I read an interesting article about the petroyuan and I added this comment:
“So let me get this straight: Senator Elizabeth Warren wants to put limits on a century old financial process that, if limited will diminish the ability of her government to borrow the money that she would want borrowed for her favored domestic programs. Got it.”
The petroyuan and the petrodollar narratives have both been egregiously overstated, to the point of being largely fictitious.
The dollar dominates for two reasons:
1. The US economy is the world's largest by far.
2. The US does not impose capital controls the way China and Russia do.
These two realities are what allow the "eurodollar" system to function, in which dollars are created and utilized entirely outside the United States.
China cannot allow a similar system to exist for the yuan without liberalizing the Chinese economy and circumscribing the power of the CCP. Xi Jinping has made it clear that the power of the CCP takes precedence over economic prosperity.
That limits the degree to which the yuan can be utilized in global commerce, and that limits the scope of what a "petroyuan" system can achieve.
I’m so glad you are following the China situation in detail, Peter. Long term, I think it could be the most consequential result from this war.
One thing in particular has me pondering: China selling off its petroleum reserves. Short-term gain, but long-term foolishness. They’re just going to have to buy replenishment at higher cost! So, either they are exceptionally confident that Iran will prevail and make it up to China, or, they are in such dire financial straits internally that they are grasping at whatever short-term salvation they can. Or, China has some gambit planned that we can’t see. Peter, would you hazard a speculation? (Come on, we won’t hold you to it!)
Right now all markets are anticipating a fairly quick return to pre-war price levels. That's not speculation, as we see that in current price movements.
With that as a contextual backdrop, China's decision to sell off its reserves in a short-term arbitrage play makes perfect sense. If everyone is convinced the status quo ante will be restored, China would be passing on a nice revenue opportunity if it did not sell down its oil inventories.
However, if Iran has to start shutting in oil wells, and Iraq keeps its already shut in wells shut in, then a countdown clock gets started as to when restoring the status quo ante becomes a near term impossibility, and a long term question mark. At that point China's arbitrage play goes from good moves to bad bet.
I wouldn't say China is grasping at financial straws. I do think they are seriously misreading the situation, and I don't think they are alone in that. No one seems willing to grasp that the IRGC is not what we would consider a rational actor.
Yes! The IRGC has not behaved rationally thus far, and their deranged ideology - and their insistence on hastening their envisioned Apocalypse - leads one to assume they’ll continue to behave irrationally.
If oil returns to the status quo of recent times, I think Trump would consider that a loss. He has bigger visions of reigning in China and other geopolitical players. Thus far, he has successfully steered trade to U.S. oil market. I’ll bet he has several other market allocations in mind, too!
The question remains; will China pressure Vahidi and the IRGC to open the Straits?
The IRGC will be inclined to keep the Stratis of Hormuz closed as it remains the only large scale weapon they have. With military ordinance production facilities wrecked or decentralized to prevent efficient production, if China cuts off supplies of essential materiel, Iran will only have "one last stand" before total ruin. China may provide that pressure to ensure thier own survival.
The days of Iran in its current governance configuration are likley numbered.
I would not be surprised if China already doing that behind closed doors.
China is not going acknowledge it needs Persian Gulf oil to flow. The cultural demands of saving face alone make that a non-starter. Additionally, wannabe hegemons do not advertise their economic vulnerabilities (which is one very plausible reason President Trump will never say anything but that the war with Iran is a tremendous victory).
The question, however, is whether threats like total destruction can work with the IRGC leadership. The Mahdist strain of Twelver Shi'a Islam in which the IRGC leadership is completely indoctrinated is the epitome of a death cult. Going out in a blaze of glory may actually be a pleasing thought to Vahidi.
If that is the case, then there is no negotiating that will work. You can't reason with someone who embraces his own immolation. All the usual appeals to self interest are off the table.
Donald Trump may ultimately have no choice but to destroy Iran completely, because that is the only outcome Vahidi will accept. The only way to avoid that outcome would be regime change by the Iranian people.
Now would be an excellent time for a popular uprising in Iran to tear down the Khamenei regime.
As I have said before, Iran never had a 2nd Amendment, nor any substantial tradition of Citizen possession of small arms. That would be the first step to a population uprising.
Their only chance is if they can acquire some by ambushing Basji or IRGC, purchasing them from corrupted Basji or IRGC (are they getting paid?), or smuggled in to Iran by US/Israeli agencies or allies (more likley after random attacks on neighboring States).
If the people revolt, the Artesh may follow on. Politically, I believe the Artesh may be bullied in to inaction at this time. Certainly, experienced military commanders realize that there is no winning this war, only more devastation. Are they willing to see it happen as well?
I read an interesting article about the petroyuan and I added this comment:
“So let me get this straight: Senator Elizabeth Warren wants to put limits on a century old financial process that, if limited will diminish the ability of her government to borrow the money that she would want borrowed for her favored domestic programs. Got it.”
https://substack.com/@amuseonx/note/p-195464846?r=bbwgp&utm_medium=ios&utm_source=notes-share-action
The petroyuan and the petrodollar narratives have both been egregiously overstated, to the point of being largely fictitious.
