♠ Posted by Emmanuel in
Currencies,
Energy,
Middle East
at 4/05/2019 04:03:00 PM
Here's some news important to the study of IPE that has been flying under the radar. American lawmakers have, since the turn of the millennium, been contemplating passage of a "NOPEC" law removing the immunity of nations from American antitrust laws. As the name implies, the main target is collusion on setting global oil prices by OPEC member countries. In response to the Trump administration's increasing
browbeating about high oil prices and OPEC's role in causing them, Saudi Arabia has come up with a potentially consequential strategy. That is, the Saudis will begin pricing their oil in a currency
other than US dollars:
Saudi Arabia is threatening to sell its oil in currencies other than the
dollar if Washington passes a bill exposing OPEC members to U.S.
antitrust lawsuits, three sources familiar with Saudi energy policy
said.
They said the option had been discussed internally by senior Saudi
energy officials in recent months. Two of the sources said the plan had
been discussed with OPEC members and one source briefed on Saudi oil
policy said Riyadh had also communicated the threat to senior U.S.
energy officials.The chances of the U.S. bill known as NOPEC
coming into force are slim and Saudi Arabia would be unlikely to follow
through, but the fact Riyadh is considering such a drastic step is a
sign of the kingdom’s annoyance about potential U.S. legal challenges to
OPEC.
In the unlikely event Riyadh were to ditch the dollar, it
would undermine the its status as the world’s main reserve currency,
reduce Washington’s clout in global trade and weaken its ability to
enforce sanctions on nation states.
“The Saudis know they have the dollar as the nuclear option,” one of the sources familiar with the matter said.“The Saudis say: let the Americans pass NOPEC and it would be the U.S. economy that would fall apart,” another source said.
Despite being a dollar bear, I am unsure if the Saudis denominating oil sales in another currency would be the proximate cause of the dollar becoming an even less dominant currency worldwide. At any rate, here's a NOPEC description:
NOPEC, or the No Oil Producing and Exporting Cartels Act, was first
introduced in 2000 and aims to remove sovereign immunity from U.S.
antitrust law, paving the way for OPEC states to be sued for curbing
output in a bid to raise oil prices.
While the bill has never
made it into law despite numerous attempts, the legislation has gained
momentum since U.S. President Donald Trump came to office. Trump said he
backed NOPEC in a book published in 2011 before he was elected, though
he not has not voiced support for NOPEC as president.
Trump has
instead stressed the importance of U.S-Saudi relations, including sales
of U.S. military equipment, even after the killing of journalist Jamal
Khashoggi last year. A move by Saudi Arabia to ditch the dollar
would resonate well with big non-OPEC oil producers such as Russia as
well as major consumers China and the European Union, which have been
calling for moves to diversify global trade away from the dollar to
dilute U.S. influence over the world economy.
It could be potentially exciting, eh? The real question for me is what would cause such a dramatic rupture in US-Saudi relations that the Arabs would stop pricing oil in USD. Still, I do not think the economic consequences for the dollar would be catastrophic. If many others follow suit, though, then we may be on the cusp of a whole new international political economy (though I doubt it).
