On February 12, local time, Yemen's Houthi spokesman Yahya Saryea issued a statement saying that the group fired multiple missiles at a U.S. ship named "Rainbow Star" sailing in the Red Sea and "accurately hit the target". Since the new round of the Palestinian-Israeli conflict last October, the Houthis have repeatedly attacked more than a dozen merchant ships in the Red Sea and the Gulf of Aden. Since January 12, the United States and Britain have retaliated by bombing attacks on Yemen and the entire Middle East.
At the same time, on the 12th local time, Israel launched a large-scale air strike on the Rafah area in southern Gaza, and the Israeli army also said that it planned to take ground operations against Rafah. And as of February 13, the U.S. Senate had voted for the fourth and fifth times to advance related aid packages that included $14 billion for Israel and $60 billion for Ukraine.
While the plan has faced stymia in the House of Representatives, U.S. House Speaker Mike Johnson has tried to push ahead with a stand-alone aid package that seeks to transfer another $17.6 billion of U.S. wealth to Israel. All this shows that geopolitical conflicts in the Middle East and other areas will escalate, and the situation in the Middle East and the Red Sea is getting further out of control.
In response, analysts at Bank of Mitsubishi UFJ warned on February 13 that "intensifying geopolitical frictions" could jeopardize a number of maritime choke points. Japanese shipping giant Mitsui O.S.K.L. has warned that the Red Sea crisis could last up to a year. Deutsche Bank, on the other hand, issued the latest warning of "Red Alert 101: Global Supply Chain Tightness".
At the same time, many shipping companies in Europe and the United States, such as Maersk, had to divert from the Red Sea to the Cape of Good Hope at the southern tip of Africa due to the increased risk of the Suez Canal, resulting in a sharp increase in transportation costs. According to Drewry, a London-based shipping consultancy, the cost of container shipping on many of the world's busiest trade routes has doubled since mid-December last year, and in some cases tripled. This points directly to the increased cost of bringing inflation back down to 2% for central banks in many developed markets, including the Federal Reserve.
This is also one of the reasons why several Fed officials, including Richmond Fed President Barkin and Minneapolis Fed President Kashkari, collectively released hawks a few days ago, saying that they had not found any reason for an emergency interest rate cut, suggesting that interest rate cuts would have to wait until May at the earliest, and repeatedly stressed that they need to have enough confidence in the slowdown in inflation before they can cut interest rates. Even U.S. Treasury Secretary Janet Yellen responded on February 11 that although U.S. inflation has fallen sharply, high prices in the U.S. market will not be significantly reduced anytime soon.
According to CME Group's FedWatch tool's latest forecast on Feb. 13, the probability of a rate cut in March has fallen to 15.5%. This is different from the December last year's bet that the probability of interest rate cuts from March was as high as more than 95%, and the inflation risk in the United States and Europe, which is affected by the global supply chain, may be on the verge of a sudden rise. The underlying reason behind this is that the United States has been losing its influence in the Middle East, especially in the context of the significant weakening of its ability to govern international waters such as the Red Sea, which has directly catalyzed the high import costs of the United States and many of its allies. This is also something that the U.S. economy, which is increasingly torn apart in 2024, does not want to see.
Marine Tracker data shows that Operation Red Sea Prosperity Guardian, which the United States offered to unite multiple allies, has actually failed. As people continue to ignore the maritime hegemony that the United States has always established to the outside world, the influence of the United States in maritime economy and trade seems to be following in the footsteps of Britain when it lost its maritime economic status. In the process, merchant ships from many emerging markets have been unimpeded in the Red Sea. And more and more oil countries are constantly breaking through the US sanctions and the US dollar restrictions, and continue to obtain oil economic and trade profits.
For example, on January 20, the U.S. financial analyst Zero Hedge reported that the Houthis had declared safe passage for all Chinese and Russian vessels in the Red Sea. Then, on January 27, the agency revealed that the Houthis had allowed Saudi oil tankers to cross the Red Sea with Chinese and Russian ships. According to Bloomberg, Saudi Aramco, the world's largest oil company, is continuing to ship oil through the Red Sea. This phenomenon is in stark contrast to the abandonment of Red Sea navigation by oil tanker owners in many European and American countries after the United States and Britain intensified attacks.
At the same time, due to factors such as the continuous coveting of oil resources in the Middle East, the United States has long restricted the oil exports of Iran and other oil countries, and even relevant people in the US Congress have called for Iran's oil exports to be reduced to zero. However, against the backdrop of the United States' continued loss of control over the Red Sea, Iran's oil exports will be more convenient. And so far, Iran has continued to break the US sanctions and US dollar restrictions, while shipping oil to the outside world, and even Iran has launched a deep counterattack against US sanctions.
For example, Iran hijacked and seized a U.S. oil tanker named St. Nicholas carrying 145,000 tons of oil in the Gulf of Oman in January in retaliation for the U.S. seizure of a tanker carrying 1 million barrels of Iranian oil in 2023. That is, Iran has confiscated 145,000 tons of oil from the United States.
