are certainly going to fight this international cabal which includes allies who have been loyal up till now, like Japan and the Arab Gulf states," predicted the Independent's journalists.

Until the American dollar is abandoned on the oil exchanges, it's said that a transition currency will be used: gold, according to Chinese banking sources. This transtion would involve colossal sums: Abu Dhabi, Saudi Arabia, Kuwait, and Qatar are said to have placed in reserve for this purpose a common reserved of US$2.1bn, according to the Independent.

The markets' reaction was immediate: at the end of the day, gold set an historic record on the NYMEX, reaching $1040, up $22.

--With AFP and PC.

Translated by Mark K. Jensen
Associate Professor of French
Department of Languages and Literatures
Pacific Lutheran University
Tacoma, WA 98447-0003
Phone: 253-535-7219
Email: This email address is being protected from spambots. You need JavaScript enabled to view it.