De-dollarisation of Oil Market by 2018

Sometimes a story grows legs, other times it hits the dust.

But yesterday’s front page story in the Independent about negotiations to end oil trading in dollars seems to have hit a raw nerve and sent shock-waves through the currency markets.

In response to the story, gold is now trading at record levels and the dollar is sliding.

As Robert Fisk – the respected Middle East correspondent of the paper – points out in today’s edition it has been denied by what he called the “usual suspects”, principally Mohammed al-Jasser, the director of Saudi Arabia’s central bank, who told reporters that there has been “absolutely nothing” of that nature discussed between Saudi Arabia, the world’s biggest oil exporter, and other countries.

It was not the only Gulf State to deny the rumours. Everyone was tripping over themselves to deny it.  “We have never heard of this or discussed this, not even secretly,” Qatar’s oil minister Abdullah bin Hamad Al Attiyah said. Japan’s Finance Minister said “I know nothing about it”.  Russia, Kuwait and Oman also dismissed the speculation.

But speaking on Aljazeera yesterday, Fisk was sticking to his guns. “They have been talking about it for 2 years. There have been about 4 meetings in comparative secrecy to discuss this,” he said.

Fisk argues that it is not something that is going to be achieved over-night, but should happen by 2018.

The veteran jounalist, who is based in Beruit, argues that it is normal for stories to be denied by the Saudis at the same time as they know them to be true. Don’t forget, he argues, that Saudi Arabia denied Iraq had invaded Kuwait in 1990 until the US broadcasters showed tanks across the border.

But the Saudi’s are key players: “Yes” says Fisk, “the Saudis have been involved. Yes, the Gulf Cooperative Council has been involved. They are planning another currency”.

Fisk continues: “The move is the beginnings of a new world order and would involve a massive power play between China – that wants to move away from holding vast reserves of dollars – to the US.”

Fisk argues that “if we are going to have an economic battle fought over the Middle East – not over the justices and injustices of the conflicts of the Middle East, but about oil – then we are not going to solve the problems of the Middle East. We are going to find that the Middle East – once again – becomes a tool of super-power rivalry.”

And that can only be bad news.