The Demise of the Dollar?

The Independent published an allegedly “exclusive report” by Robert Fisk that several countries, including China, Russia, Japan, France and Gulf states had met secretly to find ways to stop using the U.S. dollar as the standard currency for oil trading. The news sent the value of the dollar further on its downward slide. From the Independent’s report:

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.

Representatives from several of the countries named immediately issued denials. From Bloomberg:

Saudi Arabia hasn’t held talks with China and other countries on dropping the dollar as the currency for pricing oil, Saudi Central Bank Governor Muhammad al-Jasser said, denying a report in the U.K.’s Independent newspaper.

The Independent report is “absolutely incorrect” and there has been “absolutely nothing” of that nature discussed between Saudi Arabia, the world’s biggest oil exporter, and other countries, al-Jasser told reporters in Istanbul, where he’s attending an International Monetary Fund summit. The dollar pared losses after his remarks.

And from AP:

Officials in several of the countries either denied talks or said they had no knowledge.

But the denials did not stop the dollar selloff. By late afternoon London time, the dollar was down 0.8 percent at 88.80, while the euro was up by 0.7 percent to $1.4748.

Further sustained falls could see the dollar fall below its multi-year low of 87.11 yen, and the euro break above its two-year high of $1.4842, achieved last month.

Kuwait’s oil minister, Sheik Ahmed Al Abdullah Al Sabah, said there have been no talks on the topic among Gulf oil ministers. “At our level, no,” he said. “I didn’t even dream about it.”

And the head of the United Arab Emirates’ central bank, Sultan Nasser al-Suweidi, said the Gulf nation has no plans to stop pricing oil in dollars. “There has been no meeting … whatsoever,” he told The Associated Press, adding that the dollar “will continue as the price for oil.”

And from the New York Times:

The article named no sources and was quickly denied by Muhammad al-Jasser, the governor of the Saudi central bank, and Dmitry Pankin, Russia’s deputy finance minister. French officials declined to comment. In China, the government is closed for a weeklong holiday, but well-connected bankers were skeptical.

“While informal discussions might have taken place, I doubt they represent a serious intent to undermine the existing global monetary order or the role of the U.S. dollar,” said Fred Hu, who is the chairman of greater China for Goldman Sachs and advises the Chinese government.

Al Jazeera interviewed Robert Fisk, the author of the Independent report, about his claims:

October 6, 2009 1:08 PM
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