Gold for oil deals has become increasingly popular in recent years as a way for countries to bypass the use of the US dollar as the global reserve currency and to diversify their economic partnerships. As a result, there has been a growing trend of countries striking deals to exchange gold for oil in recent years. These deals are typically made between countries with large reserves of gold, such as Russia and China, and countries with large reserves of oil, such as Saudi Arabia and Venezuela.
US dollar
The main motivation behind these gold-for-oil deals is to bypass the use of the US dollar as the global reserve currency. The US dollar is the currency in which oil is traded globally, and many countries have to hold large reserves of dollars to ensure they have enough to purchase oil. This is a significant financial burden for many countries with weaker economies. By striking deals to exchange golds for oil, countries can bypass the need to hold large reserves of dollars and instead use golds. A more stable and widely accepted store of value.
Another motivation behind these deals is to increase trade between countries and diversify their economic partnerships. For example, countries with large oil reserves, such as Saudi Arabia, depend heavily on the US and other western countries as their primary customers. By striking gold for oil deals with countries such as China and Russia, they can diversify their customer base. Which effectively reduces their dependence on the west.
These deals also have strategic implications, as countries with large reserves of gold, such as China and Russia. Can secure a steady oil supply without relying on the US and other western countries. Who may impose sanctions or embargos on them.
Russia and China signed an agreement
For example, in 2018, Russia and China signed an agreement to exchange golds for oil. Under the deal, Russia would supply China with oil in exchange for gold, bypassing the need to use US dollars. Similarly, Venezuela, which has the world’s largest oil reserves. Has been seeking to strike gold for oil deals with countries such as Russia and China to bypass US sanctions and secure a steady oil supply.
However, it’s important to note that these gold-for-oil deals are not without their challenges. The gold has to be transported physically. And it can also be difficult to accurately value the gold. As it can be traded in different forms and purity. Additionally, these deals can be prone to manipulation and corruption. In some countries, Gold for oil deals have been used as a cunning plan. By lead players in govt to enrich themselves.
In conclusion, gold for oil deals is becoming increasingly. Popular as a way for countries to bypass the use of the US dollar as the global reserve currency. Increase trade between countries and diversify their economic partnerships. These deals also have strategic implications and allow countries with large reserves of gold to secure a steady oil supply. Without relying on the US and other western countries. However, they are not without their challenges and require accurate valuation and physical transportation of gold.