China about to knock out petrodollar by trading oil in yuan

John Ryder knocks out Patrick Nielsen © Andrew Couldridge / Reuters

As one of the world’s top energy importers, China has successfully completed its fifth dry run in yuan-backed oil futures contract trading. The step has been already called Beijing’s challenge to the US dollar.

According to Bloomberg, which cited a statement from the exchange, 149 members of Shanghai International Energy Exchange traded 647,930 lots in the rehearsal with a total value of 268.2 billion yuan. The system met the listing requirements of crude futures after the exercise, it added.

“This contract has the potential to greatly help China’s push for yuan internationalization,” said Yao Wei, chief China economist at Societe Generale in Paris.

She added, however, “its success will hinge critically on the degree of freedom allowed for the capital flows related to the contract.”

A former China division chief at the International Monetary Fund, Eswar Prasad said: “It is not unreasonable to envision a world in which the overwhelming share of commodity contracts, especially for oil, are no longer denominated just in dollars.”

But “the yuan’s role in global finance will ultimately be determined by the degree of commitment of Xi Jinping’s government to economic and financial market reforms.”

Since the 1970s, the global oil trade has almost entirely been conducted in US dollars. The largest energy consumer, China, is interested in having oil contracts in yuan. Beijing plans to introduce its own oil benchmark which will rival Brent or West Texas Intermediate. Analysts say Chinese authorities will need to first convince large oil producers and consumers to use the yuan and invest in the Shanghai benchmark.

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The Chinese government announced plans to start a crude oil futures contract priced in yuan and convertible into gold earlier this year. The contract will enable the country’s trading partners to pay with gold or to convert yuan into gold without the necessity to keep money in Chinese assets or turn it into US dollars.

The new benchmark will reportedly allow exporters, such as Russia, Iran or Venezuela to avoid US sanctions by trading oil in yuan.

In September, Venezuela ditched the greenback for oil payments. Caracas has ordered oil traders to convert crude oil contracts into euro and not to pay or be paid in US dollars anymore. The measure followed the rolling out of sanctions by the United States against the country.

 

Supreme Court OKs full enforcement of Trump travel ban

A general view of the U.S. Supreme Court building in Washington

The Supreme Court has ruled to allow the full enforcement of President Donald Trump‘s travel ban affecting six Muslim-majority countries.

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The Trump administration’s request to enforce the third incarnation of Trump’s travel ban was approved Monday. The Supreme Court ruling rolls back lower court rulings that restricted enforcement based on bona fide relationships with US persons or businesses. Such exempt relationships had included grandchildren, grandparents, nieces, nephews and cousins of US persons.

The travel ban on US entry for nationals from Chad, Iran, Libya, Somalia, Syria and Yemen will be in full effect, while it also undergoes challenges in the 9th US Circuit Court of Appeals, based in San Francisco, and the 4th US Circuit Court of Appeals in Richmond, Virginia, according to AP.

The Supreme Court is set to hear arguments for and against the current version of the travel ban, updated in September to include some Venezuelan officials and North Korea, next year. Lower courts have already approved of those two latest additions to the list of countries.

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Justices Ruth Bader Ginsburg and Sonia Sotomayor, liberals on the high court appointed by presidents Bill Clinton and Barack Obama respectively, would have left the lower court rulings in place, according to AP.

In court papers, Solicitor General Noel Francisco argued that since June, “multiple government agencies have conducted a comprehensive, worldwide review of the information shared by foreign governments that is used to screen aliens seeking entry to the United States,” according to The Hill.

“Based on that review, the proclamation adopts tailored entry restrictions to address extensive findings that a handful of particular foreign governments have deficient information-sharing and identity-management practices, or other risk factors,” Francisco said.

The American Civil Liberties Union reacted on Twitter, saying the Supreme Court decision lacked merit. “We are at the 4th Circuit Court of Appeals on Friday to argue that the Muslim ban should ultimately be struck down,” the ACLU said.

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War between Iran & Saudi Arabia could send oil to $300 per barrel & impoverish the world

FILE PHOTO Members of Saudi security forces © Ahmed Jadallah / Reuters

An armed conflict between Riyadh and Tehran would have a major impact on oil markets and the global economy. RT asked experts what a war between the two Middle East superpowers would mean for crude prices.

If a conflict happens, oil prices could increase 500 percent.

“Energy prices will seriously depend on the severity of the conflict. Let’s remember the unrecognized Iraqi Kurdistan, which in a state of continuous war exported about 550,000 barrels per day through Turkey. In this connection, we can expect a panic rise in oil price to $150-$200 on the first day of the conflict… If Saudis and Iran attack each other’s oil facilities, crude prices can skyrocket to $300,” Mikhail Mashchenko, an analyst at the eToro social network for investors told RT.

Ivan Karyakin, an investment analyst at Global FX, points out that the area of possible conflict pumps a third of global oil. Saudi Arabia, Iraq, Iran, the United Arab Emirates, Kuwait, Oman, and Qatar together produce about 28 million barrels per day, which is slightly less than 30 percent of global production; prices will go up immediately to $150-180 per barrel, he said.

