It's obvious what's going on and anyone who doesn't see it is in denial.

For anyone wondering how the abandonment of the dollar reserve status would look like we have a Hollow Men reference: not with a bang, but a whimper... Or in this case a whole series of bilateral agreements that quietly seeks to remove the US currency as an intermediate. Such as these: "World's Second (China) And Third Largest (Japan) Economies To Bypass Dollar, Engage In Direct Currency Trade", "China, Russia Drop Dollar In Bilateral Trade", "China And Iran To Bypass Dollar, Plan Oil Barter System", "India and Japan sign new $15bn currency swap agreement", and now this: "Iran, Russia Replace Dollar With Rial, Ruble in Trade, Fars Says." And ironically, the proposal to dump the greenback did not come from Iran. Per Bloomberg: "Iran and Russia replaced the U.S. dollar with their national currencies in bilateral trade, Iran’s state-run Fars news agency reported, citing Seyed Reza Sajjadi, the Iranian ambassador in Moscow. The proposal to switch to the ruble and the rial was raised by Russian President Dmitry Medvedev at a meeting with his Iranian counterpart, Mahmoud Ahmadinejad, in Astana, Kazakhstan, of the Shanghai Cooperation Organization, the ambassador said." Is Iran gradually becoming the poster child of an energy rich country that just says no to the dollar: "Iran has replaced the dollar in its oil trade with India, China and Japan, Fars reported." Next thing you know China, Russia and Japan will engage in bilateral trade agreements with the Eurozone in exchange for purchasing European or EFSF (which at last check are now forced to give 30% guaranatees) bonds, and bypassing dollars completely. But yes, aside from everyone else, virtually everyone (footnote 1) is still using the dollar as currency of global exchange.
And just to make sure that the message is heard loud and clear, Russia just docked several warships in Syria, the same country the US told all American citizens to leave two months ago. From China Daily:[link, quote follows]......
[Durden]That this is happening just as Reuters inform us that Iran is about to move the invasion timetable by a few months is rather disturbing - recall that "according to Ehud Barak, the Israeli Defense Minister, after September, a successful military attack on Iran’s nuclear sites will no longer be possible, because Iran will widen the redundancy of its facilities and spread them out over more sites, including the impenetrable site at Fordow (near Qom), which is located inside a mountain." From Reuters:[link, quote follows].....
[Durden]The bottom line is that once the transition to Fordow is complete there will be no more possible ways to spin an invasion. Which gives a rough "window of opportunity" - expect to see it reflected ever more in the price of Brent as the September deadline is pushed forward by weeks and months.
As for the escalation in the USD-depegging, all that needs to happen now is for the brand spanking new Chinese aircraft carrier to do some wargames of its own in the Straits of Hormuz for the pre-terminal escalation chaos to be complete.

