petrodollar collapse 2020: The perils of US hegemony, the petrodollar and the role India could play in the emergence of the New World Order

In 2012 with the Greece-Spain sovereign debt crisis, the Indian government’s budget conditions worsened and GoI had resorted to selling dollars which devalued the rupee further to Rs 56/$ in June 2012. As banks are selling the dollar and buying the euro, the euro is appreciating steadily. China, which maintains the huge reserve of dollar accumulating about $ 1.53 trillion, has announced its intention to decrease the share of dollar in its reserves and to add more euros. The river of oil and gas dollars, which supplied the Russian economy with hard currency to buy imports and pay for external obligations, is rapidly “drying up” due to the boycott announced by the largest buyers of raw materials in the EU. The Conference ordinarily meets on the Vienna headquarters, no less than twice a year and in additional extraordinary sessions when essential.

• At the heart of the petrodollar system lies the relationship between the US and Saudi Arabia, the leading member state of the OPEC.
• OPEC usually has problem agreeing on policy choices as a result of its member countries differ broadly of their oil export capacities, production costs, reserves, geological features, population, financial growth, budgetary situations, and political circumstances.
• In a televised interview in May, Prince Mohammed said the PIF will spend at least half of the money from Aramco’s initial public offering on domestic investments.
• Such a sudden change will have impact not only on US economy but on global economy as well due to wide presence of dollar in international monetary system.

Russia achieved this feat by quietly expanding its oil and gas exports and capturing the majority of the market in Eastern and Central Europe. Europe consists of highly developed Advanced Industrial Nations requiring an exponential quantity of energy. Thus, with Europe’s limited connectivity to pipelines and absence of any potential alternative to Russian oil and gas resources, it made them more dependent on Russian supplies, thereby marginalising US energy exports to the region.

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Now the US will take the gas from Qatar through the pipeline from a much shorter route through Iraq-Syria into Turkey and Europe. The blowback of these measures taken to control the rampaging virus worldover was felt by major oil suppliers including the Gulf countries as the supply of Petrodollars dwindled. Brief comparisons between the Gulf monarchies and other oil-producing countries in the region reveal other common ground besides oil, such as culture and religion.

This, therefore, ensured that the US could simply keep printing dollars and sending them overseas until foreign central banks start to demand gold in exchange for their dollars. As regards petro-yuan or petro-dollars, any sane nation will choose petro-dollars. They are at mercy of China that will stage manage currency exchange rates by cooking up the books. The United States uses the power of petrodollars to enforce its foreign policy. And that has been one of the major reason why Dollar dominates and even a meagre instability in the US economy affects the global economy. In general, export-oriented industries recorded a decrease in revenue by 12%, but in the oil and gas sector, the decline was 4.5 times higher.

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With the oil prices at historic low and no signs of recovery in the future, Saudi will cut billions of petrodollars it used to spend to finance Islamic seminaries. The problem for the US had actually begun in 1965 when General Charles de Gaulle, President of France, who by that time, had made France a resurgent economic powerhouse through austerity programmes and had managed to build up gold reserves of the Nation. After he returned to power in 1965, he started demanding the other Nations of the world to follow France’s lead and exchange their dollars for gold in return. During 1971 war it were americans who came for the aid of pakis and not the chinese. And with the trade war going on between the US and the chinese, US is set to win it and when chinas economy collapses its milotary machine will also collapse. In addition, the fact that the EU and the U.S are the main trade and investment partners of the Arab world has amplified the impact of the health crisis in those areas on the economic performance of the MENA region.

US gas stations limited the amount of gasoline that might be distributed, closed on Sundays, and restricted the times when gasoline might be purchased, primarily based on license plate numbers. 4) The U.S. is a horrible trading partner because it will carry out economic warfare against its own trading partners (such as the Fed raising interest rates to break Britain’s bond-based pension system) while pushing transgenderism and the LGBT agenda on the world. Saudi Arabia gave billions of dollars to Islamic countries around the world, and this money was being transferred primarily to Madrasa where Maulvis propagated Wahhabi interpretation of Islam. Saudi funded Masjids and Madrasas even in European countries, and urged the Maulvis out there to teach a radical Wahhabi version of Islam. The Biden administration recently accused OPEC+ of siding with Russia and significantly cutting down the oil supply to the world. In retaliation, democratic lawmakers introduced a legislation that demands the withdrawal of essential US military hardware camped in Saudi Arabia and the United Arab Emirates .

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In the mid-1970s, in exchange for oil trade only in dollars it agreed to provide US military assistance to the Gulf nations. The US got a great assistance from Saudi monarchs in this as Saudi has been dictating terms to the OPEC nations. Evidently, Saudi Arabia is the largest exporter of crude oil in the world including to the USA.

