MARITIME INSECURITY IN THE STRAIT OF HORMUZ

MARITIME INSECURITY IN THE STRAIT OF HORMUZ

All the elements of war are in place between the United States, the West and Iran in the Strait of Hormuz (two miles wide). This maritime region is the world most important chokepoint representing a daily transit of 1/3 of all seaborne-traded of crude oil and other liquids. This Strait of Hormuz is the world most busy territory for the transportation of oil where more than 18 million barrels of oil transit every day.The Iranian violation of international maritime law in this region is an integral part of the dynamic of development of new world maritime order influence by the geo-politic of oil and the new political will of maritime nations to expand their national sovereignty in the maritime territory. This dynamic is characterized by new challenges to the freedom of navigation as it was established by international maritime law. Iran recent activities in the Strait of Hormuz is an expression of defiance to UNCLOS. This defiance is based on a geo-strategy that define the Strait of Hormuz as a maritime territory that must be totally under the control of Iran. China is developing the same geo-strategy in South China Sea. Dominant power (global or regional) must control the oceans in this period of development of the “blue economy”. This new ambition of maritime nations is a determinant factor of transformation of international relations. As a maritime nation, China is the world number 2 economy with capacity to influence the transformation in the global maritime order. Today, China is the world biggest investor and country of development of maritime industries and the “blue economy”. The Chinese “Belt and Road Initiative” is a demonstration of this reality. But, Iran doesn’t have the same economic and political influence on the world order. Iran is struggling to define its position as a dominant regional power in the Middle East. Challenges created by the American economic sanctions and the ambition to develop the atomic bomb are creating enormous pressure on the Iranian regime. By multiplying incidents on the Strait of Hormuz, the Iranian regime is sending an important message to the international community. The Strait of Hormuz is an important maritime territory. Disruption of the freedom of navigation in this region will have important negative impact on the world economy. In this moment of increase tension in international trade, the Iranian strategy of leveraging chaos is not the best solution. This systematic violation of international maritime law by the Iranian regime will increase the marginalization of the Islamic Republic in the international community and all factors of destabilization of this country.

DE-DOLLARIZATION

The De-dollarization is slowly transforming the architecture of international finance. The predominance of US dollar is diminishing. Shift of the world center of economic development from the West to emerging nation is creating a new equilibrium that is at the origin of de-dollarization. The phenomenon will be exacerbated by the current trade tension created by Washington. Dynamic of de-dollarization could lead to the creation of new alternative payment systems that will not be dominated by the US dollar. Countries at the forefront of the de-dollarization are China, India, Iran, Russia and Turkey.  In Europe the SWIFT is gradually being called into question. Creation of a new payment system could strengthen the process of de-dollarization. More than 60% of the world’s foreign exchange reserves and 70% of global trade transactions are in US dollar. The multipolar world is creating a multipolar currency system. 

US debt is $21.21 trillion-June 2018

This debt can be divided in 4 categories:

US Investors $6.89 trillion (32.5%)

Foreign Investors $6.21 trillion (29.3%)

US Government $5.75 trillion (27%)

Federal Reserve $2.38 trillion (11.2%)

US debt is $21.21 trillion-June 2018

Seventy percent (70%) of this debt is own by Americans.

Petro-Yuan

China’sgold-backed yuan oil contract is now a reality. The contract is trade on the Shanghai International Energy Exchange (INE).  The Petro-Yuan is challenging the predominance of the petro-dollar in the oil market. This competition can’t be neglected because it will create a monumental shift in the world international market. The objective of the Petro-Yuan is to end the supremacy of the US dollar as the standard currency in the oil trade. Development of the Yuan oil trading will help increase the use of the Chinese currency in global trade. Currently the Yuan represent less than 3% of global trade. About 90 % of all transactions in the $5 trillion/day FX markets are made in US dollar, but the Yuan represent only 4% of this global trade. These 2 factors explain why the competition between the Petro-Dollar and the Petro-Yuan is a long-term challenge. They are among the many factors that explain why the beginning of the Petro-Yuan is not very strong. OPEC state “the extent to which the INE contract is independent from government interference is currently the main risk factor facing western investors, which is in addition to a currency risk, given that the INE is settled in yuan” (OPEC-April monthly oil market report).But, this reality could change very quickly. About 60% of China’s crude oil import come from OPEC. According to OILPRICE, on March 27, 2018 the Petro-Yuan oil futures volume was bigger than Brent crude oil futures volume. This performance demonstrate that the Petro-Yuan will be the world 3rd global price benchmark for crude oil. Many countries are trading oil in Yuan, this is the case of Russia (world number 2 oil producer), Iran, Venezuela, ect. In the future, when Saudi Arabia will accept the Yuan as the currency of payment of its oil export to China, the balance of power between the Petro-Dollar and Petro-Yuan will dramatically change.Saudi Arabia is the world biggest exporter of crude oil and China is now the world biggest importer of crude oil.On January 2018, the Chinese import reach of 9.61 million b/d. The Yuan a isgovernment-controlled currency, but it is one of the 5 global currencies in the IMF’s Special Drawing Rights (SDR) basket. Value of the oil market is about $14 trillion, it is bigger than the Chinese economy. The Petro-Dollar is the essential instrument of the supremacy of U.S in the world economy. Growth of the Petro-Yuan will weaken this domination and create a huge transformation of the world capital allocations and trade flows.

"Black Panther" a billion-dollar film franchise

On Thursday February 15, 2018 when "Black Panther" will start showing in US movie theaters, the film will reach new high of profitability of black films. "Black Panther" opening week end will bring more than $200 million and break all records. "Black Panther" is a billion-dollar franchise and a tectonic shift in the financing of black films. The film will have enormous positive impact on the career of black talents and their future earnings in Hollywood. Worldwide box office will be more than $1 billion.

PETRO-DOLLAR vs PETRO-YUAN

PETRO-DOLLAR vs PETRO-YUAN
In 2018, the 1st yuan-denominated oil futures contract could be reality in China. This possibility is the result of the internationalization of the Yuan and the weakening of the dollar as the world reserve currency. It will totally change the architecture of the world financial market with emergence of the “petro-yuan”. China surpassed the United States as the world biggest importer of crude oil in April 2015 with 7.4 million barrels per day. Chinese import of crude oil is today about 9 million barrels per day. Now Asia is the world center oil consumption. This new dynamic could help China succeed to establish an alternative pricing and trading mechanism for the global oil trade. But, the “petro-yuan” could be only one of the multiple “petro-currencies” that will compete against the petrodollar. Among the future “petro-currencies” we can name the “petro-gold” and “petro-ruble”. Russia would like to create a ruble-based trading and pricing mechanism for its oil exports. The Urals oil futures traded on the Saint-Petersburg International Mercantile Exchange could be the instrument. The Trump administration disengagement from world leadership will help the emergence “petro-yuan”.