The war on the petrodollar

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Since the Bretton Woods Agreement in 1945, countries worldwide have been forced to use the petrodollar to buy any form of oil. However, in the last decades, a new wind of protest is coming, that might very well throw away the petrodollar altogether.

After so many sanctions from the West, Russia is trying to find all ways to continue selling its gas abroad. Indeed, its economy needs the influx of foreign money, to keep the imports and exports balanced. The measures taken are a bold attempt at de-dollarizing the world.

Russia’s public debt

Russia is one of the countries of the world with the smallest debt compared to its GDP. Unlike the Western world which literally lives on debt, Russia has managed to clear its debt almost entirely.

Can you find Russia on this world debt chart?

Hint: Russia is at the outskirts, at the bottom right. Source: Visual Capitalist

People have been talking about a possible default for Russia, but this is just fearmongering. Yes, the sanctions and the war itself will take their toll on the Russian economy. Truth be told, the EU is currently laughing, ruthlessly applying sanctions ordered by the Americans, but I wonder how long it will laugh. This meme tells it all.


While sanctions have been used extensively against many countries, their benefit is doubtful at best. First of all, the perspective of sanctions has certainly not stopped Putin from invading Ukraine. Second, the ones who end up starving are the people, not the elites. It is now a very well known fact that economic sanctions have only one effect: spreading more poverty.

And I won’t drop a tear for this Russian millionaire who allegedly can’t pay his maid anymore. Besides, many Russian oligarchs approved of the war, at least at the beginning. Indeed, they feared being at a loss should Ukraine turn toward the West and cut its ties with Russia.

Additionally, it seems that the West has rushed out all sanctions at once. This wasn’t a smart move, as it is now lacking any kind of extra pressure against Russia. This has left โ€œthe enemyโ€ with some time to counterattack. I mean, anyone with a pair of neurons knows that you should never play all your cards at once. It looks like they don’t even teach the basics in schools for politicians. I mean, at least learn how to play cards!

… are useless

Of course, you may think that starving people might turn an angry crowd against their government. I mean, if any of our leaders in the West decides to wage a war, like in Iraq, Afghanistan, Libya, Syria, do we, the People have any say? We don’t. How could anyone in their right mind imagine that it would be any different in Russia?

Moreover, sanctions on the people by a foreign nation are also the best way of helping any dictator justify isolation and protectionism from the evil foes. And be right in the eyes of his citizens.

It does look like we are governed by lunatics with a total lack of common sense. Or maybe they did need a war and sanctions to hide the problems in their own countries. Like a crumbling economy and financial system. Or a 700+ billion dollar budget on the military that seems quite unjustified after pulling out of Afghanistan.

Russia stocks gold

For the last two decades, some countries like France and Switzerland have been massively selling their gold. On the other hand, Russia has stockpiled gold at an unprecedented rate. So has China.

While some Western countries sell their gold, Russia and China stockpile at an impressive rate. Source: IMF

Besides, Russia is the world’s second nation with the most gold to be mined in its soil behind Australia.

It is quite clear that Russia has tried to protect itself against any kind of sanctions thanks to its massive stock of gold. Now, the US attempts to ban any transaction involving gold with Russia worldwide. The problem is that, unlike an electronic transaction system like SWIFT, you can hardly ban anyone from transacting gold. It is untraceable and can be traded physically, melted and minted back.

Appreciating the rouble

Preliminary note: SWIFT is an electronic system that enables banks all over the world to exchange money. Most international commerce currently goes through it. Because of its monopoly, a number of countries, including Russia, have been developing their own transaction systems during the past decade. Besides, it is common knowledge that the US is doing everything it can to capture anything that transits through this system. Counter-terrorism, of course, nothing else, surely.

The sanctions from the West, including banning Russia from SWIFT, have really weakened the rouble. For the record, banning a whole country from SWIFT is unprecedented. A number of Iranian banks were once banned due to the Iranian nuclear program, but a nationwide SWIFT ban has never been applied anywhere else. Nevertheless, it hasn’t stopped the war anyway.

