At an emergency meeting of the Arab League in Cairo, Lebanon’s Foreign Minister Gebran Bassil has proposed passing sanctions on the United States in retaliation for Donald Trump’s unilateral decision to recognise Jerusalem/Al-Quds as the Israeli capital.
The move has been condemned by an overwhelming majority of states and religious institutions throughout the world. The UN has also condemned the decision.
During the meeting, Bassil who is from the Maronite Christian Free Patriotic Movement, stated,
“Pre-emptive measures (must be) taken against the decision, beginning with diplomatic measures, then political, then economic and (then) financial sanctions”.
Such a move is not without precedent. In 1973, the Organization of the Petroleum Exporting Countries decided to increase the price of oil by 70%, while cutting production levels.
The oil embargo specifically targeted countries that supported Tel Aviv during the 1973 Arab-Israeli War.
While the United States is increasingly energy self-sufficient, a rise in oil prices and/or a cutting of supplies would still negatively impact the US economy. The oil embargo of the 1970s sent shock-waves through the Dollar based financial systems as well as US stock exchanges.
While it is not thought that America’s allies in the Persian Gulf would agree to sanctions or a wider energy embargo in 2017, movement among oil producing Middle Eastern nations away from the Petrodollar and towards the Petroyuan, could have a similar effect on US markets and the Dollar itself, even if embarked upon in a situation unrelated to the matter of Jerusalem/Al-Quds.
The fact that the US Dollar is the de-facto trading currency in global energy markets, is one of the main factors in stabilising the US fiat currency. In today’s global economy, swapping the Dollar for the Chinese Yuan as a primary currency in the energy trade, could have far longer lasting effects on the US economy than the 1973 oil embargo.
The issue of the Petroyuan has long been one discussed quietly even among US allies in the Middle East, however, now that the wider Middle East is at odds with the US in the most united sense since 1973, the Petroyuan could now become a geo-political tool as well as one used to gain monetary leverage against the Federal Reserve.
Although the Northern bloc of the Middle East, which Gebran Bassil was essentially speaking on behalf of, would be far more eager to hit the US economically than the Saudi dominated Southern bloc, because Saudi Arabia will be dependant on Chinese investment if it seeks to realise the highly ambitious Vision 2030 project of Crown Prince Muhammad bin Salman, there exists a long-term incentive for Saudi Arabia to consider a break with the Petrodollar in order to attract more investment and more confidence from a Chinese government which already has extremely healthy relations with Riyadh.
Thus, the Petroyuan is attractive not only to China and countries like the heavily sanctioned Iran, but also countries like Saudi Arabia that require a long term relationship with China in order to diversify its economy.
Here we see an area where Saudi Arabia could act in its self-interest while also re-gaining a substantial degree of lost credibility among the wider Arab world over the issue of Palestine. What for a country like Lebanon is about its own security and about Arab dignity, for Saudi Arabia, turning towards the Petroyuan as a means of sanctions against Washington through the back door, could be a self-interested move that would allow Riyadh much needed economic leverage against the United States, while gaining at least some levels support among the wider Arab world which feels the GCC’s close relations with Washington have compromised the Palestinian cause.
In this sense, one sees a powerful oil rich state in the Southern bloc of the Middle East, standing to gain from following the geo-political lead of a far less wealthy country in the North.
This could in the medium term, represent a wider “win-win” situation for a Middle East that is growing increasingly ill at east with America’s hegemonic role in the region.
A wider Middle East embrace of the Yuan could breathe new life into a region as a whole by preparing for the advantages of economic inter-connectivity which far outweigh the prima facie disaster of sectarian conflict. This would not only see countries like Lebanon and Saudi Arabia gain a uniquely common ground (however limited at first), but it could also only be good for peace in Palestine.
The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of The Duran.