ZeroHedge: Iran Moving to Phase Out Petrodollar; Will Accept Gold For Oil

A Reuters report from Tuesday says that Iran is moving to accept gold and foreign currencies for its oil in the wake of economic sanctions against the country over its nuclear program. "Significant difficulties in making dollar payments to Iranian banks have forced Iran's trading partners to look for alternative ways to settle transactions, including direct barter deals."

The sanctions have been imposed by the United States and the European Union. Amid pressure from the United States, Japan and Korea have announced quota cuts, but major trading partners such as China and India are continuing imports of Iranian oil.

"In its trade transactions with other countries, Iran does not limit itself to the U.S. dollar, and the country can pay using its own currency," central bank governor Mahmoud Bahmani was quoted as saying. "If a country should so choose, it can pay in gold and we would accept that without any reservation."

ZeroHedge points out that alternative payment methods which do not rely on the U.S. Dollar can only occur with the complicity of major world powers which trade with Iran. If countries such as India, China, and Russia begin bartering gold for oil, it could further undermine the U.S. Dollar which remains in a long-term downtrend.

The fact that much of the world's oil trading occurs in U.S. Dollars, and that crude is priced in Dollars, underpins the greenback's status as the world's reserve currency. One interpretation of the news out of Iran is that a system between major global powers to phase out the use of the petrodollar is now gaining momentum as a result of the sanctions and a need and willingness to skirt them.

Earlier this month, ZeroHedge wrote that "according to the FT, China has decided to commence a barter system in which Iranian oil is exchanged directly for Chinese exports. The net result: not only a slap for the US Dollar, but implicitly for all fiat intermediaries, as Iran and China are about to prove that when it comes to exchanging hard resources for critical Chinese goods and services, the world's so called reserve currency is completely irrelevant."

Now, reports indicate that Iranian crude will not only be traded for exports, but also gold as well as basically any foreign currency. ZeroHedge notes that the news could be interpreted to suggest that "gold is 'suddenly' just as equally accepted as a pseudo-reserve currency virtually everywhere in the world, as the dollar: a blasphemous concept to many legacy economists for sure. But the truth is that gold and barter appear to be working."

The key takeaway from these reports is that major powers such as India, China, and Russia are complicit in moving away from the petrodollar in order to import Iranian oil, and this could be an early warning sign about the future of the greenback as the world's reserve currency. It also implies that countries such as China are becoming more and more disturbed by U.S. fiscal and monetary policy and recognize that a trade system which is not so heavily dependent on the Dollar might be a necessity in the future.