People Still Lose The Sight ...

 ... of the issue. No, it doesn't have to be in the US Dollars. 

The ONLY dominating reason for the primacy of the US Dollar (aka Petrodollar) in the hydrocarbons trade was not some magical financial BS, albeit not without it, no--the main reason was a perception that the US CAN enforce the use of a US Dollar by means of its grossly exaggerated military power. Period, everything else was secondary. Now, suddenly, US has been exposed as a military paper tiger and the world took a note. Can US enforce anything with China? Of course not, not to mention the gargantuan scale and diversification of Chinese economy which dwarfs that of the US. Can the US enforce anything against Russia? Well, unlike US military academies and Pentagon, military people around the world actually DO study real military science and operations. They also study REAL military history and they know the score, especially against the background of SMO. Soooo .... ?

You get the picture, right? The US zenith as global economic power is over, if you doubt it--go to Walmart or COSTCO. The main issue now is how to preserve remaining American industrial capacity and expertise. Expansion? Seriously? Military-wise, you all know by now what it all turned out to be--a simulacrum, a projection by Hollywood primarily and by Wehrmacht. US military is obsessed with Wehrmacht as happens with impressionable and obsessive child who endows some adult person with qualities this child desperately wants to posses, not understanding that this adult is just average and lacks those qualities. It is called projection. Read it, read it attentively--it implicitly answers the question why Sarah Paine is "moron with Ph.D." and why the US military is primarily a figment of imagination of people like her. I speak about it in my video today and about how Epistemic Closure looks like. Here is a simpler explanation:

The term "epistemic closure" has been used in an unrelated sense in American political debate to refer to the claim that political belief systems can be closed systems of deduction, unaffected by empirical evidence. This use of the term was popularized by libertarian blogger and commentator Julian Sanchez in 2010 as an extreme form of confirmation bias.

Emphasis on empirical evidence. That is why the US lost all of its wars and lost its grossly exaggerated status as a preeminent global power. 

What The Collapse Looks Like...

 ... on the example of Russian-Iranian financial relations. 

DUBAI, United Arab Emirates (AP) — Iran and Russia have taken a key step toward linking their banking systems in a move that further boosts their cooperation in the face of Western sanctions, an Iranian official said. At a signing ceremony on Sunday, Mohsen Karami, the deputy central bank governor, said banks in the two countries had connected their messaging networks following agreements reached over the past year, according to the state-run IRNA news agency. It was not clear whether those links would allow for the transfer of funds, and services were not yet available to bank customers. Karami said 100 banks in 13 other countries were connected to the network, without naming them.

This was a week ago. Now it is a DONE deal. Both systems are linked as Ria Reports and ramifications are global:

"Мы соединили друг с другом системы передачи (финансовых - ред.) сообщений двух стран. Это значит, что банкам двух стран больше не нужна Швейцария для связи друг с другом и коммерческие банки обоих государств могут устанавливать друг с другом посреднические отношения. Экспортер может выставить российской стороне счет в риалах и получить по нему деньги от российских банков в Иране", - приводит слова Карими агентство Fars. Заместитель главы ЦБ Ирана также подчеркнул, что экспортеры обеих стран могут осуществлять сделки в своих национальных валютах. Днем ранее член исполнительного совета Фонда национального развития Ирана Хосейн Айвазлу заявил, что фонды национального благосостояния России и Ирана планируют создать совместные инвестиционные комитеты для реализации различных проектов в нефтегазовой, нефтехимической, фармацевтической и ряде других сфер. 

Translation: "We have connected the transmission systems of (financial - ed.) messages of the two countries with each other. This means that the banks of the two countries no longer need Switzerland to communicate with each other and commercial banks of both countries can establish intermediary relations with each other. The exporter can set the Russian side an account in rials and receive money from it from Russian banks in Iran,” Fars agency quotes Karimi as saying. The deputy head of the Iranian Central Bank also emphasized that exporters of both countries can carry out transactions in their national currencies. A day earlier, Hossein Ayvazlu, a member of the executive board of the National Development Fund of Iran, said that the national wealth funds of Russia and Iran plan to create joint investment committees to implement various projects in the oil and gas, petrochemical, pharmaceutical and a number of other areas.

