Mexico Is Prepared To Sell Venezuelan Oil

Mexico is already joining a widening circle of countries who are prepared to defy US sanctions on Venezuela and deal with the South American country.

The United States accounts for less than 15% of the global economy and this is projected to decline to 13.86% by 2024 and yet it behaves as if it owns the world imposing sanctions on any country which doesn’t kowtow to it.

However, soon US sanctions will become a thing of the past with the petrodollar eventually losing its status as the oil currency of the world to the petro-yuan.

With the petro-yuan a reality now, major oil exporters are finally having a viable way to circumvent the petrodollar system. Undermine the petrodollar, and you undermine not only the US sanctions regime but also the US financial system and the US economy. That is exactly what China is doing right now.

The COVID-19 pandemic may have hastened the day when the dollar will crash. The pandemic and the economic crisis it has triggered have sent US budget deficit soaring to a peacetime record of 17.9% of gross domestic product in 2020. The dollar will not be spared under these circumstances. The key question is what will spark the decline?

Look no further than the Trump administration. Its protectionist trade policies, its withdrawal from the Paris Agreement on Climate, the Iran nuclear deal, Trans-Pacific Partnership, World Health Organization, traditional Atlantic alliances, its gross mismanagement of Covid-19 pandemic, its threat to impose sanctions on an ally like Germany because of its firm stand on the Nord Stream gas pipeline and Angela Merkel's refusal of the President Trump invitation to come to Washington DC together with spreading racial turmoil not seen since the late 1960s, are all painfully visible manifestations of America’s sharply diminished global leadership.

These events along with plunging domestic savings could weaken the dollar by as much as 35%. Trump’s trade war with China raises questions as who will fund the soaring US deficit if China stopped buying US Treasury bills and at what terms?

Like Covid-19 Pandemic, racial turmoil and the fall of the dollar will cast US global leadership in a very harsh light. The world is changing and the world order must be revamped. Pax Americana is virtually over and Washington must adjust to the new world.

Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London