Besides, another set of sanctions, which nobody speaks about much, is those of the rating agencies. They have lowered Russia’s rating, which makes it more difficult for Russia to get credits from investors, and at least raises the interest rates to get foreign money. This is also a very important sanction, coming of course from the exact same West than the other sanctions. Indeed, rating agencies are part and parcel of the Western banking system.

As a result of all this, Russia is facing a very serious threat: the depreciation of the rouble. While this could be a godsend for a country with a lot of debt, it is not the case for Russia. A depreciating rouble means that Russia will have a hard time importing goods at affordable prices for its population.

The leverage of energy

However, despite the wild ban on SWIFT, Germany has stepped up immediately: without the Russian gas, it could not survive the winter. Just after the ban, the Germans have appealed to still keep SWIFT working with Russia only to pay for their gas.

If the Russians were indeed preparing for this war long ago, it makes you wonder why they did not attack Ukraine last November. They could have had even bigger leverage on the European gas in the heart of the winter. Besides, they love the cold, and they would have been able to use frozen soil to deploy tanks and other vehicles in the fields rather than being stuck on roads. Did they not have time to paint their tanks white?

Anyway, one sure thing here: the EU cannot simply stop paying for gas – it is a matter of survival. And some experts point out that even American gas cannot be an alternative at least for the next 10 years. The amount of infrastructure that would be needed, including transport ships, is massive. Here is the order of magnitude: gas transport ships around the world can currently deliver roughly one billion cubic meters of gas per year. The EU consumes 150 billion per year.

Putin is now taking advantage of Europe’s Achilles’ heel to salvage the rouble. He is now asking that gas be paid only in roubles by โ€œunfriendlyโ€ countries. In other words, he’s clearly saying: you want to put sanctions on my country, well I’ll make you a deal you can’t refuse that will annihilate those sanctions. And there are no more cards to be played on the EU side, sanctions-wise.

The petrodollar

For the record, since the end of WWII, petrol and gas have been universally bought using โ€œpetrodollarsโ€, a fancy name for… US dollars. There was no way around that, and those who have tried to do otherwise, such as Saddam Hussein and Muammar Gaddafi, have encountered some… โ€œminorโ€ problems, leading to their death.

However, the BRICS cooperation is not Iraq or Libya. China has been paying some of the gas it imports from Russia in yuan rather than in dollars since 2017. Check out the petroyuan. Note that Saudi Arabia, a historical ally of the US, is also changing its stance and considers accepting the petroyuan as well. Which is quite huge geopolitically.

Anyway, Putin’s move does seem to work, as the downfall of the rouble has been stopped. Indeed, if everyone needs to buy roubles to pay for their gas, then obviously there is some high demand for the rouble, which makes it more valuable.

In the meantime, US dollars that were used to buy Russian gas will be ditched, which will have an impact on its value. Granted, if it is only about the purchase of Russian gas, the effect could be quite negligible. However, if more international trade ditches the dollar, there is a possibility that a lot of dollars will go back to the US, worsening the current inflationary trend.


As I was already warning in 2017 in my book โ€œMoney: What You Don’t Knowโ€, Russia, among others, has been looking at cryptocurrencies very closely. Russia is working on creating its own legal Central Bank Digital Currency.

This currency would of course not be a real decentralized cryptocurrency, and in this sense, Russia is obviously opposed to them. Giving the power to the people is not really Putin’s credo.

But again, right now the master of the Kremlin is looking at all the possible ways of selling its gas. Including cryptocurrencies. But that’s only for โ€œfriendlyโ€ countries. This move is also new, as he did not seem to like cryptocurrencies that much in the past, even banning them from Russia at some point.

Money machines

As my readers already know, the US dollar, as well as the euro, are being created in an uncontrolled way. This is especially true in the last decades. Typically, the amount of euros has doubled every decade since its creation. No wonder inflation is now lurking around the corner!

The amount of euros created by the European Central Bank in the last 20 years is following an exponential curve. Source:

Gold rouble

So, following the new Russian counter-sanctions, โ€œunfriendlyโ€ countries are left only with two options when it comes to buying Russian gas starting March 31st, 2022. It is either with gold or with roubles.

