Oilgarch Trump, dollar dominance, and global trade shifts: What's next?

Central banks have been trying to reduce their dependence on the dollar by building up stockpiles of gold. Emerging economies driving global trade are increasingly turning to settlements in local currencies. With countries like US sanctions-hit Venezuela - it has the biggest, yet largely untapped, proven oil reserves in the world - selling their oil in renminbi, euros and roubles, slump on the petrodollar has been palpable. Which is where the US invasion on Saturday is reckoned to come handy to get Venezuelan oil trade back in dollars.

The irony is that no serious alternative to the dollar is likely to emerge because of imbalance in world trade. So long as the US buys and China sells stuff on credit, the two biggest economies have compelling reasons to ensure the dollar's preeminence. Then there is the question of size. No economy has an appetite for debt to rival the US. Dollar will continue to be the world's problem. But an 'intervention' to push up dollar trade should warm the cockles of Republican hearts in a tough political year ahead.

Venezuela has nearly choked its 50-yr-old oil infrastructure, and US companies can revive it with some serious investments. But the US record of political oversight is patchy. Events like these tend to isolate the US in the international arena, with repercussions on instruments like the dollar that drive globalisation. Suspicion over US actions will feed dedollarisation. Yet, the process is, at best, limited.


Entrepreneur Trump risks neither investor nor creditor revolt by wading into Venezuela's reserves of crude. US refiners stand to gain by processing it for diesel and industrial petroproducts. Market reaction should be muted, especially the oil market that's grappling with oversupply. The Trump regime was very publicly building up towards some form of intervention in Venezuela. The risk-off sentiment could reverse with the prospect of a smooth political transition in the country. But the bigger effect of an attack on a sovereign nation is further fissures in a deglobalising world.