This is the end of Petrodollar and with it America's "exorbitant privilege". But then again, since 1980s US Dollars was supported by... pretty much nothing other than mythology left from US industrial capacity of 1940-1970s and some serious rewriting of military history and military art to support the bluff of "the finest fighting force in history". The bluff has been called and the revealed reality is rather pitiful. Remarkably, though, at this stage both the United States and Russia would rather see Europe weak and lacking any ambitions. There is a logical explanation for this on both sides, but if the United States preserves itself as a country and sees some new crop of statesmen emerging, Russia will talk to the US. With Europe--no.

But now, it is all up to respective central banks in Russia and Iran how to settle accounts and nobody cares what Washington says. The trend not only continues but accelerates, and Russia and China settle accounts in Rubles and Yuans, which are supported by immense industrial capacity of China and immense Russia's resources and... the finest fighting force in history. I wonder why Lloyd Austin and Pentagon didn't even bother with informing the White House about Secretary of Defense hospitalization--this is a WOWser! Are these the signs of a start of decomposing of American governance as such? 

Oh, Boy, Oh, Boy!

Just when you think that you repeated that USD and US stock market papers are just virtual "values" which are "worth"... well, let's leave at that for now, enough times to drive point home, news come in which in these strange times take it to eleven. From yesterday (in Russian):

Правительство России разрешило инвестировать средства Фонда национального благосостояния (ФНБ) в национальную валюту и гособлигации Китая.

Translation:  Government of Russia allowed to invest resources of the Fund of National Wealth (FNB) into national currency and state obligations of China.

This is exactly what many of us here discussed very recently, and that means acceleration of the removal of the USD as one of many (yes, Pound Sterling, Euros, Swiss Franks are also there) cash (I stress it--cash, not some BS paper) from Russia's main piggy bank. That also shines a light on the long-term policy of growth of trade between China and Russia and that means, among many other things, dedollarization of the oil trade. Reputable "establishment" Gazeta Ru then proceeds to make this astonishing statement:

Доля европейской валюты в отечественном экспорте в КНР за год выросла с 12% до 45,6%. При этом импорт китайских товаров и услуг в Россию почти на 25% оплачивается в «других валютах». Вероятнее всего, это и есть юани. 

Translation: The share of European currency in domestic (Russia's) export to China grew in one year from 12% to 45.6%. Meanwhile, almost 25% of import of Chinese goods and services in being paid for almost 25%  in "other currencies", which, most likely are Yuans. 

This is what drives many people in the US (like yesterday's Paul Brandus) totally desperate and butt-hurt, because removal of USD in mutual payments between geopolitical players who matter IS the end of the petrodollar. It is a very practical end, without much fanfare--just normal everyday economic activity which is ongoing without employing USD and creating a financial fortress and common Eurasian market whose actual size dwarfs US economy even when this economy is valued by Wall Street  fraudst.... pardon me, exceptionalists. Ah, yes, about exceptionalism. Daniel Larison published today a good piece related to Andrew Bacevich's latest article:  

It Took COVID To Expose the Fraud of ‘American Exceptionalism.’ Our leaders were so preoccupied with remaking the world they failed to see that our country was falling apart around them.

