The US government hasn't used their military to force anyone to transact in dollars, or even threatened to do so.
The dollar has value primarily because taxes inside the US are denominated in dollars. If you don't pay your taxes with dollars then eventually civilian law enforcement will show up and seize your assets.
Oil is trading against Yuan for a number of years now:
> Traders appear to embrace yuan oil futures contracts, pricing them similarly to the Brent and WTI benchmarks, says analyst
> According to Bloomberg Intelligence, the volume of crude oil contracts traded on the Shanghai International Energy Exchange (INE) accounted for 10.5 per cent of the global volume at the start of June compared to 6.2 per cent in the second quarter of 2018.
And with the Euro being explicitly set up by other countries with the intention of challenging the USD as a global reserve currency without the US so much as wagging a finger at them, it's a little hard to believe that the "real" reason a US administration dominated by neoconservative hawks resumed a decade-old conflict with an outspoken enemy in a strategically important region full of oil at a time the country was obsessed with fighting sponsors of terrorism was the relatively insignificant decision to accept Euros for some types of international payment...
The best you could say about that theory is that it's confusing cause and effect. Other nations which have been hostile to and sanctioned by the US for some time also shifted from dollars to Euros.
Ah absolutely, the much more tangible short-term example of “guys with guns” is (admittedly ever more militarized) domestic law enforcement.
But the implied threat towards anyone who say, started dumping US sovereign debt, or transacting petroleum in EUR, or whatever is very real. Countries have been liberated for less.
Thank you for the links. I was unaware that the PRC’s Treasury holdings had been pared back so much.
I do think it’s interesting to note that both of the examples you used are the only two countries that the US military wouldn’t like to try its hand against. And there is a broader point there: my original point becomes less relevant the further that global US hegemony slips.
I admit it is mighty convenient for the US to have the dollar as the reserve currency, but really, you are stretching your point, people outside US not accepting US dollars don't have violent threats looming over them.
Besides the Iraq thing someone mentioned, Gaddafi in Libya got taken out right after he spoke about wanting to sell oil in euros.
But most importantly, there's Saudi Arabia. Saudi Arabia has no military except the US military, and Saudi Arabia prices oil in dollars. It isn't conceivable that they could price oil in another currency and still receive protection from the US (i.e., continue to exist).
The US kind of "has" to continue this arrangement because if the world stops trading oil in dollars, the demand for dollars plummets and the dollar crashes because there are just too many dollars out there. The Fed can't "suck in" all that excess money without causing a severe recession/depression.
The US gains some minor benefits by providing the reserve currency used for most international oil trades. However that's only a small fraction of worldwide dollar use. Even if everyone switched to trading oil in euros tomorrow that wouldn't cause a dollar crash.
This article is interesting and helpful. So, thanks.
That said, I'm not 100% convinced. If we stop trading oil in dollars, doesn't that reduce the need for countries to keep dollars in reserve? It could be the beginning of a slippery slope.
The amount of dollars kept in reserve to trade oil with certain petroleum exporters is a tiny proportion of total dollars in circulation
What is useful is having quadrillions of dollars of other payment obligations denominated in dollars, from the IRS to mortgage debt to IMF loans to international financial markets to people paying cash rent in Ecuador, and a central bank that can raise interest rates if it believes the demand for dollars is falling.
Sterling is still valuable, despite the fact it stopped being the main global reserve currency decades ago and the UK doesn't have any real ability to invade people to change that.
> Besides the Iraq thing someone mentioned, Gaddafi in Libya got taken out right after he spoke about wanting to sell oil in euros.
Source? Specifically, a source that can pinpoint a statement by a Libyan official in the immediate run-up to the intervention in Libya (i.e., late 2010 or early 2011) indicating a desire to switch to selling oil in euros.
The closest I've ever seen to such a source is that one of the cables released in the Wikileaks leak reported that a source close to Sarkozy outlined a few reasons why he wanted to intervene of Libya, one of which was a desire to replace the CFA franc (effectively backed by France) with a gold-based Libyan dinar.
I... am stunned why people think this in any way supports the narrative of petrodollar-supremacy. Because neither oil nor dollars are implicated in that string of statements at all. Especially GP's summary of the statement--"we bombed Libya because they wanted to price oil in euros instead"--is at complete odds with the implied statement here--"Libya wanted to move from euro-backed currency."
Now it's important to note the context of the source. The diplomatic cables are--effectively--gossip reports. In general, they're not indications that anyone actually believes them, nor indications that their reports are causes for action. A report that a French president is concerned about threats to French suzerainty in its former African colonies is exactly the sort of thing that I'd go "right, I believe that... and I don't care." There is yet, to my knowledge, any evidence that this actually influenced US foreign policy in any manner whatsoever, let alone supports the petrodollar-supremacy narrative.
> If not supremacy of dollar, what reason do you hold dear for the toppling of yet another sovereign government in this case?
Why the US and the West targeted an anti-Western, terrorism exporting dictatorial regime with a history of trying to acquire WMD whose overt ideology was a blend of totalitarian socialism and a unique version/descendant of Islam during a period where it was unusually active in targeting anti-Western, Islamic regimes especially those with a history of trying to acquire WMDs under the aegis of a war on terror?
Dunno. Must be rumors that they planning to move away from the CFA Franc somehow raising worries that they’d stop selling oil for dollars.
I think dragontamer has a compelling answer that is better put than I could have, but I would add one thing. Russia and China could have vetoed the UN resolution that effectively signed the Qaddafi regime's death warrant. But they didn't. Even if you don't care to understand anything about Middle Eastern or North African politics, that alone should suggest that there exists other reasons than naked Western imperialism for the toppling of the Qaddafi regime.
Saudi Arabia has the fifth largest military budget in the world. They spend more than Germany, France or the UK. Their training and readiness probably isn't nearly as good, but to say they have no military is ... odd.
More to the point, many nations sell oil for non-USD. It's quite common. Further, the oil trade is a small fraction of international USD movement. The idea that the "petrodollar" is a major factor in international politics is... unlikely to be true.
Saudi Arabia has a large military to deal with external threats. And they also have a large and separate National Guard to protect the royal family from coups and terrorists.
