Stateless, uncensorable and non-inflationary, bitcoin has been carved out as an international reserve currency. Any erosion of the petro dollar brings us closer to the end.
The Riyadh-Beijing axis is getting stronger
While the United States is busy pitting Europe against Russia, the Middle Kingdom is advancing its ambitions in the Middle East.
The three-day visit of Chinese President Xi Jinping to Saudi Arabia confirms the rapprochement between the Gulf countries and the multi-polar alliance embodied by BRICS.
Xi’s lavish welcome stands in stark contrast to the US president’s humiliation this summer. Joe Biden came calling for an increase in oil production so that OPEC would finally reduce it by two million barrels a day!
Conversely, a salvo of gunfire and alpha jets that painted the colors of the Chinese flag in the Riyadh sky welcomed the arrival of his Chinese counterpart, who was newly re-elected as the leader of the CCP.
His last visit was in 2016, when the Kingdom of Saudi Arabia agreed to join the New Silk Roads. This titanic project plans to connect 68 countries (4.4 billion inhabitants) by building port, rail, land, mining and energy infrastructures.
This meeting was the occasion to launch the first Sino-Arab summit. Xi met with about 30 heads of state there and signed numerous treaties. The China Energy Corp, for example, will build a sprawling 2.6 GW solar power plant in Saudi Arabia.
Even more interestingly, China will also be teaching the Saudis how to create nuclear fuel from its vast uranium resources.
The goal of course is to get closer to the nuclear bomb, like Iran, its Shiite neighbor and rival. This embryonic nuclear program was probably one of the conditions for considering the sale of Saudi oil in yuan.
Petrol Yuan?
Xi Jinping on Friday asked the leaders of the main Gulf states to sell their oil in yuan:
” China will continue to import large quantities of crude oil from Gulf Cooperation Council countries. We will increase our imports of liquefied natural gas. We will strengthen cooperation in engineering services, storage, transportation and hydrocarbon refining. And we will make full use of Shanghai’s financial markets to settle oil and gas trading in yuan.”
This statement certainly sounded like a thunderclap in Washington. But that’s the way the world is. The Chinese have long been the first trading partner of the Arabian Peninsula.
Trade between China and Saudi Arabia increased by 40% in 2021 to $88 billion. Meanwhile, trade between the US and Saudi Arabia has fallen from $76 billion in 2012 to just $29 billion last year.
It is also an unmistakable sign that the Saudis want to join BRICS+. Especially since Argentina, Turkey, Iran, Indonesia and Algeria are already on the threshold.
This is vital information as the BRICS are making no secret of their ambition to demystify global trade… As a goodwill gesture, Indonesia’s central bank recently asked importers and exporters not to use the dollar no more.
Unfortunately the emergence of a multipolar world will not be smooth sailing. Uncle Sam will not allow his monetary hegemony to go down without a fight.
Petrol-Dollar?
The United States has enjoyed exorbitant privilege since the 1970s. That is when OPEC was forced to sell its oil exclusively in dollars. Don’t miss our article on this dirty story…
Since then, many other commodities have been denominated in dollars. The greenback rules supreme in world markets. Whether oil, wheat or copper, their prices are fixed in dollars. Even tea planes or Airbus…
It follows that nations prefer to accumulate dollars in reserve. According to the IMF, the dollar represents 59% of central bank reserves. That’s $6.65 trillion. The rest is basically euro, gold and yen.
It is the amount of money that comes to finance the public debt of the United States and to protect the country from a collapse in its exchange rate. And this despite a chronically negative trade balance.
In short, the dollar’s exchange rate would be much lower if the dollar were not the international reserve currency. In other words, the Americans would be forced to balance their trade balance and tighten their belts.
It is therefore a foregone conclusion that the United States will not sit idly by if Saudi Arabia adopts the yuan.
Bitcoin to replace the Dollar smoothly?
Finally, we recall that the war in Iraq was a show of force. The purpose was to protect the petrodollar and show Europe and all the Gulf countries what it costs to threaten the imperial currency.
Oil sales will be restored in dollars immediately after the defeat of Saddam Hussein who denominated his oil in euros instead of dollars two years earlier.
All this to say that the United States maintains hundreds of military bases abroad and could put its fist on the table if challenged by OPEC.
The American Empire will not surrender its exorbitant privilege to China. It will be a war. The proxy war in Ukraine is also the sad consequence of this geopolitical conflict.
However, it could be that Washington agrees to play on equal terms by agreeing to return to gold. Except that moving gold bars around the world is much too slow and cost too much.
This is a problem that Bitcoin does not have. Sending the equivalent of millions or billions of dollars in bitcoins instantly to the other side of the world is no problem at all.
Furthermore, no country could allow the owner of such a ship or such an airline to carry gold into an embargoed country. No one can be “disconnected” from Bitcoin.
Therefore, Saudi Arabia would do well to take an interest in Bitcoin. If there’s one nation that can take a bit of volatility as they wait for bitcoin to hit the trillions, it’s this one. “Better believe it…”
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Journalist reporting on the Bitcoin revolution. My papers deal with bitcoin through geopolitical, economic and libertarian prisms.