Well, I have a minor quibble with this title, because this fraud was exposed way before any COVID was present. In fact, I launched this blog in 2014 to do precisely this, prior to that I formed opinion on this fraud years before. As I state ad nauseam, American exceptionalism is a self-replicating delusion which is organic to the US body-politic as a main prerequisite of achieving anything on the way to power and money. It is also a main driver behind degeneration of American political and intellectual elites. As Larison observes: 

The more that U.S. policies have proved “American exceptionalism” to be a pernicious myth at odds with reality, the more we have heard the phrase used to defend those policies. Republican hawks began the decade by accusing Obama of not believing in this “exceptionalism,” and some Democratic hawks closed it out by “reclaiming” the idea on behalf of their own discredited foreign policy vision. There may be differences in emphasis between the two camps, but there is a consensus that the U.S. has special rights and privileges that other nations cannot have. That has translated into waging unnecessary wars, assuming excessive overseas burdens, and trampling on the rights of other states, and all the while congratulating ourselves on how virtuous we are for doing all of it.

As the recent events of the 2020 have demonstrated so dramatically--to have some "special rights and privileges" one has to perform across the board, from economy, to military to culture, to society. And, I mean, of course, in real terms not by cooking books, declaring defeats victories and praising social illnesses as achievements. The world is not impressed anymore, not to mention this ever present fact that, as I wrote in my latest book:

Today, the same titanic battle for life on Earth is being waged globally for a new, better, freer, more just and more peaceful global order to emerge. This struggle is not for glory and the sword for forestalling evil has been forged. 

But it will be ultimately up to Americans and America's internal struggles to determine if, she can be, as Larison observes:

American exceptionalism has been the story that our leaders told us to excuse their neglect of America. It is a flattering story, but ultimately it is a vain one that distracts us from protecting our own country and people. We would do well if we put away this boastful fantasy and learned how to live like a normal nation.

One can only hope.      

Basic Arithmetic.

$250,000 x number of days. Say, one month of renting such a storage will cost you $250,000 x 30= $7,500,00. Boy, I am in the wrong business, can I get myself a tanker to rent out? There you go, everything you need to know about current state of the oil war and availability of the oil storage in the United States. 

Daily fluctuations of plus-minus 5-7% of the oil price mean absolutely nothing because price corridor is visible and, most likely, will stay more or less stable for months to come. This hurts, so much so that some cretin came up today with this.  

U.S. companies may go bankrupt, but Putin and MBS need petrodollars to keep their citizens from rioting

Paul Brandus, who wrote this butt-hurt drivel has an "impressive" by Western "standards" background, and you guessed it right--in journalism. American journalism, I stress, no less. And, of course, Brandus has it exactly backwards when he bundles Saudi Arabia and Russia together, especially when stating a deliberate lies that Russia needs "petrodollar". It is Saudi Arabia which needs it, Russia doesn't need it at all. In fact, as already has been stated not for once, and even this loser Brandus admits it:

If the Russians were out to inflict pain on the U.S. oil patch, they’ve succeeded. But what happens over the long term? If Moscow thinks they’re going to put the Americans out of business, they’d better think again.

The issue here is not "inflicting" pain on US "oil patch"--at issue for Russia here is what to do with a gigantic bubble of financial trash, aka US Dollar and US T-bills, in the nearest future since once this bubble begins to deflate, the issue of petrodollar, which is being obliterated as I type this, will be of secondary importance. This is happening precisely because Russia, in a long run, doesn't need petrodollar and views it as a main driver behind a financial catastrophe which is in progress. Russia and China, as an example, long ago, have no problem with Rubles and Yuan oil trade.

China and Russia are actively reducing dependence on the dollar in bilateral trade. In October 2017, Beijing launched a payment system for transactions in yuan and Russian rubles. This means that settlements for Russian oil deliveries to China, which have reached 60 million tons per year, can be done without using the dollar. After Monday's launch of the yuan-backed oil futures in Shanghai, there have been negotiation between Russia and China on mutual promotion of oil futures in national currencies, RIA Novosti reported. In 2016, the St. Petersburg exchange in Russia launched Urals oil futures in the Russian ruble, and support from China could prop up Russian crude futures.

