If the US take anti-cartel legislation against OPEC, Saudi Arabia refuses to use us dollar when selling oil. Why is the United States closer than ever to approval of this law, invented twenty years ago? And what permanent effects it can launch?
Saudi Arabia threatens to abandon the dollar when selling their oil in response to the adoption by Washington of the bill NOPEC (No Oil Producing and Exporting Cartels Act), which gives U.S. courts the power to consider antitrust lawsuits against the OPEC countries and other States participating in a cartel in the oil market (that is, against Russia in particular). This was reported by Reuters with reference to sources.
In response to NOPEC Saudi Arabia is also considering the sale of assets of the Kingdom in the United States. Saudi Arabia invested in US almost 1 trillion dollars and owns U.S. Treasury bonds worth about $ 160 billion. Riyadh could also abandon the peg to the dollar Saudi SAR traded at a fixed rate since 1986.
What is so terrible cartel law that even longstanding ally of the United States is ready to begin the process of de-dollarization?
It is worth saying that this bill in one form or another, the US is trying to take over almost 20 years. But so far this has not been done. One source at the Agency said he does not think that the NOPEC bill will be passed and now. However, a leading expert of the national energy security Fund, lecturer of Financial University Igor Yushkov considers that today the chances of such a bill is the highest in the last twenty years. And not only because the authorities came to Donald trump.
“Even if there were no trump, then this result, the United States would have come. Differences in the enactment of such laws there. The cooling of relations with the middle East monarchies began under Barack Obama. In the last year of his presidency was held the traditional meeting of the President of the United States with the heads of monarchies in the Middle East, but the monarchs for his meeting with Obama did not come, but sent their representatives. It will be worse. Because the US all more themselves produce and export oil,” – says Igor Yushkov.
Earlier there was a clear interdependence of the U.S. with Saudi Arabia and other middle Eastern oil producers. Because they were oil pantry for Americans the main suppliers of oil. For this the United States guaranteed them his protection and political loyalty, turning a blind eye to many things in the middle East. Now, the United States became dependent on Saudi oil is much less as themselves now it is mined. “If the Americans will be able to opt out of middle East oil, it will be a huge blow for the middle East monarchies that are of no use to the Americans. On the contrary, from the point of view of US oil-producing countries are becoming a threat, as supply resources global competitors in the US, for example, China” – says the expert of the NESF.
“Now they get out of the Cabinet the bill, shake the dust off it, and after you’ve ironed it out – will. Domestic commercial law they are going to use as a pretext for international sanctions”, – says Igor Yushkov.
“The United States is driven by the logic of commercial competition – it is necessary to remove competitors from the market, clear markets,” he says. And to achieve the goal, any means are good. United States use its political and economic influence in the world, to bend the competitors in any way possible, not paying any attention to international WTO rules, to anything else.
The United States has driven under tough sanctions, Iran is actively helping the growth of chaos in Venezuela and imposed targeted sanctions on Russian projects, which were to increase production in Russia. So, there are sanctions against mining on the continental shelf, the development of stranded, and there are threats against Russian shale projects (still foreign, but not far off, and sanctions against domestic oil shale projects).
“If we could find a reason for sanctions against Russia, Iran and Venezuela was easy, then that is against the Saudis and other allies it is harder to do. They were looking for leverage that could be applied against OPEC. And as we can see the reason for the sanctions and there is,” says Yushkov.
Moreover, according to him, the adoption of a law does not mean that the United States will immediately start to use it, they can just keep it as a sword of Damocles over OPEC and other countries to force them to compete with each other, showing a strong political loyalty to the United States and not to disturb them.
If cartel law will work, it will lead to serious consequences. Interestingly, U.S. energy Secretary Perry recently warned that the adoption of NOPEC supposedly can stimulate an unprecedented growth of oil prices. However, it looks quite strange, because the consequences are expected to be the opposite.
“If the Americans are quick to apply this law and the collapse of OPEC, this may lead to global shocks,” said Yushkov. If the United States threatened fines and sanctions on the OPEC members+ in case of continued regulation of oil production, the members will begin to leave under fear of punishment. “Every oil producer immediately begins to extract the maximum. This will lead to an oversupply in the market, there will be panic and a fairly significant drop in prices, not growth. And how the world will sit with these low prices is unclear. Question – who was the first to leave the market?” – paints Yushkov.
If $ 30 per barrel, would be bad for all exporters. Major manufacturers will carry primarily the fiscal losses – primarily Russia and Saudi Arabia. And the US is starting to reduce production.
The period of low prices, he said, will last months, maybe a year. At this time, nobody will invest in new mining projects, because they are all expensive and the low price it will be unprofitable. If a year or two no one will invest, then begins the decline, the shortage of supply in the market and then prices skyrocket.
OPEC+ now allows you to keep the price of mid – $ 60 to $ 70 per barrel. Without regulation the OPEC prices will fall conventionally to 30 dollars per barrel to soar up to 100 dollars per barrel. “Such price swings will be constantly in the world oil market”, – said Yushkov.
At the same time, not all manufacturers can survive. “At $ 20-30 per barrel in the middle East as Libya may be sliding any one country. And we can be a global change. Russia will have to cut budget spending, especially social, and this causes discontent. The Saudis, too, will quickly eat up their reserves. After all members have agreed to a deal OPEC+ is also not a good life: resources were melting before our eyes” – draws a bleak picture Yushkov.
“This threatens the emergence of dozens of new “LIH”. After all, there are unhappy people. When there are no jobs, especially among young people appears religious fanatic who “explains” the reasons for the departure from the origins,” adds the source. Thus, the destruction of OPEC eventually may become an alternative to armed war with the aim of a new redistribution of world capital.
“If the law NOPEC will not be directed to all OPEC countries, including Russia, then we expect a sharp transition to the calculation in euros and the decline in production: production will fall because of the fear of buyers before the American sanctions – if you trade with OPEC, then you get retaliatory sanctions. A good example would be Iran, which has reduced its production after the us sanctions twice”, – says Vadim Merkulov, head of the analytical Department IR “freedom Finance”.
Open threats to Saudi Arabia’s de-dollarization of its economy are unlikely to scare US.
“If Saudi Arabia wants to use its threats, for example, sell US treasuries, they simply will not do it. Washington just arrest them money, as it were, for example, from the Venezuelan gold, which the United States took a “hostage”. Americans are well aware that the fulfillment of these threats depends not on Riyadh,” says Yushkov.
“The effect on the dollar is difficult to assess since to date, more than 70% of transactions in the world takes place in dollars. Even if all transactions will be in euros, it still will not change the situation in the world, because it is about tens of trillions of dollars”, – said Merkulov.
“To get away from trading in us dollars when selling oil, the Saudis will be able, when the Americans absolutely refuse to purchase oil from the middle East. The Saudis will trade with Europe and China in euros and yuan, just when will the crisis in the Iranian-type situation,” concludes Yushkov.
To move away from the dollar would China and Russia and even the EU are unhappy that only 20% of the contracts for imported energy denominated in euros, and as much as 80% – in dollars. However, sharp movements, no one does. They are concerned not only with risks due to changes in exchange rates, they are afraid of sanctions from the United States, and not necessarily in the same EU or China and addressed to the sellers of oil. Importers of energy resources is simply not affordable.
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