Therefore, in such an ambiguous situation, the best option for India will be to prepare herself in as many domains as possible to be able to choose the best option prevailing at that time. The West thus, chose to design these Institutions skewed in their favour assuming that the Earth was their inheritance in spoils of war. On the other hand, the US also went ahead and announced that the war in Syria was over claiming to have wiped out ISIS. This claim of US was completely opposed to the earlier belief of the US intention to topple Assad. However, in all likelihood, it is believed that a tacit Syrian Peace Deal behind doors had taken place in Oct 2018 between major oil buyers – Germany and France, oil transporter- Turkey and supplier Russia. The likes of Exxon Mobil, Chevron, British Petroleum and Russia’s Gazprom carved up their respective routes through Anti-West Assad regime-controlled Syria and Pro-West Kurd controlled newly established the State of Rojava for their oil and gas pipelines.

The U.S. is surprised by the apparent finalisation of the transition of Saudi Arabia away from Washington and towards China, which effectively marks the end of the 1945 core agreement between the U.S. and Saudi Arabia that defined their relationship up until extremely recently. For these reasons and more, the nations of the world are set to repudiate the dollar and bring the U.S. empire to an end. Founded in 2011 by IIT-ians, VJTI-ians and Finance Professionals ­ MarketExpress is an online financial, business news, insights and research portal. MarketExpress platform brings together some of the industry’s top experts on finance, business, education with a common goal – to provide quality information, insights & analysis. Experts are constantly warning that countries such as the United States and the United Kingdom may face a recession amid the… Even today the US maintains 5 military bases in the Islamic holy land of Saudi Arabia which are the cause of much heartache among Saudi Arabian citizens – 15 out of the 19 men who were involved in the World Trade Center attacks on September 11, 2001 in New York were Saudis.

While oil’s collapse has deepened concern that Saudi Arabia will need to liquidate its Treasuries to raise cash, a more troubling worry has also emerged. The reforms could also help soak up an oversupply of units, which has left gleaming towers half-empty and seen prices drop by almost a third since 2016, according to consultancy ValuStrat’s Price Index for residential property. As governments and industries seek less-polluting alternatives to hydrocarbons, the world’s biggest crude exporter doesn’t want to cede the burgeoning hydrogen business to China, Europe or Australia and lose a potentially massive source of income. ADIA, which manages capital on behalf of the oil rich Abu Dhabi government, has focused on trimming its bloated management team, cutting expensive, long-tenured staff who have worked there for decades, said the sources, declining to be identified as the matter is not public. With the decision, Saudi Arabia joins China and Brazil in having a positive real rate. Neighboring Gulf countries including Kuwait and Qatar also didn’t follow the Fed in full.

US gasoline stations restricted the quantity of gasoline that might be allotted, closed on Sundays, and restricted the days when gasoline could possibly be purchased, based on license plate numbers. It’s been that way by design since the 1970s, when the United States worked with OPEC to ensure a steady flow of oil to the country. One can argue that the US has been printing dollars with reckless abandon because of the Great Recession in 2008 and the Covid Pandemic in 2020. However, the fact is that only less than US$ 1t had ever been printed until 2008 since its invention more than 200 years ago but is close to US$ 6t these days.

In petrodollar collapse 2020ern political thought, elections represent one of the key benchmarks for judging the legitimacy of government. The PIF said on Oct. 9 it would set aside $1.1 billion to support small- and medium-size enterprises. It’s also announced a string of domestic mega projects, such as a $2.7 billion company to invest in local entertainment—a plan that is seen both as a way to open up society and retain some of the money spent on trips by Saudis to Dubai and elsewhere.

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But these two Iraqi https://1investing.in/s in opposition to fellow OPEC founders marked a low level within the cohesion of the organization, and oil prices subsided quickly after the short-time period provide disruptions. The September 2001 Al Qaeda assaults on the US and the March 2003 US invasion of Iraq had even milder quick-term impacts on oil prices, as Saudi Arabia and different exporters again cooperated to maintain the world adequately equipped. By the time of the 2011 Libyan Civil War and Arab Spring, OPEC began issuing specific statements to counter “extreme speculation” in oil futures markets, blaming financial speculators for rising volatility beyond market fundamentals. In February 1959, as new provides have been becoming out there, the multinational oil companies unilaterally reduced their posted costs for Venezuelan and Middle Eastern crude oil by 10 percent. Both oil ministers had been angered by the worth cuts, and the two led their fellow delegates to ascertain the Maadi Pact or Gentlemen’s Agreement, calling for an “Oil Consultation Commission” of exporting nations, to which MOCs should present worth-change plans. Even after the embargo led to March 1974 following intense diplomatic activity, costs continued to rise.

