Inflation traders do not seem to be pricing in any geopolitical risk when determining five-year forward five-year breakevens because the breakevens are determined by taking central banks' inflation targets as a given and considering liquidity rather than doing top-down or bottom-up analysis. What follows are higher inflation rates in the West.

The market has not yet fully realized that the emerging multipolar world results in smaller cross-currency bases and larger commodity bases. This induces a shift away from the use of US dollars in international trade. Going forward, oil and gas may not be available to the West at low prices due to encumbrance by the East.Ĭhina plans to increase its oil and gas purchases from GCC countries and pay for them in renminbi over the next three to five years. Russia, Iran, and Venezuela account for about 40% of the world’s proven oil reserves and are selling oil to China at a steep discount. The US has sanctioned half of OPEC, that have 40% of the world’s oil reserves. What are the results of the cooperation between China and GCC? In the next 3-5 years, China is prioritizing all-dimensional energy cooperation with GCC countries, including the import of large quantities of crude oil and natural gas, cooperation in the upstream and downstream sectors, and the use of the Shanghai Petroleum and Natural Gas Exchange platform for RMB settlement in oil and gas tradeĬhina and GCC countries may also engage in currency swap cooperation and advance the m-CBDC Bridge project The invoicing of oil in renminbi could hurt the dollar's value and lead to more inflation in the West. President Xi’s Speech at the China-GCC SummitĬhina's visit to the Gulf Cooperation Council (GCC) marks the first China-Arab States Summit in history. This marks the birth of the petroyuan and an increase in China's control over OPEC+'s oil and gas reserves. The GCC - Gulf Cooperation Council is a political and economic alliance of six countries: Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates. Bretton Woods III is taking shape with the motto ' our commodity, your problem.'Ĭhina is building a 'special relationship' with Russia and all of OPEC+ through its relationship with Saudi Arabia and the GCC. The financial relationship between China and Russia has implications for the future of the US dollar and liquidity in the US Treasury market. The G7 of the East (consisting of the BRICS - Brazil, Russia, India, China, and South Africa - countries) is building a new multipolar world order.

The actions of heads of state are more important than central banks' actions in shaping the global economic order. In this case, the collateral is oil and gas traded between China and its trading partners, making it unavailable to Western markets. What does it mean? The concept of 'encumbrance' in finance refers to the use of collateral in specific trades, which can limit its use in other trades and potentially lead to scarcity of collateral. To maintain the main points he is making, this summary got longer than the previous one.Įncumbrance plays a significant role in Zoltan’s article. It’s a much more comprehensive report compared to that of November 2022. This is a summary of Zoltan Poszar’s newest piece from December 2022.

Lyn alden oil