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Monday, September 26, 2022

Russia is Rocking World Economy with Latest Move

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Russia is the largest natural gas exporter, third largest oil exporter, and the third largest gold producer. Joe Bidens administration has been digging its heels into anti-drilling rhetoric, indicating they will not operate in good faith with the US oil industry.

Instead of working with US based companies to solve our energy issues the Biden Administration chooses to panhandle with countries like Venezuela, Iran, and Saudi Arabia in order to secure energy resources.

It might feel good to ban imports from Russia because of an unprovoked attack on Ukraine but it has forced us to work with other countries who could care less about our feelings or global financial stability.

While Biden and his administration are in the news working to make people feel better by banning Russian oil and implementing sanctions, Russia is actively taking steps to secure their future in the global market and stabilize their economy.

March 25 the Bank of Russia offered to purchase gold for approximately $1,600 per oz. By offering to purchase Gold the Bank of Russia has now silently linked the Russian Ruble to gold. Since gold typically trades in US dollars the Bank of Russia has set a base price for the Ruble based on the value of the US dollar.

Since Russia is the largest natural gas exporter and the third largest oil exporter, they have demanded foreign buyers to pay for their resources in Rubles.

This means their natural gas, which is tied to the ruble because that’s the method of payment, is now tied to gold because that’s what the ruble is tied to.

The same can be said for their oil sales. By demanding payment in rubles Russia has essentially tied their oil to gold.

The petrodollar was structured in a way that kept other currencies from competing with the US dollar in the global market. That’s because it demanded exclusively trading oil in US dollars. With Saudi Arabia’s wandering eye toward China, and Russia dealing in gold now.

If countries are forced to use gold to buy Russia’s commodities and Global markets start accepting the Ruble as payment, there will be trouble for the US dollar.

As foreign countries shift from the US dollar to other means of trade like Gold or the Ruble for commodity trading, the US should take action and see this as a wakeup call rather than pushing for inflationary policies.

Russia’s Ruble being backed by Gold makes it very appealing to Global Traders and in the long term could have dire effects on the US in Global Markets.

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