“Then everything will depend on the duration of the conflict. The world market will survive two or three days of the conflict. If the conflict lasts a week, then prices will rise to $200 or higher, and this will have long-term consequences, as stockpiles will decrease,” Karyakin said.

The analyst insists a war between Riyadh and Tehran is unlikely, as it’s not in the interests of Russia and China.“Russia is a partner of many conflicting countries in the Middle East. Largest oil importer China, which carries the greatest risks in the event of a rise in oil prices, will use all its influence on Iran and the US to prevent a conflict,” he said.

A war in the Middle East will be very unprofitable for importers, according to Ivan Kapustiansky, Forex Optimum analyst. “In the event of war, markets may lose about 20 percent of the world supply. First of all, of course, the largest importers will be affected. These include the US, China, Japan, as well as the eurozone, in fact, the main locomotives of the world economy,” he said.

Both Saudi Arabia and Iran understand how crucial oil is to their economies, and will try to maintain production even in the event of a conflict, says Andrey Dyachenko, Head of Private Solutions Department of Сastle Family Office in Russia and the CIS. “Even a temporary drop of market share will mean that other players like the US will take their place. And they will not be able to get their market share back. Therefore, if such a conflict does happen, both Saudi Arabia and Iran will do everything possible to continue producing and supplying as much as possible,” he said.

What will happen to the global economy

A sharp jump in oil prices and other hydrocarbons will threaten the stability of the entire global economy, as it will lead to a surge in inflation, warns Dyachenko. “At the time of relatively low growth rates, a significant jump in inflation will lead to the impoverishment of a large part of the world population,” he added.

Both producers and importers will be forced to slash prices to prevent it, according to Dyachenko.

War is unprofitable for both Saudis & Iran

Relations between Riyadh and Tehran have seen worse times than now, assures Petr Pushkarev, Chief Analyst at TeleTrade. The Iranian revolution of 1978-79 and the death of Iranians during the Hajj pilgrimage in 1987, which led to the severing of diplomatic relations between Shia Iran and Sunni Saudi Arabia for three years, were a greater stress test for the countries.

“For the coming years, Saudi Arabia itself is too busy with technological and innovative projects to replace the lost oil revenues. They are not at all ready for full-scale armed conflicts with their neighbors right now, which would be very costly, and very inappropriate at the time when Crown Prince Mohammed Bin Salman is intensely concentrating power around himself. Perhaps the presence of an external enemy like Iran can suit his purpose, but only in the mediated conflict on the territory of Yemen,” Pushkarev said.

According to eToro’s Mikhail Mashchenko, the war is unprofitable for both Saudi Arabia and Iran. “The Saudis, although they feel more confident than their eastern neighbors, have a budget deficit of 10 percent of GDP. Tehran has only begun to increase oil exports after a partial lifting of the sanctions,” he told RT.

Most experts agree a conflict between Saudi Arabia and Iran will be limited to proxy wars like the ones going on in Yemen and Syria. The situation is comparable to the Cold War proxy wars between the United States and the Soviet Union.

The Deciding Vote for Obama’s Iran Deal Was Bob Corker

by JOHN HAYWARD

The Beltway press tried to make the passage of President Obama’s nuclear sellout to Iran look like a moment of high political drama, but you could tell their hearts weren’t really in it. Everyone knew this was a done deal from the very beginning, thanks to the efforts of the true “deciding vote,” Republican Senator Bob Corker of Tennessee.

Democrat Barbara Mikulski might have been the 34th vote from her party that made it impossible for the Senate majority to stop the deal, but Corker was the key figure in turning Congressional rules upside-down and rendering the majority powerless.

Everything since Corker’s deal has been mere theater, with Corker himself an occasional star performer. “From my perspective, Mr. Secretary, I’m sorry. Not unlike a hotel guest that leaves only with a hotel bathrobe on his back, I believe you’ve been fleeced,” he drawled at Secretary of State John Kerry during a congressional appearance, knowing, as he spoke, that his objections were meaningless, his criticism pure posturing.

Even more hammy were Corker’s hilariously inaccurate predictions that his rules could actually halt the Iran sellout. “Look, I don’t ever want to overcommit and under-deliver,” he said in April. “We are moving in a very positive direction, and we’ve worked through some issues that I think have given me a lot of hope… I feel like were going to present a bill tomorrow that keeps 100 percent of the integrity of the process relevant to the nuclear agreement in place.”

He was confident that process would result in President Obama’s deal dying on Capitol Hill–a confidence shared by no one capable of counting how many Democrats had survived the 2014 midterm bloodbath.

As hilariously lame and awkward as Kerry’s sojourns to Congress were, the Secretary could rightfully complain that it was all a gigantic waste of his time anyway. The fix was in. The odds that a handful of Democrat Senators could not be persuaded to spare their President a historic embarrassment were incredibly small. No one ever really thought Obama would have a hard time getting 34 members of his Party to meet the absurdly low threshold Corker arranged.