The US administration responded to Iran’s announcement last weekend that its Fordo uranium enrichment plant was operational with renewed threats of military action. The sharp rise in tensions in the Persian Gulf follows steps by the US and Europe to impose an embargo on Iranian oil exports that would ruin the country’s economy.
Speaking on the CBS “Face the Nation” last Sunday, US Defence Secretary Leon Panetta acknowledged that Iran was not building a nuclear bomb at present. But he added, Iran was “developing a nuclear capability” and “that’s what concerns us.”
He warned: “Our red line to Iran is: do not develop a nuclear weapon. That’s a red line for us.” Panetta is threatening a devastating US military attack on Iranian nuclear and military facilities under the pretext that Tehran is developing nuclear arms.
While insisting that the current US focus was economic and diplomatic pressure, he repeated the mantra that the US was not “taking any option off the table.”
General Martin Dempsey, the chairman of the US Joint Chiefs of Staff, was asked on the same program how difficult it would be for the US to “take out their [Iran’s] nuclear facilities.” He did not address the question directly, but indicated that he was ensuring the “right degree of planning” and positioning of assets “to provide those [military] options in a timely fashion.”
Asked about any attempt by Iran to block the strategic Strait of Hormuz, Panetta declared that the US would not tolerate such action. “That’s another red line for us, and we will respond to them,” he said. Dempsey confirmed that the US “had invested in capabilities to ensure that if that happens, we can defeat that... We would take action and reopen the Straits.”
The US threats are being accompanied by a relentless campaign in the US and international media to demonise Iran as a rogue state bent on acquiring nuclear weapons. The opening of a second enrichment plant at Fordo near the city of Qom is portrayed as another step in that direction. Like the Natanz enrichment plant, the second is buried deep underground and heavily guarded—which is hardly surprising, given repeated US and Israeli threats to bomb Iran’s nuclear facilities.......
The Iranian regime has also signalled a harder line, by imposing a death sentence on Amir Mirzaei Hekmati, a US citizen and former Marine convicted of spying. The US has denied that Hekmati was a spy.
These allegations come amid a series of assassinations and a program of sabotage directed against Iran’s nuclear and military programs over the past two years, indicating that Israel is waging a covert war inside Iran, with US support.[And today, we have the assassination of an Iranian nuclear scientist with a bomb]
The European Union is stepping up pressure on Iran, announcing that a meeting of foreign ministers would be held on January 23—a week earlier than previously proposed—to finalise an oil embargo already agreed in principle. Divisions still exist among EU members, some of which like Greece are heavily dependent on Iranian oil and are seeking a lengthy “grace period” to find alternate supplies. Europe accounts for about 20 percent of Iran’s oil exports.
US Treasury Secretary Timothy Geithner is currently visiting China and Japan, both of which are large importers of Iranian oil, to press them to wind back their purchases from Iran. US President Obama has signed a measure into law that would exclude corporations doing business with Iran’s central bank from the American financial system. Most of Iran’s oil transactions involve the central bank.
Japan, a close American ally, has already taken steps to reduce its oil imports from Iran...... Japan and South Korea buy about 25 percent of Iran’s oil exports.
China, which is confronting US demands on multiple fronts, has so far resisted US bullying. Last week, President Obama released a key strategic review that made Asia the top priority for the US military and singled out China as the chief threat to American economic and strategic interests in the region.
In Beijing, Geithner will repeat US demands that China revalue its currency. Trade relations are already tense after China imposed tariffs on imported American automobiles in November and began an inquiry into US government subsidies for renewable energy industries. According to the Wall Street Journal, the Obama administration is setting up a new task force to investigate alleged unfair trade and business practices by China.
The US demand that China fall into line with unilateral American sanctions on Iran is another device designed to undermine Chinese economic and strategic interests. China has developed close economic relations with Iran and purchases large quantities of Iranian oil, in part to avoid being dependent on close American allies such as Saudi Arabia and the Gulf states.
China has publicly opposed the imposition of further penalties on Iran via the UN Security Council and has so far refused to back Washington’s sanctions.....
Washington’s attempts to strong-arm Beijing underscore the fact that the sharpening US confrontation with Iran is part of a global imperialist strategy that goes far beyond concerns with Tehran’s alleged nuclear weapons program. Rather, US imperialism is seeking to establish its untrammelled hegemony over the key energy-rich regions of the Middle East and Central Asia, as a means of undermining its European and Asian rivals.
Geithner’s visit to Beijing contains the implicit threat that the US could punish Chinese corporations for trading with Iran—a move that would dramatically heighten economic tensions between the US and China.

The US Dollar Paper Tiger
By: Jim Willie CB
Posted Wednesday, 11 January 2012

Events in the last decade displayed a vigorous effort to defend the USDollar. The rogue nation of Iraq sold crude oil in Euros for three years, until they were liberated. Its tyrant was a scourge to be sure. Weapons of financial mass destruction seem to have replaced the traditional type, the new variety being derivatives, mortgage bonds, and even sovereign bonds from weak nations. Newer weapons from the United States feature extended hands from clearing house fronts that snatch and grab segregated private accounts, and backdoor raids of exchange traded fund precious metal. Let's not overlook the more frontal assault weapons deployed like unseating Qaddafi and capturing his gold held in foreign accounts, along with all that cash. Liberation has its benefits. The confrontation with Iran would be comical if not so dangerous. The claims have been silly in my view for years, in the perception of Iran as a serious threat to the West. They have been subjected to cut communication lines on the Persian Gulf seabed. They have been subjected to Stuxnet viruses to obstruct their nuclear refinement process, via the Siemens rear door. They have been subjected to an influx of heroin from the north, where the USMilitary manages the Afghan situation and locale.

To be sure, Iran's clergy qualify as a bunch of clownish fools with a tight grip on power and security forces. The shock here is that the relatively educated Tehran crowds have not disposed of their corrupt class of leaders. The clergy has been skimming from oil revenue for years, complete with hidden Swiss accounts. The same goes for the American corrupt class of leaders, with their USDollar control levers, their failures to deliver USTreasury Bonds (aka naked shorting by Wall Street firms), their hidden mechanisms behind Quantitative Easing to Infinity (QE never stopped), their insider trades to exploit financial markets (flash trades with a peek), their ETF dampers on numerous individual markets (regular inventory raids by Wall Street), their nationalization of Fannie Mae & AIG in order to put the fraud records in a warehouse (bond counterfeit, duplicate income stream usage), and their absurdly positive economic drivel data (more like chronic 10% CPI and chronic minus 3% GDP).

