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That’s about as nuclear of an option as they can threaten in terms of geoeconomics and how they’ll directly impact the US, tbh.
For those in the back: they’re threatening to jump on the bandwagon that’s shifting away from the petrodollar, which would have absolutely catastrophic consequences for the US economy, as well as in general. Think “fall of the USSR” type shit. This is not an exaggeration.
And yeah, it can absolutely be argued that the petrodollar was a stupid fucking idea for a lot of reasons. But it did let the US more or less not care about debt at all for over a half century. Pulling that rug is going to have a lot of consequences in a lot of places all over the world - not just the US - and will ultimately yield a lot of chaos.
I think some people might not grasp the scale of destruction and death that resulted from "The fall of the USSR". Western neoliberalism doesn't really teach this as the absolute crime against humanity that it was. They think they just got pizza huts.
It was the single greatest decline in life expectency rates in recorded history that was not caused by a disease, famine, or war. Ukraine became the child sex trafficking "capital" of the world.
The capitalist oligarchs will do it again to the western world as long as they are able to maintain their positions of power. The "fall of US democracy" or whatever history will call it, it's not the fall of the oligarchs that run that nation. They will be fine. The people and the working class of the US will suffer the consequences.
This guy economics.
It's no small threat, but you have to keep in mind that the UAE doesn't produce that much oil to begin with. If they did go ahead with it, little consequences would be felt immediately. If they can convince Saudi to do the same, however...
It’s more about the precedent that it sets than their outright share of global oil trade.
It's still a long long road to get there though.
While I agree that shifting the world away from being so US-centric is a good idea long-term, this is absolutely not the way to do it. This is going to cause an absolute shitload of harm everywhere - and not just to Western countries, lest you think I’m trying to be an apologist for them. The only parties that this will unequivocally benefit are Russia and NK. Even China is gonna feel some splash damage from the (now ongoing) collapse of US geopolitical and geoeconomic stability.
The end of the USD Reserve status is going to cause an absolute shitload of harm in the US (at the very least, huge inflation) but how much damage is it really going to cause elsewhere?
The US isn't a keystone nation in most manufacturing processes anymore, nor does it produce anything that nobody else does: Modern day America mainly exports Social Media and enshittification. Even things like cloud services are provided by datacenters all over the World with the ones based in North America serving North America.
The greatest value of the US for the rest of the World is as a big consumer market for their exports, not as an essential provider of anything which is physically bound to it.
Absolutelly, there would be damage, especially for any nation left holding US Treasuries to the end (especially in the worst scenario of a US default), but "absolute shitload of harm" outside the US, that doesn't seem likely: if the US magically dissapeared today a bunch of multinational companies would see their Revenues fall maybe 15% but otherwise things would just keep on working because very little the US makes is key.
Granted, countries for which the US is a disproportionatelly high export market like Canada and Mexico would suffer a lot economically, plus Israel would collapse without America's propping up, but beyond that ...
Importance of Petrodollar is overstated. Currencies are easily exchangeable, and the value of GCC colonies is the massive recirculation of oil profits to US investments/weapons, The harm to US that comes is the economic destruction of GCC, and US incapacity to protect them, which forces them into alliance with Iran/China. Their previous necessity of US/Israel alliance was to protect them from US/Israel coups/attacks that would install an Israel puppet like in Lebanon/Syria, or Reza Pahlavi for Iran.
It's possible for GCC to end up without US bases, but still buy US/Israel protection without their weapons. Its easier to have free shipping if they let go of Israel support. Free shipping is what permits GCC to invest in the US to buy protection from US/Israel. They may try to walk that fine line, but in short term (and long term renewable penetration) they will invest everything in their own reconstruction.
Slowly, and then all at once
Yes but that's decades still
That really depends on whether or not there is a tipping point were an exit from the USD becomes a positive feedback cycle were states ditching it cause more states to do so (which is probable, IMHO), and if so how far we are from it.
I don't think we know enough to be able to say that there's no such tipping point or we're far from it and, similarly, we can't really say there is for certain such a tipping point and this action by the UAE would be enough to reach it.
All we do know is that over the last 2 decades the USD has decreasing as a fraction of foreign 1currency reserves in most of the World.
This is true but realistically neither the RNB or EUR are anywhere near a position where they could take over this role without massive structural changes, and % of world reserves in $ are still a lot higher than they were even in parts of the 2010's. This is not something that will happen quickly if it does happen. It will take decades and the US will almost have to take part in bringing it about.
The EUR absolutelly is - the EU is a big stable open economy with large Financial Markets a freely trading currency and deep Treasuries markets.
It's not by chance that over the last 2 decades mainly the EUR has taken a bigger and bigger slice of foreign exchange reserves away from the USD, with by 2025 the EUR being roughly 1/3 the amount of USD reserves (see here).
(That said, looking at that data, the EUR and USD foreign currency reserves have barelly moved since 2017)
Agree on the RNB not being ready - China's currency isn't freely traded and neither are their treasuries, and access to mainland Financial Markets is highly restricted. That's reflected on the above mentioned foreign exchange reserves where the RNB is but 1/10 of the EUR reserves.
The EUR lacks
As someone who actively invests in both continents and has lived half his life on each, I can tell you that the Euro has extremely meagre investment options compared to the US. No one will hold trillions of EUR in a reserve currency with such a lack of investment options and such a fragmented and difficult system to navigate. The lack of liquidity alone already counts it out for institutional investors. You can't invest in a market where you can't buy and sell freely.
Which is not to say the EU couldn't fix this and step up to the plate. They could create a eurobond and a single stock market (Germany is the main one blocking this). But even if the EU did manage this, they would have to accept a massive strengthening of their currency which would choke off exports, for which Europe still counts on. They would have to deindustrialize much of the same way the US did and go to a services economy. There are a lot of powerful lobbies that wouldn't go for this.
With Bretton-Woods collapsing, it might soon be time for this, but the EU is still quite timid when it comes to doing anything that can invite the ire of the US. Which brings me to the final point. The US has 7 times the navel assets of Europe combined. If the EU really pissed the US off, the US could just blockade them until they cried mercy. Changing this would take absurd amounts of money and time.
That chaos has been long overdue, honestly.
We could have made a gradual transition to a more sustainable paradigm, had we begun investing societal resources in it years ago when people were calling for it. That didn't happen, the oligarchs doubled-down on the old paradigm, and smothered anything trying to build the new paradigm so it couldn't compete. They'll deserve every bit of economic pain this brings them.
For all the working class people who depend on their 401ks, or who will get laid off during a recession, yeah it's gonna suck. It'll hurt. But these are the birth pains of a new era. Let's try to make sure this new era turns out to be an altruist instead of a sociopath like the last one?
Again, we could have made a smoother transition to the inevitable. However, society collectively decided to put its head in the sand and pretend it could bring back some glorified past that never was.
Sooo... as someone who was trying to spread the word several years ago, and was shunned and ridiculed for it, the schadenfreude is going to be freaking real. I'll be starving in a ditch with everyone else and still saying "I told you so."