U.S. Dollar in for a Scare as Russia Begins Abandonment Procedures

[wizard1]

Some staggering news erupts from Russia, but doesn't even make your evening local news in the U.S.

Thursday, June 12, 2014
 

Just when you may have thought that the days of any real threat to the value of the U.S. dollar were far into the unforeseeable future, the Russians go and do this - they are actually making a move against the petrodollar. It appears that they are quite serious about their de-dollarization strategy, in which they will begin finding, and/or implementing, a solution for getting rid of the U.S dollar in Russian currency exports.

 

The largest natural gas producer on the planet, Gazprom, has signed agreements with some of their biggest customers to switch payments for natural gas from U.S. dollars to the currency's arch nemesis: the euros. Keep in mind, however, that Gazprom would never have done this without the full approval of the Russian government, which holds a majority stake in Gazprom.

 

There hasn't been a single word about this from the big mainstream news networks in the United States, but you can bet that this is nonetheless huge. When you are talking about Gazprom, you are talking about a company that is absolutely gigantic. It's one of the largest companies in the entire world and it makes up 8% of Russian GDP alone. It holds 18% of the natural gas reserves of the entire planet and it is also a very large oil producer. In other words, for Gazprom to make a move like this is extremely significant.

 

When Barack Obama decided to slap some meaningless economic sanctions on Russia a while back, he probably figured that the world would forget about them after a few news cycles. But the Russians don't forget, it seems, and they certainly do not forgive.

 

At this point, by their actions, the Russians are declaratively turning their backs on the United States, and thus the U.S. dollar by proxy. Although it hasn't made any headlines, what Gazprom is now doing has the potential to really shake up the global financial landscape. The following is an excerpt from a news report by the ITAR-TASS news agency…

 

Gazprom Neft had signed additional agreements with consumers on a possible switch from dollars to euros for payments under contracts, the oil company's head Alexander Dyukov told a press conference. 

"Additional agreements of Gazprom Neft on the possibility to switch contracts from dollars to euros are signed. With Belarus, payments in roubles are agreed on," he said. Dyukov said nine of ten consumers had agreed to switch to euros.

 

It gets worse. Gazprom is not the only big company in Russia that is moving away from the U.S. dollar.

According to RT, other large Russian corporations are moving to other currencies as well as Russia begins settling more contracts in Asian currencies, especially the yuan, in order to lessen its dependence on the dollar market, and because of Western-led sanctions that could freeze funds at any moment.

"Over the last few weeks there has been a significant interest in the market from large Russian corporations to start using various products in renminbi and other Asian currencies, and to set up accounts in Asian locations," according to Pavel Teplukhin, head of Deutsche Bank in Russia.

 

Diversifying trade accounts from dollars to the Chinese yuan and other Asian currencies such as the Hong Kong dollar and Singapore dollar has been a part of Russia's pivot towards Asia as tension with Europe and the U.S. remain strained over Russia's action in Ukraine. And according to Zero Hedge, "expanding the use of non-dollar currencies" is one of the main things that major Russian banks are working on RIGHT NOW.

 

Andrei Kostin, chief executive of state bank VTB, said that expanding the use of non-dollar currencies was one of the bank's "main tasks". "Given the extent of our bilateral trade with China, developing the use of settlements in roubles and yuan [renminbi] is a priority on the agenda, and so we are working on it now," he told Russia's President Vladimir Putin during a briefing. "Since May, we have been carrying out this work."

 

"There is nothing wrong with Russia trying to reduce its dependency on the dollar, actually it is an entirely reasonable thing to do," said the Russia head of another large European bank. He added that Russia's large exposure to the dollar subjects it to more market volatility in times of crisis.

 

So it would seem that the entire country is undergoing a major financial conversion. Personally I think this should be headline news across ALL financial media outlets. Meanwhile, Russians have been pulling money out of U.S. banks at an unprecedented pace. In March, without waiting for the sanction spiral to kick in, Russians yanked their dinero out of U.S. banks. Deposits by Russians in U.S. banks suddenly plunged from $21.6 billion to $8.4 billion; that is to say, they pulled out 61% of their deposits in just one month! Maybe they learned their lesson in Cyprus the hard way: get your money out while you still can before it gets confiscated.

 

For those that don't think that all of this could hurt the U.S. economy or the U.S. financial system, you really need to understand that the U.S. economic system is extremely dependent on the financial behavior of the rest of the globe. Because nearly everyone else around the rest of the planet uses our currency to trade with one another, that keeps the value of the U.S. dollar artificially high and it keeps our borrowing costs artificially low. Heck it's probably why all of our fiat printing doesn't seem to be making a direct dent in everyday consumer expenditures in the U.S.

 

As Russia abandons the U.S. dollar there is no doubt that this will hurt, but if other nations start following suit, then that we could see a financial avalanche of sorts. Again, however, the effects won't be felt right away, so don't expect this to cause financial disaster next week or next month. At the very least, however, this is definitely another element in the "perfect storm" that is starting to brew for the U.S. economy. While we may be living in a temporary bubble of false stability for a few years, the long-term outlook continues to get much worse.

 

So what can you do about this NOW? Keep up those gold and silver purchases of course. Every single ounce you obtain of the precious metals commodities is just that much more safety against the next impending bubble burst within the U.S. economy - courtesy of her Fed shenanigans.

 

Be safe, be wealthy and above all else, be happy.

 

- Mitch

 

Sponsored by Leland National Gold Exchange

 

 

[dontlop]

Makes ya want to short the Russian rupil

Ya just know Russia is going to take a nose dive if they proceed

[Maggie123]

Thank You Wizard... Good Article.

 

He is right... we won't be hearing this on the evening neuz.