During the period from 1960 and 1989, relations between the two countries were extremely bad. At the height of the Sino-Soviet split, a seven-month long war was fought between the two over areas of their common border that was not fully resolved until 1991. Part of the battle was ideological as to the “best” form of communism. Since both systems failed, no winner was declared. Conspiracy theorists claim that the United States produced some incidents that created deep suspicions between China and the USSR. These interlocking deals are a critical development in the worlds’ energy picture. But more than that is the continuing and increasing cooperation and union of the Russian bear and the Chinese dragon.
The world needed oil for the economy. Washington, in a 1975 deal with the Saudi monarchy, insured that Arab OPEC would refuse to sell one drop of their oil to the world for any currency other than US dollars. The value of the dollar soared against other currencies such as the German Mark or Japanese Yen. Wall Street banks were awash in petrodollar deposits. The dollar casino was open and running, and the rest of the world was being fleeced by it.
For several years it’s been known in gold markets that the largest buyers of physical gold were the central banks of China and of Russia. What was not so clear was how deep a strategy they had beyond simply creating trust in the currencies amid increasing economic sanctions and bellicose words of trade war out of Washington. Currently, in addition to founding members China and Russia, the SCO full members include Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan. At the September 5 annual BRICS Summit in Xiamen, China, Russian President Putin made a simple and very clear statement of the Russian view of the present economic world. He stated,
“Russia shares the BRICS countries’ concerns over the unfairness of the global financial and economic architecture, which does not give due regard to the growing weight of the emerging economies. We are ready to work together with our partners to promote international financial regulation reforms and to overcome the excessive domination of the limited number of reserve currencies.” To my knowledge he has never been so explicit about currencies and American dollar. hina will soon introduce a crude oil futures contract denominated in yuan and convertible into gold, the Nikkei Asian Review reported on September 1. Analysts say that since China is the world’s largest oil importer, the move could deal a major blow to the global influence of the United States dollar.
The contract would allow oil exporting nations such as Russia, Iran and Venezuela to conduct sales in yuan, instead of in U.S. dollars, and to then change the yuan into gold on both the Hong Kong and Shanghai exchanges. This would also allow these countries that often fall afoul of American foreign policy to circumvent dollar-based U.S. sanctions.