The dollar dominates for two reasons:
1. The US economy is the world's largest by far.
2. The US does not impose capital controls the way China and Russia do.
These two realities are what allow the "eurodollar" system to function, in which dollars are created and utilized entirely outside the United States.
China cannot allow a similar system to exist for the yuan without liberalizing the Chinese economy and circumscribing the power of the CCP. Xi Jinping has made it clear that the power of the CCP takes precedence over economic prosperity.
That limits the degree to which the yuan can be utilized in global commerce, and that limits the scope of what a "petroyuan" system can achieve.
NARROW STRAITS 🌐🗝️⚖️🗺️⏰💱🛢️🔔⚓📆
https://claude.ai/public/artifacts/4eddec13-9d94-4db3-abd6-2054739f03a4
🧮✍🏼🤖 Great work Peter, stats, dates and All Facts Matter. Grace and peace to you Amigo, Semper Fortis!
⬆️ All Facts Matter, Pete✅
^Note how Claude ‘grades’ the sources for accuracy and bias! 🤖✍🏼⚖️🎯🧐 [A B C]
I’m so glad you are following the China situation in detail, Peter. Long term, I think it could be the most consequential result from this war.
One thing in particular has me pondering: China selling off its petroleum reserves. Short-term gain, but long-term foolishness. They’re just going to have to buy replenishment at higher cost! So, either they are exceptionally confident that Iran will prevail and make it up to China, or, they are in such dire financial straits internally that they are grasping at whatever short-term salvation they can. Or, China has some gambit planned that we can’t see. Peter, would you hazard a speculation? (Come on, we won’t hold you to it!)
Right now all markets are anticipating a fairly quick return to pre-war price levels. That's not speculation, as we see that in current price movements.
With that as a contextual backdrop, China's decision to sell off its reserves in a short-term arbitrage play makes perfect sense. If everyone is convinced the status quo ante will be restored, China would be passing on a nice revenue opportunity if it did not sell down its oil inventories.
However, if Iran has to start shutting in oil wells, and Iraq keeps its already shut in wells shut in, then a countdown clock gets started as to when restoring the status quo ante becomes a near term impossibility, and a long term question mark. At that point China's arbitrage play goes from good moves to bad bet.
I wouldn't say China is grasping at financial straws. I do think they are seriously misreading the situation, and I don't think they are alone in that. No one seems willing to grasp that the IRGC is not what we would consider a rational actor.
There is a reason we shoot mad dogs.
Yes! The IRGC has not behaved rationally thus far, and their deranged ideology - and their insistence on hastening their envisioned Apocalypse - leads one to assume they’ll continue to behave irrationally.
If oil returns to the status quo of recent times, I think Trump would consider that a loss. He has bigger visions of reigning in China and other geopolitical players. Thus far, he has successfully steered trade to U.S. oil market. I’ll bet he has several other market allocations in mind, too!
The question remains; will China pressure Vahidi and the IRGC to open the Straits?
The IRGC will be inclined to keep the Stratis of Hormuz closed as it remains the only large scale weapon they have. With military ordinance production facilities wrecked or decentralized to prevent efficient production, if China cuts off supplies of essential materiel, Iran will only have "one last stand" before total ruin. China may provide that pressure to ensure thier own survival.
The days of Iran in its current governance configuration are likley numbered.
I would not be surprised if China already doing that behind closed doors.
China is not going acknowledge it needs Persian Gulf oil to flow. The cultural demands of saving face alone make that a non-starter. Additionally, wannabe hegemons do not advertise their economic vulnerabilities (which is one very plausible reason President Trump will never say anything but that the war with Iran is a tremendous victory).
The question, however, is whether threats like total destruction can work with the IRGC leadership. The Mahdist strain of Twelver Shi'a Islam in which the IRGC leadership is completely indoctrinated is the epitome of a death cult. Going out in a blaze of glory may actually be a pleasing thought to Vahidi.
If that is the case, then there is no negotiating that will work. You can't reason with someone who embraces his own immolation. All the usual appeals to self interest are off the table.
Donald Trump may ultimately have no choice but to destroy Iran completely, because that is the only outcome Vahidi will accept. The only way to avoid that outcome would be regime change by the Iranian people.
Now would be an excellent time for a popular uprising in Iran to tear down the Khamenei regime.
As I have said before, Iran never had a 2nd Amendment, nor any substantial tradition of Citizen possession of small arms. That would be the first step to a population uprising.
Their only chance is if they can acquire some by ambushing Basji or IRGC, purchasing them from corrupted Basji or IRGC (are they getting paid?), or smuggled in to Iran by US/Israeli agencies or allies (more likley after random attacks on neighboring States).
If the people revolt, the Artesh may follow on. Politically, I believe the Artesh may be bullied in to inaction at this time. Certainly, experienced military commanders realize that there is no winning this war, only more devastation. Are they willing to see it happen as well?