Oops. Looks like some more movement in the “let’s-dump-the-dollar” game.
Seems like the oil-producing states of the Middle East have made some moves. According to the Telegraph (U.K.):
“The Gulf monetary union pact has come into effect,” said Kuwait’s finance minister, Mustafa al-Shamali, speaking at a Gulf Co-operation Council (GCC) summit in Kuwait.
The move will give the hyper-rich club of oil exporters a petro-currency of their own, greatly increasing their influence in the global exchange and capital markets and potentially displacing the US dollar as the pricing currency for oil contracts. Between them they amount to regional superpower with a GDP of $1.2 trillion (£739bn), some 40pc of the world’s proven oil reserves, and financial clout equal to that of China.
Saudi Arabia, Kuwait, Bahrain, and Qatar are to launch the first phase next year, creating a Gulf Monetary Council that will evolve quickly into a full-fledged central bank.
The Emirates are staying out for now – irked that the bank will be located in Riyadh at the insistence of Saudi King Abdullah rather than in Abu Dhabi. They are expected join later, along with Oman.
Earlier in the year, we posted about other moves to dump the dollar. See below for some relevant posts.
The Gulf pact faces hurdles internally (Saudia Arabia will dominate and Saudi needs will come first and may leave the other states on the short end) as well as from the outside:
Ben Simpfendorfer, Asia economist for RBS and an expert on the Middle East, told the FIKR conference that the rise of China had paradoxically disrupted the case for pan-Arab economic integration.
There was a natural fit ten years ago between rich oil state and low-wage manufacturers in Egypt and Syria, but cheap exports from China have forced poorer Arab states to retreat behind barriers to shelter their industries. “The rationale for a single currency has become weaker,” he said.
We’ll have to see what transpires. Just wanted to bring you up to date on the latest rumblings.
The Scanner–International Edition, March 24, 2009: Say Goodbye to the Dollar? China, Russia Proposing a New World Currency for “Non-Credit” Based Economies, Echo G-20 Agenda of Expanding IMF; China Will “Consider” Buying IMF Bonds; 10th China Develpment Forum Underway (UPDATE 1X–Geithner Supports China Proposal??)
Russia-China Proposals; “Rebalancing” Global Currency Reserves: Why the U.S. Can’t Take Anything for Granted Re: the Dollar (March 27, 2009)
HEADS UP! It’s HERE! The New World Currency Design, Presented to the G-8 Delegations (With Pics) (July 13, 2009)
As China (And Other Countries, Too) Makes Non-dollar Trade Deals Around the World, Maybe Americans Should Seek Safety in the Reincarnation Bank (July 31, 2009)
Yuan on the Way to Becoming an Alternative Reserve Currency & Obama’s Off to China to INSIST That the Chinese Play Nice (November 12, 2009)
Filed under: Current Politics | Tagged: Bahrain, Ben Simpendorfer RBS Asica economist, China, Culf Co-operation COuncil (GCC), Egypt Syria, Gulf monetary union pact, Kuwait, Middle East oil reserves, Middle East single currency, Oman, pan-Arab economic integration, petro-currency, pricing oil contracts, Qatar, Saudi Arabia, Saudi Arabian King Abdullah, Telegraph (U.K.), U.S. dollar hegemony, United Arab Emirates | Leave a Comment »