But, of course, Brandus, being a journo, doesn't read news which he doesn't like. That is why he doesn't get it, that specifically for Russia "killing" US shale is a secondary aim, not to speak of oil market being artificially "elevated" precisely to keep shale oil alive. In other words, there was no real economic sense in propping up inherently economically senseless US shale oil by pouring billions of nonreturnable loans into it. And then, of course, there is this "power element" which goes missing in Brandus' moan, because Saudis are expendable in this big geopolitical transformation and nobody would cry if this backward shithole of a country disintegrates tomorrow, Russia is a completely different player--the only country which can wipe the United States off the map, and which has excellent real industry and real economy which even such radically pro-Western neo-liberal fundamentalists as Kudrin begin to believe in (in Russian).  

Remarkably, it is precisely US client state, Saudi Arabia, the pillar on which petrodollar rests, which is most interested in killing US shale oil. Russia here is just for the ride, doing what any sensible strategist would do--use someone's efforts, in this particular case by bat shit crazy MBS to improve own position. An additional benefit, so to speak, easily gained through the effort of others. In the end, Russia doesn't operate in tankers on the scale of Saudis: 

Fleet Of 28 Saudi Oil Tankers Could Send U.S. Oil Prices Crashing In May

So my suggestion to Brandus is to calm down and start learning about how real geoeconomics, geopolitics and power balance form and work, before expressing his opinions on any Russia's topic because it is the only country which realistically holds world from sliding into a global war. Especially when one operates with such numbers, which even 4 months ago would have been inconceivable, but then again--I warned, the time of real valuation of economy is coming:

Second quarter GDP being down 45% is one of the more bearish predictions on the Street. But it could prove to be on the mark judging by the lackluster read on first quarter GDP that only reflects a small sampling of the coronavirus’ effects on households and businesses.   

Does Mr. Brandus even know when such numbers happened before? Right, before World War Two. But that would require at least some brief acquaintance with the nature of conflict and warfare. So, no matter what Brandus and his ilk write on the issue, they will never grasp a full picture of the current events and they better pray that these events remain only in the realm of economic conflict without spilling into the realm of a practical military confrontation, which is far closer than Mr.Brandus can ever wrap his brain around. Especially when proper valuation of the US economy completes and we all will see the actual scale of devastation inflicted upon majority of Americans as a result of mindless and criminal robbery by the American financial class.

Tangibles, Yet Again.

A little piece of news today. 

At a time of weak economic growth and increased market volatility, analysts are getting more bullish on gold. According to Bank of America, the precious metal is headed 78 percent higher, to hit $3,000 per ounce in 18 months.“As economic output contracts sharply, fiscal outlays surge, and central bank balance sheets double, fiat currencies could come under pressure. And investors will aim for gold,” the bank’s analysts said, adding that the US Federal Reserve has provided enough momentum to propel investment demand and prices higher. They have warned that the Federal Reserve’s balance sheet as a percentage of GDP could rise 20 percent to 40 percent this year. They’ve also pointed out that the Fed “Can’t print gold.”

You gotta love this fancy BS "financial" lingo: "momentum", "economic output", "investment demand". What a load of a contrived BS. To put it in simpler words--paper, from dollars to all kinds of "paper gold" (certificates, not physical gold) and stocks are worthless because they are.... well, papers which merely reflect the mood of moneyed class, which, while being moneyed, is not very bright, to put it mildly, and believes in all kinds of fairy tales about "financial markets". But once crapola begins to hit the fan in earnest one needs to "hide" whatever "investment"--yeah, let's call greed and speculation that--one has accumulated in something which will not be burned, literally and figuratively, in the furnace of financial voodoo going off the ritual script completely. 

