Last week, Venezuela announced it would develop a national cryptocurrency backed by its oil reserves, the Petro. Now there is a report that Russia is considering the same thing. Iran will likely follow suit.
As of right now this is just a rumor, but it makes some sense. So, let’s treat this rumor as fact for the sake of argument and see where it leads us.
The U.S. continues to sanction and threaten all of these countries for daring to challenge the global status quo. There is no denying this. And so much of what we see in the geopolitical headlines are knock-on effects of this challenge.
The Geopolitical “Why”
From the Middle East to North Korea, the Dutch changing their laws to block Nordstream 2 to the Saudis breaking off relations with Qatar, everything you read about in the news is a move on the geopolitical “Go” board.
Because at the heart of this is the petrodollar. Contrary to what many believe, the petrodollar is not the source of the U.S. dollar’s power around the world, but rather the U.S.’s main fulcrum by which to keep competition out of the markets.
It is a secondary effect of the dollar’s dominance in global finance today. But it is not the main driver. Financial market are simply too big relative to the size any one commodity market for it to be the fulcrum on which everything hinges.
It was that way in the past. But it is not now. That said, however, getting out from underneath the petrodollar gives a country independence to begin building financial architecture that can be levered up over time to threaten the institutional control it helped create.
U.S. foreign policy defends the petrodollar along with other systems in place – the IMF, the World Bank, SWIFT, LIBOR and the central banks themselves – to maintain its control.
The main oil producers, however, can escape this control simply by selling their oil in currencies other than the U.S. dollar. That’s not enough to dethrone the dollar, but, like I just said, it is where the process has to start.
Therefore, any and all means must be employed to defend the dollar empire by keeping everyone inside that system. So, it looks like the petrodollar is all-important, but only in the long-run. In the short run, monetary policy, diplomacy and political stability are far more powerful actors on the system.
Source/More: Oil Producers Turning to Crypto to Solve Sanctions Problems | Gold Goats ‘n Guns