Posted on: Thursday, April 03, 2014
Written By:"The Elemental Economist" Jim Purnell
Zerohedge.com reports: [Spot what is missing in the just blasted headline from Bloomberg:
- IRAN, RUSSIA SAID TO SEAL $20B OIL-FOR-GOODS DEAL: REUTERS
If you said the complete absence of US Dollars anywhere in the funds flow you are correct. Which is precisely what we have been warning would happen the more the West and/or JPMorgan pushed Russia into a USD-free corner.
Once again, from our yesterday comment on the JPM Russian blockade: "what JPM may have just done is launch a preemptive strike which would have the equivalent culmination of a SWIFT blockade of Russia, the same way Iran was neutralized from the Petrodollar and was promptly forced to begin transacting in Rubles, Yuan and, of course, gold in exchange for goods and services either imported or exported. One wonders: is JPM truly that intent in preserving its "pristine" reputation of not transacting with "evil Russians", that it will gladly light the fuse that takes away Russia's choice whether or not to depart the petrodollar voluntarily, and makes it a compulsory outcome, which incidentally will merely accelerate the formalization of the Eurasian axis of China, Russia and India?"
In other words, Russia seems perfectly happy to telegraph that it is just as willing to use barter (& "heaven forbid" gold) & shortly other "regional" currencies, as it is to use the US Dollar, hardly the intended outcome of the western blockade, which appears to have just backfired & further impacted the untouchable status of the Petrodollar.
More from Reuters:
Iran & Russia have made progress towards an oil-for-goods deal sources said would be worth up to $20 billion, which would enable Tehran to boost vital energy exports in defiance of Western sanctions, people familiar with the negotiations told Reuters.
In January Reuters reported Moscow & Tehran were discussing a barter deal that would see Moscow buy up to 500,000 barrels a day of Iranian oil in exchange for Russian equipment and goods.
The White House has said such a deal would raise "serious concerns" & would be inconsistent with the nuclear talks between world powers & Iran.
A Russian source said Moscow had "prepared all documents from its side", adding that completion of a deal was awaiting agreement on what oil price to lock in.
The source said the two sides were looking at a barter arrangement that would see Iranian oil being exchanged for industrial goods including metals & food, but said there was no military equipment involved. The source added that the deal was expected to reach $15 to $20 billion in total & would be done in stages with an initial $6 billion to $8 billion tranche.
The Iranian & Russian governments declined to comment.
Two separate Iranian officials also said the deal was valued at $20 billion. One of the Iranian officials said it would involve exports of around 500,000 barrels a day for two to three years.
"Iran can swap around 300,000 barrels per day via the Caspian Sea & the rest from the (Middle East) Gulf, possibly Bandar Abbas port," one of the Iranian officials said, referring to one of Iran's top oil terminals.
"The price (under negotiation) is lower than the international oil price, but not much & there are few options. But in general, a few dollars lower than the market price."
Surely an "expert assessment" is in order:
"The deal would ease further pressure on Iran's battered energy sector & at least partially restore Iran's access to oil customers with Russian help," said Mark Dubowitz of Foundation for Defense of Democracies, a U.S. think-tank.
"If Washington can't stop this deal, it could serve as a signal to other countries that the United States won't risk major diplomatic disputes at the expense of the sanctions regime," he added.
You don't say: another epic geopolitical debacle resulting from what was originally intended to be a demonstration of strength & instead is rapidly turning out into a terminal confirmation of weakness.
Also, when did the "Foundation for Defense of Petrodollar" have the last word replaced with "Democracies"?]
Why the US, EU, UN & NATO decided to poke a stick in Putin’s eye w/ the “Ukrainian revolution” during the Olympics & trigger a cascading geopolitical crisis . . . . . I’m not really sure but it was executed with western coordination & funding. Now the dominoes are starting to fall as the fallout from “our march to spread democracy to the world” has seemingly backfired.
When you personally have a monetary issue, the decision is often made to reign in your spending & ‘tighten the belt’ to get through the rough patch that has presented itself. So if this logic is smart for the average person, maybe it would also make sense for a nation who for a half decade has been monetizing their governments debts & bailing out any campaign contributing corporation who’s profit column appears threatened? Maybe I’m foolish on this point & giving a billion dollars in aid to this hotbed of drama that stokes cold war memories is a better option than investing in your country in a time of need?
Nevertheless, why would we have the very banks who created the global monetary crisis act as if they are morally bound to refuse to facilitate the global transfer of money for Russia because they “invaded a sovereign country for no reason” when we created the reason they needed to step in & protect the very patch of land that has the majority of Russian oil exports to Europe travel through? After all, didn’t we invent the “invading sovereign countries for no reason” foreign policy? And if Russia funded a coup in Mexico & they threatened our oil exports, wouldn’t the US rightfully step in militarily & protect our nations export interest of our #1 product? Kinda looks different through that lens regardless of what the corporate media in unison reads off their scripts huh?
And now the backlash has begun at a point where the US has alienated itself long ago but now has the world looking for any excuse to go with any other global transaction option that would permit them to shield themselves from the monetary consequences of our endless money printing policies that have all but destroyed the exchange value of the USD internationally & exported the inflation to the world. What happens when the world has enough next best options to choose from & the dollar is marked ‘return to sender’? INFLATION is what happens at home as these unwanted dollars start flooding the US as the world swaps their dollars for gold & happily trades gold for goods like oil, food & energy.
The FED is ignoring the employment data now because projecting the image of stability & growth in the US economy has taken a back seat to an obviously more pressing issue that has them scrambling to get out of QE Infinity as quickly as they can regardless of whatever consequences may materialize as a result of the withdrawal of the endless liquidity. On top of that the announcement that the FED will be raising rates by year end brings a whole new issue into focus because history shows us that rising rates are very beneficial to gold as the ‘higher interest carry trades’ fall by the way side when the 0% interest rates to borrow money & put money into a 3% yielding Treasury now loses its appeal & wealth preservation becomes the focus as the cost to borrow approaches the yield of the asset itself. But why after 5 years of seemingly endless money printing & crony capitalism is there a fear driven panic to end the status quo as quickly as possible if not for the threat of an alternative option to the dollar as we continue to isolate ourselves from the rest of the world? If there was ever time a time to seek out a stabilizing asset like gold & silver bullion to offset the potential risks the future may hold I’m not sure its more clear than now. Stocks are at all time highs while the economy is shrinking in front of our eyes, the endless money printing that has created the global currency war is being abandoned with recklessness, & the threat of rising rates is looming on the horizon while China is importing almost 10 metric tons of gold EVERYDAY in 2014 in preparation for . . . . . Maybe you should consider this fact & apply it to your asset allocation strategy moving forward?
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