THE DECLINE OF THE PETRODOLLAR? IRAN AND INDIA SETTLE IN RUPEES: BUT ...January 9, 2016
A couple of years ago you might recall that the world watched as India and Iran agreed to settle some of their payments in Indian rupees rather than dollars. It was, I suggested, a symbolic act signaling more to come. Well, in this article shared by Mr. D T, it just came:
Note that the article is clear as to what is going on: trade between the two nations, which had been settled in part in rupees, is now going to be conducted bi-laterally entirely in rupees, do not pass go, no longer going to the Federal Reserve jail:
Iran and India have announced that they intend to settle all oustanding crude oil payments in rupees, as part of a joint strategy to dump the dollar and trade instead in national currencies. The Indian Express reports:
Ditching the dollar, Iran and India have agreed to settle all outstanding crude oil dues in rupees in preparation to future trade in their national currencies.
In other words(and reading between the lines a bit), the prior arrangement whereby some oil payments were settled in rupees worked well enough for both parties to agree to a total abandonment of the dollar, at least with respect to oil payments. And as the article also notes, such arrangements have geopolitical consequences:
This is truly a bold move by Iran, a country literally surrounded by American military bases. We shouldn't forget what happened to Iraq after it announced that it was dumping the dollar.
The difference, of course, is that Iran has a little friend called "Russia".
There's more going on here than just a message from Russia, and in my high octane speculation of the day, I want to suggest that Russia's message isn't a message, it's a statement of geopolitical fact and principle. The message, on the surface is, "Don't try this(i.e., going off the dollar in international trade) at home, on your own, without adult(i.e., great power) supervision." Beneath that messages there is a more disturbing principle emerging, one fraught with geopolitical hazards. Perhaps it is better to call it a pattern, which last weeks executions in Saudi Arabia, and the growing tensions between that country and Iran, underscore. Thhis pattern is the alignment of the west, via the USA, with Suni Islam via its extremist proxies in Riyadh, and for the BRICSA bloc to align itself with Shia Islam, via a regime with its own form of barbarity in Tehran. The pattern that is emerging is therefore a disturbing one.
Think of it in pre-World War One terms to some extent, with the Balkans in Europe, and Catholic Austria-Hungary determined to eradicate Orthodox Serbia, which was, of course, backed by Orthodox Russia. Of course, more was involved, at the level of high politics in Vienna and St. Petersburg, than just religion. But on the ground, in Zagreb or Sarajevo or Belgrade, it was about culture and its religious underpinnings. That world came crashing down, of course, when Gavrillo Prinzip and his co-conspirators successfully assassinated the heir apparent of the Dual Monarchy, the Archduke Franz Ferdinand. As we know, the event was seized upon by Vienna - with a little prompting from Germany - to send Serbia an ultimatum which it could not accede to. Austria mobilized, and that act, of course, was the act that touched off World War One, as the rest of the great powers mobilized. The bloodletting that followed - and it's also worth noting that this year, 2016, is the 100th anniversay of two of the bloodiest(and stupidest) battles in history, Verdun, and The Somme - remade Europe. And we are still trying to resolve the problems left by World War One.
Similarly, the current great power backing within the Islamic world aligns on clearly discernible cultural-religious lines: the West-Suni and East-Shia "blocs" so to speak, and I submit this alignment, in connection with the intertwined economic relationships, is a powderkeg waiting for a Sarajevo event. And lest that "Sarajevo" event seem too unlikely, one need only note the protests and acts that have followed Saudi Arabia's execution of a Shia cleric: embassies between Riyadh and Tehran are now closed. In this context, note also that the article states that Iran is considering closer ties with the BRICSA bloc.
As I noted in last Thursday's New and Views, the situation is made more dangerous by the fact that there is significant factional division within the West and the USA regarding Middle East policy. THe old adage, prior to World War One, heard in Berlin and St. Petersburg, was that Germany and Russia should never allow policy to be driven by their less powerful neighbors in Vienna and Belgrade. Similarly, it is time for Washington, Moscow, Paris, Beijing and Berlin to recognize that policy should not be driven by Riyadh or Tehran.
See you on the flip side...