Now, The Donald in a futile attempts to keep his "promise" to resurrect a corpse of a deceased US shale oil, and reading this fresh news:

(Bloomberg) -- An historic crash in crude prices is driving U.S. shale into full-on retreat with operators halting new drilling and shutting in old wells, moves that could cut output by 20% for the world’s biggest producer of oil and leave thousands of workers unemployed. For shale companies, the price of West Texas Intermediate crude went from hunker-down-and-ride-it-out mode to crisis mode in just a few days, with many now unsure whether there will even be a market for their oil. Some 1.75 million barrels a day is at immediate risk of shutting down while the number of new wells being brought online is forecast to plunge almost 90% by the end of the year, according to IHS Markit Ltd.

Decided to employ his old (and only) trick in an attempt to "raise the price" and ordered:

WASHINGTON (AP) — President Donald Trump said Wednesday that he has ordered the Navy to “shoot down and destroy” any Iranian gunboats that harass U.S. ships, a directive that comes a week after the Navy reported a group of Iranian boats made “dangerous and harassing approaches” to American vessels in the Persian Gulf. Trump did not cite a specific event in his tweet or provide details. The White House had no immediate comment. The U.S. Navy’s Bahrain-based 5th Fleet referred questions about the tweet to the Pentagon, and the Pentagon referred questions to the White House.

Boy, you have to admire Donald's insouciance, that he has put US Navy professionals into stupor because "shooting down" gunboats requires a rather vivid imagination and a strict diet of fantasy novels for a long time in order to exist in the world of flying ships, magical spells and alternative realities. This is not to mention the fact that there are some practices in the maritime law, such as following other ships in neutral waters (I know, been there, done that), which are by no means forbidden and, in fact, are normal practice, like this, with Royal Navy's frigate shadowing Russian navy's corvettes: 

Of course, definition of "harassment" is a tricky one, but what do ya know, one has to do what one has to do trying to raise the price by any means. There is, however, a larger picture begins to emerge since the question of "who is winning" in oil war is not even on the agenda anymore, albeit Canadian oil analysts arrive to this conclusion:

North American producers are getting crushed as a flood of oil is expected to keep prices depressed for longer.RBC Capital Markets expects U.S. shale production to fall 1.5 million barrels per day. The bank says that the producers it is tracking have slashed 2020 investments by more than US$70 billion (about 30 per cent of total) since the beginning of March.“Meanwhile, temporary production shut-ins are already underway amid refinery run cuts due to collapsing refined product demand and ballooning storage levels,” RBC said. “We expect U.S. refinery utilization rates to fall from about 70 per cent currently to 60 per cent — and potentially further — as the second-quarter unfold.” 

No, the issue is broader, especially when one considers those funny statements from Saudis about Russia "being a part of the family" and that "families always overcome quarrels", just google that, the issue is US financial "empire" is at stake. Indeed, when one has these kind of forecasts:

All told, North American production could contract by 2.64 million bpd this year, with OPEC shut-ins at around 575,000 bpd, according to data gleaned from RBC and Rystad. “As storage fills up, countries are being forced to shut-in production on a large scale to counteract a theoretical oversupply of 21 million bpd in 2Q20,” said Rystad Energy senior oil market analyst Teodora Cowie. 

And increasing trade in local currencies between major players (as an example, find videos of Putin's visit to Kaliningrad and his stern demand to transfer all operations by ports into Rubles), plus parallel introduction of alternatives to SWIFT, all of it indicates that the world cannot run anymore on fairy tales but needs tangibles to find its new footing and for that, as they say, Petrodollar Delendum Est. I begin to believe that the plan for that was in place from the get go and was merely adjusted for the severity.  

Cognitive Dissonance.

You know, I stress it constantly, I am not an oil industry specialist but I can compare--you know, like I can tell the difference between black and white colors, I can also tell, most of the time, BS from truth. I am (semi)professionally involved in debunking Western media BS and here I go again. You already saw a Force 5 tornado of BS from US media on how Trump "brokered" the new deal and how Russia was "defeated". Here is an example from, who else, Bloomberg:

The ill-fated decision to face off against Saudi Arabia in early March was “a strategic mistake and now we’re paying the price, a much higher price than we could have paid,” said Andrey Kortunov, director of the Kremlin-founded Russian International Affairs Council. “This looks like a victory for the U.S., and Russia ends up a bigger loser than Saudi Arabia.”

