Russia Is Getting Around Sanctions — and Possibly Damaging the U.S. Dollar — With a Gigantic Chinese Gas Deal

Russia and China are getting cozier, and it could spell bad news for the West. ✧ Bloomberg reported Monday that the two powers had signed a second energy deal, one that was nearly as large as the $400 billion deal Russia and China reached earlier this year. ✧ The accord came as President Barack Obama arrived in Beijing for the Asia-Pacific Economic Cooperation summit, and some are speculating that the deal is part of a concerted effort by Russia and China to undermine the strength of the U.S. dollar and its role as an international currency.

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The demise of the dollar

THE INDEPENDENT (UK), 10/6/2009 by Robert Fisk *Hat tip: Glenn Beck) - In a graphic illustration of the new world order, Arab states have launched secret moves with China, Russia and France to stop using the US currency for oil trading. ∴ 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. Read more at The Independent... Read More......

Geithner 'open' to China proposal

POLITICO, 3/25/2009, Ben Smith's Blog - Geithner, at the Council on Foreign Relations, said the U.S. is "open" to a headline-grabbing proposal by the governor of the China's central bank, which was widely reported as being a call for a new global currency to replace the dollar, but which Geithner described as more modest and "evolutionary."

"I haven’t read the governor’s proposal. He’s a very thoughtful, very careful distinguished central banker. I generally find him sensible on every issue," Geithner said, saying that however his interpretation of the proposal was to increase the use of International Monetary Fund's special drawing rights -- shares in the body held by its members -- not creating a new currency in the literal sense.

"We’re actually quite open to that suggestion – you should see it as rather evolutionary rather building on the current architecture rather than moving us to global monetary union," he said.

"The only thing concrete I saw was expanding the use of the [special drawing rights]," Geithner said. "Anything he’s thinking about deserves some consideration."

The continued use of the dollar as a reserve currency, he added, "depends..on how effective we are in the United States...at getting our fiscal system back to the point where people judge it as sustainable over time."

President Obama flatly rejected the notion of a new global currency at last night's press conference.

UPDATE: Evidently sensing a gaffe, moderator Roger Altman told Geithner that it would be "useful" to return to the question, and asked if he foresaw a change in the dollar's centrality.

"I do not," Geithner said, adding several forceful promises, including, "We will do what's necessary to say we're sustaining confidence in our financial markets." Read More......