The big events in the last several weeks focus on the inability for US combined forces, both military and financial, to put Iran on a leash. The Tehran mongrel still roams and shares meals with neighbors. The Hat Trick Letter does not delve much into geopolitics and military weapon analysis, but the next generation Sunburn and Onyx missiles that Russia has supplied to Iran stand out as significant in their ability to neutralize great opposite forces. These two missiles are a step ahead of the Cruise, something perhaps not 5% of the US population is aware, but something that 95% of the USMilitary brass is aware. The US Fleet in the Persian Gulf might be rather easy vulnerable targets. The annual August belligerent war posturing against Iran invited my dismissals from 2004 to 2005 to 2006 to 2007 to 2008 to 2009 to 2010. But in 2011 the posturing and siren calls seemed more serious, yet still worthy of dismissal since waged battle would render massive damage to both sides. See Sunburn & Onyx again. The military maneuvering behind the scenes is not so easily tracked, which lately has extended to Syria with a Russian shadow. The entire reduced theater seems chock full of standoff factors. China might have sounded off threats of retaliation if Iran were attacked, but Russia delivers the same threats in more subtle private tones.

The USGovt has attempted to isolate Iran. To some extent they have succeeded. Price inflation inside Iran has turned acute, with numerous stories seeping through the information curtain. The pain, just like in Cuba, has been handed to the people and hardly to the leaders. One can be very certain that the mullahs continue to enjoy the good life, work little, eat well, enjoy ample time to pray, while skimming $million every week from oil revenues. However, a defiance seems more successful at the higher levels. The trend of bilateral trade deals fashioned by China has been growing, made popular by the same grand holder of over $3.2 trillion in US$-based debt securities of dubious value. Behind the trade deals are agreements to continue in crude oil purchases from oil-rich Iran.

INDIA CAUGHT IN CROSSFIRE

India shows up as a secondary victim of Iranian sanctions. The controversy between the two nations has lingered for a couple years. India received 11% of its crude imports from Iran last year. In an end-around maneuver, the nation is exploring the option of making payments for crude oil purchases through the giant Russian Gazprombank. No deal has yet been reached, but it is close to final. Russia has abstained from sanctioning Iran. Some analysts believe this payment route might work for India. Other alternative routes involve Turkey as intermediary on payments, except Turkish leaders appear to reject new proposals. The Bharat Petroleum Corp based in India had begun buying about 20,000 barrels per day of Iranian crude oil through a term contract in September. Now though, BPCL is considering whether to stop taking supplies. Other Indian companies that buy Iranian crude include Essar Oil Ltd and Indian Oil Corp. Contracts for other Indian buyers of Iranian crude oil tend to run from April to March. The refiners reportedly have yet to renew their deals with Tehran for the next financial year.

The cumulative Indian debts to Iran from refiners for purchases rose to as much as $5 billion in July, according to the Indian Central Bank. The outstanding payments threatened to jeopardize about $9.5 billion in annual trade between the nations. Officials in Iran have informed customers they would no longer receive August shipments unless the bills were paid. In a complex network, the refiners started clearing the outstanding payments in August after Halk Bank in Turkey agreed to make transfers. The middleman bank has gained a reputation in the oil market over the past 18 months for handling transactions related to trade deals with Iran. The recently passed legislation by the USGovt imposes sanctions on financial institutions dealing with Iran's central bank, thus putting Halk Bank squarely in the spotlight. India is worth watching closely as a test of the strength of sanctions. Watch for work-arounds, especially with Russia. The Turks do not have the required muscle. The Russians do. The Kremlin leaders are highly motivated to knock a wheel off the American wagon that seems to trample pedestrians all too often.

SCO REVISITED

During the 2002 to 2005 period, the Shanghai Cooperative Organization aroused a considerable amount of publicity. It was originally a cultural exchange group between Russia and China, led by the surviving republics of the Soviet Union. Its agenda grew to include security matters. Then later still, commercial trade and commodity supply entered the picture, as the resource rich nations lacking in economic development banded together. The added twist was the inclusion as guest SCO members such nations as renegade Venezuela, Iran, and others. The SCO defiance began to escalate right about when the organization faded from view. It never faded away, only from view, as it coalesced into a powerful movement behind the scenes. SCO became a hidden movement to build fortifications in opposition to the USDollar. Its main thrust has been gold accumulation in the shadows.