Besides this quite bold move, Russia now starts pegging its rouble to gold. This is somehow a reminder that the rouble is not like Western currencies.

By pegging its currency on gold, the Russian Central Bank is calling for a return to the gold standard. Besides, it is also a warning sign to any investor, following the sanctions: anything left in Western hands can be seized at any time, for any reason. The message is clear: don’t trust Western banks, don’t fall for Western stocks which are volatile and can evaporate in a second; instead, go for the safe bet, the solid investment in gold – or now in roubles.

โ€œStandardsโ€ always fail

While this can be a smart move in the short term in response to sanctions, this could be a bad operation in the long term.

In popular culture, there is this opposition between a currency โ€œworth nothingโ€, โ€œprinted at willโ€, versus โ€œhard valueโ€, generally represented by gold. Unfortunately, pegging the value of anything to that of anything else is always a dead end.

We remember what happened to the โ€œgold standardโ€ with the US dollar. It caused the oil crisis in the 1970s when it was forcefully abandoned by Nixon in 1971. In the 19th century and the beginning of the 20th century, it caused a lot of misery. And Venezuela pegging the bolivar to the US dollar caused the downward spiral of hyperinflation.

I believe this โ€œrouble for goldโ€ is just for show, mostly a message to Western countries, a reminder that building one’s economy on debt might prove very dangerous.

Afterword: A recipe against war

It seems the recipe applied by the West to โ€œstop the warโ€ is non functioning, to say the least.

Here is a simple recipe to avoid war all over the world. If all countries agreed to this, we would certainly live in a more peaceful world. Set in stone the following in all constitutions of all countries of the world:

  1. No war can be started by a country without an open referendum.
  2. In the event of a โ€œyesโ€ to war, anyone who has voted โ€œyesโ€ is given a gun and goes directly to the front lines. No obligation is set on those who voted โ€œnoโ€.
  3. Once everyone in the first batch has been killed, initiate a new referendum to see if anyone new is willing to go on with the war.
  4. Rinse and repeat.

Crypto-euro: the ECB’s Ultimate Weapon

Disclaimer: what I explain here is viewed from the eyes of Central Bankers. If I were a Central Banker, I would think differently. But what I present here is the point of view of Central Banks, at least the one they make public. There is also quite a bit of speculation here on what choices they will make in the near future.


With public debt at extremely high levels everywhere in Europe and a dying banking system, the ECB (European Central Bank) and the Euro are on the verge of collapse. So is the US financial system, but for now we will focus on Europe.

In my 2016 book โ€œMoney, What You Don’t Knowโ€, I was already mentioning that Central Banks (including the ECB) were looking into crypto-currencies. During the last few years, the ECB has revealed bit after bit the possibility of having a Central Bank Crypto-Money in the short term. Citizens would have a bank account directly at the ECB. It has also recently spoken about โ€œhelicopter moneyโ€. How does all this add up? Why are all these needed? Or are they?

The root cause

The root of the problem is the way money is currently created. Right now, private banks are the ones creating the bulk of the money. At least, that is how it works in the Eurozone and in the US, as well as in some other places on Earth.

The system is similar all over the world: Central Banks issue fiat money, then the private banks take as much fiat money as they can from the economy, and start giving credits (loans). When a bank offers a credit, it creates that money, rather than having to take it from its reserves. And that money is destroyed upon paying back the credit. This system has many problems, as I have detailed in two books: โ€œMoney, What You Don’t Knowโ€ and the French ยซ La monnaie : l’essentiel ยป.

But now we will stop on one of its problems: the need for more and more money. Indeed, to fuel the mechanism of credits, you need to have more and more money in the economy. If the money supply diminishes at some point, the whole system collapses.

The problem

So, why is this a problem at all? Well, since the 2008 subprimes crisis, the economy by itself does not generate enough โ€œgrowthโ€ for the whole financial system to be sustainable. By the way, only theoretical economists don’t understand why this is a real problem. You cannot have infinite growth on a finite planet, it is quite a simple concept to understand. In this regard, maybe asteroid mining will save us. Maybe not.

