Months after announcing a major energy deal, with Russia agreeing to sell $400 billion in oil to China, Russia's oil company Gazprom Neft agreed to accept rubles or yuan as payment last week. The primary reason for structuring the deal to incorporate rubles or yuan, according to one source, is because Russia is not happy with Crimean inspired, and U.S.-led, sanctions.
Why should anyone care, you ask? Good question.
Simply put, while it's another nail in the world's petrodollar coffin, it also signals more trouble for the United States global strategic position in the future (as if getting ourselves stuck in reckless wars of choice weren't enough trouble already).
One of the reasons the United States is able to print and export dollars around the world, especially at the levels that we see today, is because the world's biggest financial players have been willing to accept and hold U.S. dollars.
In fact, they've actively sought out U.S. dollars.
From drug and arms dealers to the petroleum and financial industries the U.S. dollar has been the unit of account and medium of exchange for virtually every major market deal around the world after World War II. There are many reasons for this - which I discuss at length in my book - but the key takeaway here is that this kind of "dollar hegemony" over trade also granted the United States extraordinary powers in geopolitics.
The ability to withhold dollars and credit from other nations - in the process threatening to destabilize and cripple national economies - has been a tremendous source of power and influence for the United States.
If two big nations like Russia and China can make this petro deal work, we are witnessing not just the end of the petrodollar era. We are also witnessing the gradual withering away of the power of the American dollar. With it goes America's ability to print and send dollars abroad with few to no repercussions (especially with reference to inflation).
This is a power that French President Charles de Gaulle referred to as America's "exorbitant privilege," which he railed against during the 1960s.
In all cases, as America's petrodollar era withers away, so goes the era of American hegemony.