Opinion: Saudis deny secret plan to ditch dollar in oil trades


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To paraphrase Mark Twain, reports of the dollar’s demise may be exaggerated, but they are persistent.

Several British newspapers are reporting this morning that finance ministers and central bankers from Arab Gulf states -- Saudi Arabia, Abu Dhabi, Kuwait and Qatar -- have been holding secret meetings in Hong Kong with counterparts from China, Russia, Japan and Brazil to end the use of the dollar for oil trades.


Instead, according to the Independent, they are looking to peg oil trades to a basket of currencies including the Japanese yen, the Chinese yuan, the euro, gold and a new, yet-to-happen unified Arab currency.

This is all denied by the Saudis. The country’s cental bank governor, Muhammad al-Jasser, in Istanbul for International Monetary Fund meetings, told reporters that there has been “absolutely nothing” of that nature discussed between Saudi Arabia, the world’s biggest oil exporter, and other countries.

Scrambling to protect the dollar’s status as an international yardstick, Treasury Secretary Timothy F. Geithner told reporters the United States will do “everything necessary” to maintain confidence in its currency. Also in Istanbul for the IMF session, Geithner said, ‘We recognize that the dollar’s important role in the system conveys special burdens and responsibilities on us, and we are going to do everything necessary to make sure we sustain confidence.”

But the truth is that ever since the global financial crisis last fall, the dollar’s role as the world’s main reserve currency has been in peril. As Bloomberg points out, China and Russia agreed to increase use of each other’s currencies in trade deals at a meeting last June. They and Brazil and India -- called the BRIC nations -- have talked about buying each other’s bonds and swapping currencies.

And, as the Economy News suggested, Russia and China have both been vocal in their call to end the dollar’s reign in international trade. As for the other players, said the EN, ‘Japan will clearly do what it feels necessary to protect its deflationary economy from an over-strong currency. France, of course, would take any opportunity to give Washington one in the eye.’

Gold opened today at record highs.
-- Johanna Neuman

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