the headline China and Iran Plan Oil Barter. The purpose is basically to circumvent U.S. sanctions by avoiding use of the dollar. At the same time, Iran has threatened to cut off oil being sent to India. This is a very significant development that has been little understood.
According to the FT article:
"China's oil imports from Iran have risen 49 per cent this year, according to Reuters. Iran last week threatened to cut off oil exports to India, which owes $5bn for oil but has not been able to move the money out of an escrow account to Tehran.
Unlike India, which exports almost nothing to Iran, China is dominant in Iranian business and could use a barter system to balance trade between the two countries. Beijing is involved in everything from building tunnels to exporting toys and has been expanding into Iran's oil sector, where European companies such as Shell and Total have been deterred by the difficulties of operating without contravening sanctions.
China and Iran's bilateral trade totalled $29.3bn last year, up almost 40 per cent from 2009. The two countries this month signed several infrastructure and trade collaboration agreements that would see Chinese companies invest in big infrastructure projects in Iran, while Iran would export large quantities of chrome ore to China, according to local reports."
There is a great deal to understand from this report. One key message is that the dollar is no longer King. China and Iran are just two countries preparing for a post-dollar world. Right now, the problems are being masked by troubles in Europe and the debt ceiling discussions. This headline, however, demonstrates that Phase Three as we have described is already in process.
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