Start the conversation
It's now clear as day that both Russia and China are making concerted efforts to move off the petrodollar system.
I've previously written about this petrodollar phenomenon as a developing trend…..
Well now it's no longer developing, it's in active mode.
The result of this trend will roil the currency markets, and we can expect these seismic shifts to affect the U.S. dollar, and the stock market.
The changes open up profit opportunities, too, and I've found the perfect stock to benefit from the petrodollar's demise…..
Russia's Petrodollar "Attack" Is Now Transparent
First, let's talk about where we are right now, even as our currency is under siege…
Back in May I highlighted the importance of the 30-year Gazprom agreement with China to supply natural gas, valued at a colossal $400 billion.
As usual, the deal's value was quoted in U.S. dollars. But I told you to expect that, before long and thanks to a recent slew of banking agreements, payments from China would likely be made in rubles, while Chinese exports to Russia would soon be paid for in renminbi.
I also said that we needed to prepare for a seismic currency shift, given that an ever-increasing amount of trade and large transactions between China, Russia, and several of their trading partners (swap deals) are taking place in their own currencies, bypassing the U.S. dollar completely.
Well, the wait is over. It's now official.
Russia's RIA Novosti (which cited Kommersant, a national Russian politics/business paper) one of Russia's largest news agencies, has indicated that Gazprom Neft will export 80,000 tons of oil via the Eastern Siberia-Pacific Ocean pipeline (ESPO)… And will accept payment in yuan.
Kommersant said the currency change was a result of Western sanctions. In reality, this process had started much in advance of Western sanctions resulting from the Ukrainian conflict. Sanctions were a convenient excuse to expedite the whole process.
Yet Russia is now taking still more steps, with help from China, to circumvent the petrodollar with a move that will surprise you….
Russia and China Are Planning a One-Two Punch
China UnionPay (CUP) is the second-largest payment network in the world by transactions value. Only Visa is bigger.
It's a debit/credit card like any other. Although CUP is from China, it's accepted in over 140 countries, and I can tell you first hand its logo is plastered all over Western Europe.
Now Russia has turned its gaze to CUP, at least temporarily.
Thanks to American sanctions, Visa and MasterCard blocked Russian-originated transactions back in March. That prompted wealthy Russians with dollar and euro assets to repatriate their capital for fear of having their assets frozen.
In a counter-move, Russia has decided to launch the China UnionPay credit card within its own borders.
CUP expects as many as 2 million cards in Russia within a few years, while Russia's largest banks are already in the preparation and testing phase with the system.
China UnionPay is only a stop-gap measure. Russia plans are to have its own payment system up and running with two to two years.
But Russia's not stopping at non-dollar transactions or China UnionPay either.
The Society for Worldwide Interbank Financial Telecommunications (SWIFT) completes 1.8 billion transactions daily worth $6 trillion. Now Russia wants to become a full-fledged member of the system.
As a third arrow in its payment quiver, Russia is preparing to establish its own SWIFT interbank payment processing center.
Together, Russia's Central Bank, finance, and economic departments have readied a bill. Once its Central Bank is technologically ready, the bill will be introduced.
Deputy Finance Minister Alexei Moiseyev indicated they'd "…transfer all operations to internal processing inside Russia… we have prepared a bill. We have consulted with the banking industry and the Central Bank."
So there you have it. Any doubts you may have had should now be totally erased.
Intent on moving away from petrodollar domination and its dependence on the West, Russia (with abundant help from China) is rapidly establishing its own payment agreements and payment transaction/transfer systems.
There's no way to sugarcoat it: that's bad news for the dollar.
But the opposite is true for oil, where we have an inverse relationship: when the dollar goes down, oil prices rise. And this is a situation that can play right into our hands…..
These Canadian Shares Are the Key to This Play
About the Author
Peter Krauth is the Resource Specialist for Money Map Press and has contributed some of the most popular and highly regarded investing articles on Money Morning. Peter is headquartered in resource-rich Canada, but he travels around the world to dig up the very best profit opportunity, whether it's in gold, silver, oil, coal, or even potash.