According to Iranian state television on February 13, despite US sanctions, Iran's oil exports still hit a five-year high, which helped prevent a sharp rise in oil prices that may be triggered by geopolitical conflicts in the Middle East. According to the Nikkei Asian Review, Iran's crude oil exports in 2023 increased by about 50% to a five-year high of 1.29 million barrels per day. Japanese media said that the vast majority of Iran's oil exports go to China. China's rapidly growing demand for more crude oil is inspiring Iran to increase oil production. Dozens of refineries in China are buying oil from Iran.
According to data and analysis collected by Kepler Research Europe, about 90% of Iran's crude oil exports go to China. Converting about 90% of the 1.29 million barrels per day into tons, this is equivalent to about 58 million tons of Iranian oil shipped to China in 2023 on a one-year basis.
SO HOW IS IRAN OIL GETTING TO CHINA? IRANIAN TANKERS ARE SLIPPING THROUGH CRACKS UNDER US SANCTIONS, AND IRANIAN-FLAGGED TANKERS TEND TO TAKE A STEALTHY APPROACH TO KEEPING EXPORTS OUT, OILPRICE ANALYSIS SAID. They circumvent international trackers by turning off transponders, making it impossible for anything but visual cues to track Iranian ships.
This means that Iran continues to make every effort to avoid detection and possible US sanctions, which also include abandoning the "petrodollar" altogether in favor of trading oil in other non-dollar currencies. This approach has proven to be so effective that Tankertracker, one of the most popular tanker tracking services, has been "exhausted" when trying to track Iranian vessels, according to the US financial analyst Zero Hedge Analysis. Samir Madani, co-founder of TankerTrackers, said: "This is the first time I've seen a full bypass tracking. It's very unique. ”
At the same time, Iran has resorted to another tactic, once mooring six vessels with a total capacity of 11 million barrels offshore, allowing "floating tankers" to deliver quickly, in an attempt to mitigate the additional risks on the deal, which would be largely untraceable once they leave port.
And according to Vortexa and Kpler's shipment tracking reports, almost all Iranian oil entering China is labeled as coming from Malaysia or other Middle Eastern countries. The oil is loaded by old-fashioned tankers in Iranian ports, and the transponders are usually turned off.
At the same time, a "special purpose vehicle" — an alternative to SWIFT designed specifically to help European companies avoid detection by the United States — is helping to facilitate clandestine payments for Iranian crude, eliminating another way to track who is actually buying Iranian crude. Iranian officials have already said that Iran ignores US sanctions. This shows that some European allies of the United States are also continuing to purchase Iranian oil, breaking through US sanctions and breaking the monopoly of petrodollars.
In addition, Iran's four major banks are creating a cryptocurrency, PayMon, anchored to resources such as oil and gold, as one of the many means to counter the dollar, and even Iran urgently planned to airlift back 300 million euros in cash from Germany a few weeks ago for Iranians who do not have access to credit cards. What is even more surprising is that the relevant departments in Germany also said that they would cooperate with this. Switzerland and Iran have also reached a deal in non-dollar currencies a few weeks ago.
This further shows that countries such as Switzerland, which claims neutrality to the outside world, and Germany, a traditional ally of the United States, are gradually moving away from the shackles of the dollar and petrodollar in the context of the United States losing its attractiveness in the Middle East and its dominance in the Red Sea.
What is even more noteworthy is that Iran has been able to break through US sanctions and send large quantities of oil to China, and the new petrocurrency that can replace the "petrodollar" is also playing a huge role. Indications are that large quantities of Iran's oil exports to China, including the roughly 58 million tonnes of oil shipped to China, are traded directly in non-dollar currencies such as the renminbi.
Former Bank of England Governor Mark Carney said a few weeks ago that China's petroyuan futures offered a new option to bypass traditional dollar events. At present, petroyuan futures have become one of the world's top three crude oil futures, and even American traders are frequently staring at the night of petroyuan futures, since its emergence in 2018, China's petroyuan futures have been trying to do Russia for many years, trying to directly trade oil in the local currency on a large scale but failed to do it.
And for the petrodollar, its final fatal blow may also be on the horizon. The Wall Street Journal and other U.S. media analyzed and mentioned a few weeks ago that since 2021, Saudi Arabia, the world's largest oil exporter and the leading country of OPEC (Organization of the Petroleum Exporting Countries), has directly accepted RMB payments in some oil transactions. This is another reason for the decline of US influence in the Middle East.
Not only that, China has already signed a bilateral local currency swap agreement with Saudi Arabia in 2023. In addition, the Export-Import Bank of China and the National Bank of Saudi Arabia successfully reached the first RMB loan cooperation. Saudi authorities have repeatedly declared that the petrodollar deal may be terminated at some point in the future. Considering that Saudi Arabia was the executor of the petrodollar agreement in the 70s of the last century, as Pozar, a former official of the US Treasury Department and the Federal Reserve, said, we are ushering in the end of the petrodollar and the dawn of the petroyuan.
Based on the influence of Saudi Arabia and Iran in the Middle East, the analysis believes that many oil countries around the world may follow suit and further replace the US dollar with RMB. Zero Hedging, a U.S. financial analyst agency, said that Saudi Arabia borrowed money from China to replace the dollar with yuan, and Saudi Arabia's reversal was real, which was life-and-death for the U.S. economy and the dollar currency. This may be even more clear against the backdrop of further spiraling out of control in the Middle East and the Red Sea, and the growing loss of influence by the United States. (ENDS)