Bilateral Trade & Cooperation In A “De-Dollarising” World: Russia & China Take Further Steps Towards Gold Denominated Transactions
Today let’s explore some recent examples of the broad spectrum of cooperation between Russia and China and then discuss how Russian state owned Sberbank is contributing towards de-dollarised gold trade.
Good morning Steemit. Please find below my article written today for www.ainsliebullion.com.au. See this post for context. Content hosted at
https://www.ainsliebullion.com.au/BullionNews.aspx
It’s no secret that Chinese President Xi Jinping and Russian President Vladimir Putin are two of the strongest beacons of political and economic cooperation visible in today’s geopolitical landscape. They admit it themselves. Only two weeks ago, Xi Jinping stated during his Russian visit that bilateral relations between the two nations “are now the best ever”.
The following picture of the two leaders at the BRICS summit of 2015 courtesy of kremlin.ru personifies the warm relationship between the two countries.
Some recent examples of this warm relationship include the joint statement of July 4th dealing with the Korean Peninsula issue; interestingly the first statement released under the name of both Foreign Ministries in a decade. There was additionally a subsequent joint statement on a broad range of international issues including terrorism, trade and weapons of mass destruction.
Even more interesting is the earlier Chinese Defence Ministry statement of June 29, confirming the signing of a military cooperation roadmap between the two nations extending out to 2020.
Importantly, Russia-China cooperation extends beyond the political and military spheres as we’ll discover. Significant efforts towards trade settled in Yuan have been made in what Live Trading News is calling a “first step towards an even more ambitious plan, using gold to make transactions”.
China is one of the world’s top importers of Crude Oil and Russia is neatly one of the world’s top exporters. The two market participants have been reported as taking steps to settle payments for this commodity in terms outside of the US dollar.
Journalist and economic researcher Frederick Engdahl writes that “in 2014 Russia and China signed two mammoth 30-year contracts for Russian gas to China. The contracts specified that the exchange would be done in Yuan and Russian Rubles, not in dollars. That was the beginning of an accelerating process of de-dollarization that is underway today”.
Furthermore, according to Paul Ebeling of Live Trading News, “when Russia and China agreed on their bi-lateral pipeline deal, China wished to, and did, pay for the pipeline with RMB Yuan treasury bonds, and then later for Russian Crude Oil in RMB Yuan.” Paul goes on to say that “the profits are then taken back to the Shanghai Gold Exchange to buy Gold with RMB Yuan-denominated gold futures contracts.”
This idea is supported by comments made by deputy head of the Russian Central Bank Sergey Shvetsov on a visit to China in 2016, stating that the two nations have intentions to facilitate more transactions in gold and in March of this year, the Russian Central Bank opened its first overseas office in Beijing as an early step in phasing in a gold-backed standard of trade.
To the point of this article, the latest chapter in this evolving story comes from the Moscow based state owned banking and financial services company Sberbank (the largest bank in Russia & the third largest in Europe) which has now announced that it has begun trading in gold on the Shanghai Gold Exchange via its Swiss subsidiary.
According to a Reuters article published one week ago, “Sberbank was granted international membership of the Shanghai exchange in September last year and in July completed a pilot transaction with 200 kg of gold kilobars sold to local financial institutions, the bank said”. Notably, VTB (Russia’s second largest bank) is a member of the Shanghai Gold Exchange also.
Paul Ebeling provided a succinct summary of the development yesterday by saying that “Russia and China are creating a new paradigm for the world economy and paving the way for a global de-dollarization.” What is becoming increasingly clear through the formation of the SGE (something we’ve followed since inception) and beyond is that China and Russia as two of the world’s most active accumulators of gold have every intention of seeing its monetary use globally expanded.
Here it is. I knew that Russia and China had been talking about trading crude in something other than dollars for nearly a decade, and now it's coming to fruition. More interesting still, China is moving toward a gold-backed currency. All of this doesn't bode well for the dollar, whose only source of backing is its current status as a world reserve currency. Unfortunately, if China and Russia start trading in something else, so will others, and the only option left to the United States government to keep the dollar from collapsing is military force. Really and truly, that's all that's propping it up now.
I see that as being quite a possible end state. History is littered with failing empires choosing war as their last desperate attempts to hold on to fading power evaporate
When the value of USD collapses, world financial foundations will shudder, and "the elites" will be ready to introduce SDRs to save the day.
Watch out for the SDR introduction. Rule Of Law will temporarily be bypassed in the name of resolving the crisis. Never waste a good crisis!
SDRs are meant to help "the elites", rest of the proletariat will get screwed in the deal.
I know that Jim Rickards it's a big supporter of the SDR idea. I tend to agree with the numerous commentators who suggest that a failing currency is not solved by a collection of failing currencies. We shall see how it plays out. Suspension of Rule Of Law is more than possible as you say.
Exactly. I subscribed to Jim's rag, and he pushes SDRs on regular basis.
Overall I'm not that impressed with his service. Seems that it tends towards the hysterical and over the top end of world is near - with a specific date three weeks in the future.
Like a broken clock that is right two times per day, Jim may eventually be right.
What are your thoughts on Jim's commentary?
STEEM On!!
Hi @davebrewer. Jim is a little unique. For someone so aligned with the "death of money" concept he seems very well connected with the current system including his time spent wargaming with the pentagon. He seems dispassionate and considered but he does have, as you say, a rag and books to sell so urgency is in his favour.
I guess I consider him a seemingly well educated voice that I include in the chorus of opinions that I use to keep informed.
Thanks for your input!
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Tweeted out by #thealliance
Thanks @enginewitty. I've tagged my article this morning with #thealliance for the 1st time!
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Russia And China is controling the world economy. A new era will happen after their deals and we will see new rules regarding the trading and international business.
If you don't mind, have a look at my daily Gold analysis
https://steemit.com/gold/@ohamdache/gold-needs-positive-determination-analysis-20-07-2017
Thanks for the input @ohamdache.