Anyway, after the 2008 crisis, Central Banks faced one big problem: how to create enough money so that the banking system can continue operating? Obviously, growth was not sufficient and not enough credits were being made to create more money.

The first phase (2008-2015)

Central Banks don’t have so many tools to fuel the economy. They can create bank notes, but only to a certain extent. Printing a banknote costs money. By contrast, creating money for a credit is essentially clicking the button of a mouse on a computer. This is why, in the Western world, 90% of the money is digital and created by private banks. It is quite different in other places, where people mostly use cash in their daily lives.

Anyway, the role of Central Banks is to take care of the banking system and ensure its survival. When they saw that money would be scarce if they didn’t do anything in 2008, they had to take action.

To save the banking system, the Central Banks used their first tool: the Official Bank Rate. Indeed, this rate has a direct influence on the interest rates at which private banks give credits. And of course, interest rates are one of the main drivers behind the decision to take a credit or not.

If interest rates are high, people are more reluctant to take a credit, given that they will have to pay back a lot more for the credit. Conversely, when interest rates are low, people are more inclined to take a credit. This is quite obvious.

By lowering the interest rates, the Central Banks managed to make banking credits very attractive, thus pushing people to take more credits.

The second phase (2015-2021)

This system looks great. However, when you still need to stimulate the credits and the interest rates have been lowered to the point where they are negative, you have a problem. No banking system can survive giving out money to people who take a credit. And indeed, the interest rates became negative in quite a short time.

The Central Banks, including the ECB, had to find another way of keeping the system afloat. The problem is that they can’t really do much. Normally, they are actually not allowed to create so much digital money. That digital money is also supposed to be only used by the banking system to exchange debts and bills between banks.

However, it was a matter of life and death. The ECB, along with other Central Banks, started using a tool that is normally prohibited and used only in emergency cases: Quantitative Easing. Basically, the Central Bank is โ€œbuying public debtsโ€ and injecting money into the financial system.

Through all those actions (interest rates and quantitative easing), the Euro money supply has doubled every 10 years in the last 2 decades! That is a 10% yearly inflation rate! For more detail, I explain all this in my book.

What now?

Quantitative Easing cannot go on forever. Furthermore, it doesn’t seem to solve the problem so much. Indeed, I have mentioned a 10% inflation rate, but that is not what we observe in everyday life. Yes, prices increase, but they don’t double every 10 years. In fact, the money that is generously dispatched by the Central Banks never goes back to the โ€œreal economyโ€. It remains in the banking system, where banks use it to gamble on the stock market and also keep it in their accounts as a safety net. Who thought tickle-down economy was real?

Central Banks have to face the fact that they need another tool if they want the banking system to survive. Maybe the best way would be to acknowledge the failure of that system, but doing this would put their credibility at risk.

Debt and Inflation

So far, the ECB has set a target for a 2% yearly inflation (roughly). Although inflation can be calculated with a lot of biases, let’s pretend it did achieve that goal in the last 10 years.

The problem is that there is a lot of debt in the economy right now. Private companies are especially accumulating debt following losses during the Covid lockdowns and the general slowing down of the economy. Similarly, the already very indebted states everywhere around the world are forced to have more debt to finance their collapsing economies.

From the standpoint of a Central Bank, there is one way to fight debt and relieve the economy from it: inflation. The idea is simple: if you owe a fixed amount of money, and money is worth less and less value, then you owe less and less as a result. Typically, if you manage to have 10% inflation per year, your debt is simply halved in 10 years.

However, remember that a Central Bank is not supposed to create money directly. So they have to change the rules.

A Digital Currency

The ECB is making more and more statements in favor of a โ€œdigital euroโ€. Some call it a โ€œcrypto-Euroโ€, but this is clearly a misnomer since a centralized crypto-currency is nothing more than an oxymoron! In reality, it is called a โ€œCentral Bank Digital Currencyโ€, or CBDC.