The US Dollar has been the global reserve currency ever since 1944 when the Bretton Woods Agreement was signed between the major nations of the world. But much has changed since the late 1940s, India now stands as the sixth largest economy in the world and increasingly assertive of her objectives at the international stage. With indigenous defence production taking deeper roots and other export-oriented industries to include pharma, base metals, jewels, IT services dominating respective global market, India is anticipated to rise to become the third largest economy in the next few years.

​As companies struggle with slower business and authorities impose more fees on foreigners, the biggest Arab economy is losing some of its allure to expats who once flocked to a country awash with petrodollars. In 2022, tensions between the US and Saudi Arabia over issues related not only to production of oil, but also to trading of oil in US dollars has revived fears over the future of the petrodollar system. In a televised interview in May, Prince Mohammed said the PIF will spend at least half of the money from Aramco’s initial public offering on domestic investments. How much money that raises and when is in question, with the Saudis considering delaying the international portion of the sale until at least 2019, people familiar with the situation said last week. But that does not mean that anyone is going to keep huge forex reserves in Yuan, because if the Chinese Finance Czar wakes up one day and decides to devalue the Yuan to make exports cheaper – then anyone holding Chinese Yuan is screwed.

This resulted in a 2 per cent reduction in global oil supply, the biggest cut in the last two years.7 The Saudi decision was perceived by the White House and Western commentators as being coordinated with Russia, which currently sells more crude oil than Saudi Arabia. It looks that since the inception of euro, economists all around the world are speculating for the day when euro will replace the US dollar as global currency. In present days, when old champion is showing weakness against other major currencies, these speculations are popping up increasingly. But it will not be easy for euro to take lead on dollar as dollar still has strong presence in the international monetary system. Before we move on towards our assessment of fate of both currencies it is better to take a look back in time that how both currencies have progressed.

Starting in February (-29.2%), by March it reached 47.8% and became a record since the spring of 2020. Then the contraction in oil and gas revenues was explained by the fall in oil prices and the pandemic, but now the “tacit sanctions” of European countries have hit the key sector of the Russian economy. A additional complication is that faith-linked conflicts in the Middle East are recurring features of the geopolitical landscape for this oil-wealthy region. Although occasions similar to these can briefly disrupt oil supplies and elevate costs, the frequent disputes and instabilities are inclined to limit OPEC’s long-term cohesion and effectiveness. Leading up to his August 1990 Invasion of Kuwait, Iraqi President Saddam Hussein was pushing OPEC to finish overproduction and to send oil costs greater, so as to assist OPEC members financially and to speed up rebuilding from the 1980–1988 Iran–Iraq War.

By the beginning of 2019, the US became the largest producer of oil in the world. By this time, the overt and covert military spending of the US had more than doubled and was equal to the military spending of all developed Nations taken together. The US had also established 800 major Military Bases spread over 74 countries as compared to other military powers like France and Russia which had only 13 and Nine bases respectively.

The US Congress had empowered the President of the US to militarily intervene and bomb any part of the World in the war against global “Terror and Weapons of Mass Destruction”. Even though the Soviet Union had ceased to exist from the year 1991 and so was the Warsaw Pact, but strangely, NATO continued to grow from 17 members in 1990 to 29 members by 2009. While Russia was struggling to revive itself, NATO kept expanding into Eastern Europe and Baltics closer to Russian heartland deploying both conventional and nuclear-capable missile defence. From the available records with US National Security Archives at George Washington University Library declassified up to the year 2004, the strategic and tactical employment of the CIA as an instrument of power, comes out quite clear. As per the report published in Washington Post, between the year 1947 and 1991, there were 72 attempts to change those Regimes that did not toe Washington’s line.

These situations are creating difficulties for USA as further major devaluation of dollar will affect the national economy at large. It is the official currency of European Union’s Eurozone, which currently consists of 15 European countries . Its history goes back to 1990 when exchange controls were abolished, making capital movements completely liberalised in the European Economic Community with an ultimate objective to have a single currency among its member countries. After that, while passing through many phases of discussions and events euro was launched on 1 January 1999 as an accounting currency. As on 1 January 2002, euro currency notes and coins were issued in market. Euro appreciated steadily over the years and soon became the place of second most preferable reserve currency.

That meant some other country that purchased oil from the Saudi government must change its forex into U.S. dollars earlier than finishing the sale. That led the remaining OPEC international locations to comply with suit and price their oil in U.S. currency. He was referring to the famous Triffin dilemma faced by a country issuing the global reserve currency who must then target domestic monetary policy goals while simultaneously meeting the demand for the reserve currency by other countries – an impossible task. An undue concentration of sovereign reserves in any one currency brings about undesirable outcomes.