• The Demise of the Dollar

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    In the most
    profound financial change in recent Middle East history, Gulf Arabs
    are planning – along with China, Russia, Japan and France –
    to end dollar dealings for oil, moving instead to a basket of currencies
    including the Japanese yen and Chinese yuan, the euro, gold and
    a new, unified currency planned for nations in the Gulf Co-operation
    Council, including Saudi Arabia, Abu Dhabi, Kuwait and Qatar.

    Secret meetings
    have already been held by finance ministers and central bank governors
    in Russia, China, Japan and Brazil to work on the scheme, which
    will mean that oil will no longer be priced in dollars.

    The plans,
    confirmed to The Independent by both Gulf Arab and Chinese banking
    sources in Hong Kong, may help to explain the sudden rise in gold
    prices, but it also augurs an extraordinary transition from dollar
    markets within nine years.

    The Americans,
    who are aware the meetings have taken place – although they
    have not discovered the details – are sure to fight this international
    cabal which will include hitherto loyal allies Japan and the Gulf
    Arabs. Against the background to these currency meetings, Sun Bigan,
    China’s former special envoy to the Middle East, has warned there
    is a risk of deepening divisions between China and the US over influence
    and oil in the Middle East. "Bilateral quarrels and clashes
    are unavoidable," he told the Asia and Africa Review. "We
    cannot lower vigilance against hostility in the Middle East over
    energy interests and security."

    This sounds
    like a dangerous prediction of a future economic war between the
    US and China over Middle East oil – yet again turning the region’s
    conflicts into a battle for great power supremacy. China uses more
    oil incrementally than the US because its growth is less energy
    efficient. The transitional currency in the move away from dollars,
    according to Chinese banking sources, may well be gold. An indication
    of the huge amounts involved can be gained from the wealth of Abu
    Dhabi, Saudi Arabia, Kuwait and Qatar who together hold an estimated
    $2.1 trillion in dollar reserves.

    The decline
    of American economic power linked to the current global recession
    was implicitly acknowledged by the World Bank president Robert Zoellick.
    "One of the legacies of this crisis may be a recognition of
    changed economic power relations," he said in Istanbul ahead
    of meetings this week of the IMF and World Bank. But it is China’s
    extraordinary new financial power – along with past anger among
    oil-producing and oil-consuming nations at America’s power to interfere
    in the international financial system – which has prompted
    the latest discussions involving the Gulf states.

    Brazil has
    shown interest in collaborating in non-dollar oil payments, along
    with India. Indeed, China appears to be the most enthusiastic of
    all the financial powers involved, not least because of its enormous
    trade with the Middle East.

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    12, 2010

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