Anyway, the idea behind the ECB’s digital money is that every citizen of the Eurozone would have a digital wallet at the ECB. In other words, along with your bank account, you and I would also have an ECB account. The amounts allowed in that account would be limited to a few thousand euros, but it would be there.

The main driver behind this, the ECB says, is that โ€œcitizens are ditching cashโ€.

Really? What is the point of this? Why such a big change, a big communication, on an account where you could have a few thousand euros when there are billions of euros turning around every day?

Helicopter Money

โ€œHelicopter Moneyโ€ is simply money created by the Central Bank and freely distributed to citizens. In Europe, Mario Draghi, the President of the ECB at the time, said that the concept was โ€œinterestingโ€. Peter Praet, the Chief Economist of the ECB, stated:

Yes, all central banks can do it. You can issue currency and you distribute it to people. Thatโ€™s helicopter money.

Although there is no official statement that the ECB is looking into it, there are many people pushing for it.

Now, you need a system to distribute helicopter money. If every single person has 5 bank accounts in 5 different private banks, it is quite difficult. You also have to distinguish between associations, private companies, and individuals.

Now, if every individual in the Eurozone had a bank account directly at the ECB, now things would be made much easier! The digital account at the ECB is the prerequisite for Helicopter Money.

Is it a serious option?

Think about it. The banking sector lacks money. They are literally paying people to take credits! The ECB has tried everything it could to inject more money into the banking system, and it’s running out of options. There is a lot of debt around that will simply choke the economy in the long run.

Now, you have a tool that lets you inject money directly into the economy, by giving it directly to the citizens. You create money. You create inflation, which will lower the overall debt. And in the meantime, you get rid of cash, which costs you money and empowers your citizens – along with money laundering.

If I were in a Central Banker’s shoes and I wanted to keep the system alive, I wouldn’t think twice. I would go for it without a micro hesitation.

A new centralized โ€œthingโ€

Let’s not delude ourselves about the intentions of such an innovation. It is a new control tool, nothing else. We could even name it a โ€œsupreme control toolโ€.

For a while, people have been hinting that it could go much further than simple โ€œmoneyโ€. For instance, it would be possible to distribute digital โ€œfood vouchersโ€ with this system. In other words, you would receive โ€œmoneyโ€ on your account, but you would only be able to use this money to buy basic food products with it.

One can also imagine a โ€œbasic incomeโ€ indexed on your โ€œratingโ€, given to you by the state, based on your โ€œgood behaviorโ€. A typical example is the Chinese โ€œSocial Creditโ€. It is not yet used to distribute money, but it could very well be the next step. It could also drive the level of tax you would have to pay.

In other words, this system enables a whole new range of control tools.

What about us?

Again, this is only the vision of a Central Banker. As an individual who has thought a lot about money, we would be better off throwing away the current banking system. Restart from scratch. It wouldn’t be the first time in history. And sometimes, a fresh start with a better system is much better than letting the older one rot away.

Some people may think that this is a version of a Universal Basic Income. Well, maybe. But I warned in my books that the UBI can also be a trap. A sneaky method to help the corrupt system survive.

But for us, citizens, there is already an alternative, and every single one of us can choose it freely: Libre Money. Be sure to check out the Relative Theory of Money, as well as my book โ€œMoney: What You Don’t Knowโ€ to discover your options.

The book “Money: What You Don’t Know” is out!

Welcome to this blog!

As a first post, I’m excited to announce that my new book, “Money: What You Don’t Know” is out!

It explains in simple terms how money works in general, this “thing” we use daily and which is so important, but that we know so little about. It addresses the history of money, Central Banks, speculation, and even crypto-currencies and local complementary currencies.

It is available on main platforms:

Besides, you can also get any version in the ฤž1 currency, just send me an email (you know my first name, and the domain has no “blog” in it).

I would love for you to write comments on Lulu and Amazon about the book (especially if you liked it!).

Besides, don’t forget to subscribe to my newsletter on the left panel of this page, I’ll keep the volume very low, such as new books or new editions.


PS: in case you have French speaking friends who might be interested by the French version, it is also available here.