The key to comprehension on SCO matters is to realize that all countries in the Shanghai Coop are working vigorously to bypass the USDollar, and all are increasing their gold reserves. They work in much more secrecy, probably at the direction of Kremlin and Beijing leaders. They have learned that avoiding direct confrontation and sanctions is the path to take. The proposal to end usage of the USDollar in bilateral Russian-Iran tade came from Moscow, not Tehran. One can be absolutely certain that Kremlin leaders are as stiff spined as they are motivated to challenge the USGovt and Wall Street leadership. They remember all too well the Yeltsin years and the Western oil company role. The proposal to switch to the Russian Ruble and the Iranian Rial was raised by Russian President Dmitry Medvedev with his Iranian counterpart, Mahmoud Ahmadinejad, at a meeting in Kazakhstan. It was staged without herald as an continuance of the Shanghai Cooperation Organization. Iran has replaced the USDollar in its oil trade with India, China, and Japan. At the cusp of developments is a potential deal that could bring an important linkage between crude oil and commodity trade settlement outside the USDollar, with provision for funding the European bank rescue fund, the European Financial Stability Facility. The concept was raised by the intrepid indefatigable Tyler Durden (bloodied but resilient) of the Zero Hedge crew. The bypass of the USDollar in trade is likely soon to be engrained in the financial system. The American trumpets continue to promote the notion that all global trade is done in US$ terms, when the reality is far different, and the trend is in the opposite direction, as in global revolt.

Actually, the ZH crew merely took the ball and ran with it, as they do so adroitly and consistently. In my opinion, the Zero Hedge web journal is by far the most valuable and broad single source of relevant information in the global financial crisis, bar none.

The German newspaper Bild am Sonntag had said Klaus Regling (CEO of the European Financial Stability Facility) is pushing to increase guarantees to up to 30% for investors external to the EuroZone, the amount confirmed by a fund official. Although the guarantees were non-existent a year ago, EFSF officials have stressed that state guarantees had always been planned to range from 20% to 30% range, and furthermore, such offering should not be interpreted as a deepening of the endless debt crisis. Such denials serve as clear direct confirmation of a deepening crisis. Clearly, the guarantees provide incentive to attract foreign funds. The nations with big foreign reserves like China have turned their noses up at Europeans in recent rounds. The Beijing leaders want more on the table. Think industrial collateral. Think access to central bank gold. Think official bypass of the USDollar in trade settlement. Think consolidated resistance to unilateral pronouncements. Think indirect action to isolate the USGovt and its corrupt financial fortress.

IRAN & RUSSIA REPLACE THE USDOLLAR

Iran and Russia have replaced the USDollar with their own native currencies, thus solidifying trade ties. Tehran's Ambassador to Moscow Seyed Reza Sajjadi claimed that the proposal for replacing USDollar with Ruble and Rial was raised by Russian President Dmitry Medvedev in in Astana Kazakhstan during a sidelines meeting of the Shanghai Cooperation Organization (SCO) meeting. He added that many Iranian entities are using Ruble currency for their trade deals. The Kremlin leaders stand against unilateral sanctions on Iran conducted outside the UN Security Council, their position in diplomatic circles, which WashingtonDC avoids. The USGovt has a long track record of making unilateral decisions, and attempting to impose sanctions on third party nations, all done without the blessing of global bodies. The Russians have clearly announced that they will not accept broad sanctions. The central bank in Iran is working feverishly to to circumvent and overcome plans to isolate it and cut off income. The sanctions directed by the USGovt cut off from the US financial system foreign firms that do business with the central bank in Tehran. Many even in the West believe that the move would prove futile. Most Iranian oil sales are processed by the central bank. The means to avoid the sanctions is to conduct trade settlement outside the USDollar, where the USFed would not act as processor. The peripheral impact is felt with intermediary entities such as Turkey's Halk Bank, which will likely choose to step aside and not risk being stepped on by American jack boots bearing London brand.

During the last two years, Iran has been replacing the USDollar with other currencies in its trade with the outside world. Iran has replaced the USDollar in its oil trade with India, China, and Japan. Late in November, the Reserve Bank of India (RBI) granted the necessary permission to the Central Bank of Iran to open Rupee accounts with two major Indian banks, seen as a solution final to the payment problems. While payments for Indian oil imports would initially be in Rupees, they would be converted into a separate currency, which was yet to be decided by the Apex bank. Conclude that USGovt sanctions provide the fertilizer for a seedbed in non-US$ trade settlement. The American strongarm tactics are meeting with stern resistance, as the backlash gathers momentum and intensity. Iran could become a broken plank in the US hegemony. History is not likely to repeat. The Iraq challenges with Euro-based oil sales led to the invasion and annexation. Iran has too many partners in Russia, China, Japan, and India. Without any dispute, Baghdad was defenseless. With almost ten years to fortify its partnerships, Tehran is not defenseless. The next few months will demonstrate it.