Russian President Vladimir Putin has reportedly accelerated his time line to open the St. Petersburg Exchange (SPBEX) for trading oil and natural gas, a direct response to American economic sanctions and an assault on the U.S. dollar backed petrodollar that currently is the international denomination for oil trading. What is of particular interest to precious metals investors is the potential impact of oil and gas trading in rubles in place of the $USD backed petrodollar: that status, if threatened, could have a drastic impact on global dependence and confidence in the U.S. dollar and result in a massive run on gold.
Being hailed as an all-out war on the U.S. and its economic sanctions against Russia as per the Ukraine crisis, the establishment of the St. Petersburg exchange would not only facilitate trading of oil in rubles and other local currencies but open up the rapidly expanding natural gas market to the same currency options as well. As a historical sign of how critically important the current status of the dollar backed petrodollar is to the health of the United States and its currency, the last serious attempt to defy U.S. hegemony as per the petrodollar resulted in the U.S. overthrow of the Libyan government and the execution of Muammar Gaddafi. This was followed by an attempt of Iran to break the U.S. stranglehold on the petrodollar- Iran proved to be a much tougher opponent to subdue, but through sanctions and coerced international pressure, the U.S. was able to prevail once again and maintain control over the petrodollar.
Putin’s attack on the petrodollar has been partially in response to the U.S. backed ousting of former Ukraine President Viktor Yanukovych, of which NATO took part as well. As the U.S. continues to expand its money supply amidst drastic inflationary measures, any reduction in international demand or confidence in the U.S. dollar could have ominous consequences for the USD and U.S economy as a whole. Unwanted U.S. dollars would come rushing home in a hyper inflationary tsunami as foreign nations divested themselves of a currency they would no longer need to buy oil in the open market. One expected result of this would be gold, silver and the other precious metals skyrocketing in value as the inevitable flight to safety and panic move away from the USD takes shape.
If the “dollars for oil” system backed by the petrodollar is in fact challenged by President Putin and the St. Petersburg Exchange, National Coin Broker and our top rated Rare Coin Acquisition Program remain prepared as always to offer our global clients the best and most profitable deals in rare coins, gold and silver as we enter what has proven so far to be a turbulent year in terms precious metals, geopolitical events and global security.
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