This left the Democrats with plenty of room to indulge little “conscience” dramas from a few Senators with Jewish and/or right-leaning constituencies to mollify, notably Senator Chuck Schumer of New York.

That is one reason Corker’s deal was so foolish. Even if the Iran sellout could not be stopped — because Obama went outside the American political system to work with China and Russia at the United Nations, cutting American voters and their representatives out of the loop entirely — it was still important to make this painful for the Democrats. Instead, Corker made it as painless as possible with his “bipartisan” arrangement, leaving the Democrats plenty of room to indulge members like Schumer, who had to pretend they were concerned about national security and the fate of Israel.

It also became easier for the Obama Administration to conduct its charade of “selling the deal.” Every salesman relaxes when he knows a sloppy pitch is good enough to get the paperwork signed.

The key element of Corker’s “bipartisan compromise” is that it became necessary for Congress to aggressively kill the deal, instead of voting to support it. NPR accurately compared this to the way debt ceiling increases work.

Instead of persuading the Senate to approve a deal that would shape the future of the Middle East and impact American national security for decades to come, it became necessary for the Senate to aggressively disapprove the deal. Obama could veto the disapproval, and needed to convince only 34 members of his own Party to declare they would not vote to override his veto.

In theory, it is also possible for 41 senators to filibuster congressional disapproval and spare President Obama the trouble of breaking out his veto pen — an outcome made significantly more likely by the sure and certain knowledge that his veto would be sustained anyway, although that might require a few of those scam-artist Democrat “conscientious objectors” to drop their act and vote to support the Iran deal. It would be a delicious final humiliation for the Republicans if Obama can make that happen, and it would give him a considerable political boost, because he could stage a few tearful welcome-back embraces for Democrats who “came home.” Public polling on the Iran deal is still dismal enough to make it hard to pull off, however.

Politico’s post-mortem on the Iran saga portrays Corker as President Obama’s man on the Republican side of the aisle, a slightly tetchy player on a team quarterbacked by Democrat Ben Cardin of Maryland, who became the top Senate Foreign Relations Committee Democrat after the interestingly-timed corruption probe of New Jersey Senator Robert Menendez, an opponent of the Iran deal.

“The low-key Cardin engaged in a furious round of negotiations with gregarious Senate Foreign Relations Committee Chairman Bob Corker, prompting something that was once viewed as almost unthinkable: a bipartisan deal for Congress to review an Iran nuclear deal – with the blessing of President Barack Obama and House Minority Leader Nancy Pelosi, Politico writes. Cardin served as “liaison” between Obama and Corker, ostensibly a “blunt-spoken Tennessee Republican,” who was “burning up the phones over the two-week congressional recess, keeping at bay presidential hopefuls like Florida Sen. Marco Rubio as he sought to find a middle ground on the highly charged issue.”

And that is just what Republican voters wanted when they crawled over broken glass to give Republicans a seemingly impossible Senate majority in 2014, right? Democrats still effectively running the Senate even though they are in the minority, and a beaming Nancy Pelosi blessing polite arrangements to give Barack Obama everything he wants, at minimal political cost?

This is all a mirror image of the way President Obama’s hapless team got taken to the cleaners by tough-talking Iranian negotiators, who knew from Day One that Obama would give them nearly anything to get a deal, and played their cards accordingly. Those negotiations also produced a great deal of tough-guy theater from Kerry and Obama, but the Iranians saw no reason to play along. At least the White House occasionally pretended to be frustrated with the Corker Republicans, and worried about the fate of its precious deal.

(A frequent complaint is that any significant congressional involvement in the deal will make the Iranians think America is impossible to deal with – something the Iranians never say about their legislature, which they take pains to describe as a respected institution, no matter how things actually work in the theocracy.)

The Iranians are guilty of many evils, but at least they never seemed interested in staging Failure Theater performances for the global media. That is all the Republican leadership has offered its voters throughout most of the Obama era, perpetually fearful that any stiff legislative battle would drain their account of the political capital they refuse to spend.

Defenders of the Corker arrangement say the fix was really in when Obama made it clear he would cut the American people out of the deal and impose it through international arrangements, but a fighting party would call a threat like that and force the President to carry it out – making him bleed politically with every step, shouting from the mountaintop to warn those marginalized Americans of how their representation had been cast aside like garbage, to be replaced by foreign councils.

A fighting party would have made this process as difficult as possible on their opponents, rather than working out bipartisan compromises to grease the wheels, asking for little but a few spotlight moments to voice their objections along the way. The GOP leadership supposedly believes this Iran deal is a dangerous mistake that puts the future of the world at risk, does it not? Then why did they make this deal as easy to pass as an automatic debt-ceiling increase, instead of fighting like wildcats and making the Democrats pay for every inch of ground they shoved this dead weight across?

Senate Republicans made themselves irrelevant to a process they decided they could not actually stop.  Democrats never seem to think that’s a smart strategy, even when they’re in the minority. The inevitable round of “we tried to stop Obama’s dangerous nuclear deal!” GOP fundraising letters will not go over well, if Republican voters have truly gotten sick of this crap, and insist on a party that fights like the Democrats do.