The end of an era: is the US petrodollar under threat?

Rise of the Yuan

It is no secret that Beijing has been looking to promote the yuan as an alternative reserve currency. Having that status would allow China cheap access to world capital markets and cheaper transaction costs on international trade, not to mention increased clout as an economic power commensurate with its rising proportion of world commerce.

However, the Chinese have a problem in their plans for the yuan. The government has not yet removed capital controls that would allow full convertibility, for fear of unleashing a torrent of speculative flows that could damage the Chinese economy.

However, "[It] is clear that China is laying foundations for wider acceptance of the yuan," said Karl Schamotta, a senior market strategist at Western Union Business Solutions," as quoted in an International Business Times article. IBT pointed out that "more than 10,000 financial institutions are doing business in Chinese yuan, up from 900 in June 2011, while the pool of offshore yuan, non-existent three years ago, is now near 900 billion ($143 billion). And the proportion of China's exports and imports settled in yuan has increased nearly sixfold in three years to nearly 12 percent."

Conspiracy Theory Spoiler Alert

Adding some vivid color to this story, Casey Research energy analyst Marin Katusa speculated in a recent column that the death of Total CEO Christophe de Margerie, whose private jet collided with a snowplow in Moscow, may not have been an accident. Instead, Katusa muses that the mysterious circumstances surrounding his death and the unlikely odds of being hit by a snowplow at an airport, could have more to do with de Margerie's business interests in Russia than being at the wrong place at the wrong time.

According to Katusa, de Margerie was "a total liability" due to Total's involvement in plans to build an LNG plant on the Yamal Peninsula along with partner Novatek. The company was also seeking financing for a gas project in Russia despite Western sanctions.

"It planned to finance its share in the $27-billion Yamal project using euros, yuan, Russian rubles, and any other currency but U.S. dollars," Katusa writes, then entices the reader with this: "Did this direct threat to the petrodollar make this 'true friend of Russia'-as Putin called de Margerie - some very powerful and dangerous enemies amongst the power that be, whether in the French government, the EU, or the U.S.?"

That may be a stretch, but Katusa's U.S. dollar reference shows that any developments that point to a move away from the dominance of the greenback are not going un-noticed.