Just one example of many. Who IS Mr. Kortunov and what RIAC is will talk about this later. Bloomberg also goes for the titles like this: 

Trump’s Oil Deal: The Inside Story of How a Price War Ended

And, in general, one is left to wonder what universe those people live in. I constantly repeat and I will reiterate that in modern world a profession of journalist or news handler is not a viable profession because it is based largely on a lack of any skills or well-trained analytical apparatus and is used primarily for propaganda purpose. The level of American journalism is well known and it is an Exhibit A of a serious case in cognitive dissonance, because in related news, very fresh, like an hour ago, one is forced to compare alternative and real universes.  

North America’s Oil Industry Is Shutting Off the Spigot. Energy producers are resorting to the desperate measure of shutting in productive oil wells.

It is understandable that in my case I could be accused of being biased, because I am Russian, and whatever else could be derived from this fact, but it is really difficult to accuse documented numbers of oil prices and radically anti-Russian outlet such as The Wall Street Journal in any desire to, for whatever reason, unnecessarily confirm a simple fact that US shale oil industry now has a noose around its neck. This is not to mention the fact that US shale oil is but one of few other objectives Russia pursues in her big game with the US and she has necessary cushion to play this game for a long time--time which neither US, let alone KSA, have. And here we come to Western media MO with opinions "from Russia". Let's take a look who US media draws its "opinions" from? Just one example out of many. 

For starters, let's get to RIAC. The first giveaway here is the year of its founding--2011. During Medvedev's Presidency and one after another failures of Russia's diplomacy starting from giving up Libya to being unable to stop the gang rape of Syria, yet still "integrating" with the West. In the end, enough to take a look at such people as Aven being on RIAC's board. So, in general, RIAC is a copy of a good ol' Western "think-tanks" whose real practical value approaches zero and which are involved deeply in doctrine mongering and are nothing but clubs of interests for people who think that they are good at something. RIAC is radically pro-western think-tank. Kortunov's biography is available at RIAC's site and reads exactly as a biography of any other American counterpart in US "think-tanks"--humanities degree (granted obtained at MGIMO), then white board "academic" career in fully discredited Institute of US and Canada, a teaching "tour" in the US, some "research" and writing of papers which lose any value even before they are published anywhere. It is obvious that Kortunov's "portrait" is that of a Russian "liberda" which is directly used by Western media and NGOs to distill opinions on matters of Russia's foreign and domestic policy  and present them as viable. Opinion "generators" for US media of this type which come to mind, of course, are Moscow Higher School of Economics (VShE), another zoo of confused globalists, rags such as Moscow Times, military "specialists" such as Pavel Falgnehauer, or creatures such as Masha Gessen among many others. So, you see how it works? 

As per reality, even Bloomberg had to publish later "attitude adjustment" piece:

“The scale of production cuts is a move in the right direction, but considering how badly demand is affected, it was never going to be significant enough to push the market closer to balance,” said Edward Bell, senior director for market economics at Emirates NBD PJSC in Dubai. “Is Russia going to cut production by 2.5 million barrels a day in two weeks? That’s a pretty steep ask.”

Remember this simple fact, everyone knows, that Russia is fine with the price of oil $30 per barrel, and she is happy as clam with $40 per barrel--prices which do not work for either Saudis or US. So what is the real target here? Obvious, having the US joining the emerging cartel and, in the end, Petrodollar. But as famous Mikhail Bulgakov's character of Professor Preobrazhensky from the Heart of a Dog used to say to his assistant, Dr. Bormenthal: "Don't read Soviet newspapers before lunch." You know what word to change in Preobrazhensky's advice in order to avoid a severe cognitive dissonance.