Once again, it appears that gold is re-asserting its role as money. Gold is the sovereign of sovereigns. It is the only form of money that cannot be controlled by governments, which is why its use as money or the idea of its use of money has been attacked by five generations of Federal Reserve Chairmen and college economics curriculums.
When the US opted to use the SWIFT system for international payments as a financial weapon against Iran, the world took rapid notice, and countries have been seeking ways to transact that by-pass US dollar hegemony ever since.
The natural transition is towards systems and methods which cannot be controlled by any single sovereign. So far, gold is the only form of money in 5000 years of human history that actually meets this requirement.
We have spoken about this numerous times, and predicted it would comes specifically in terms of oil for gold in our AFE Global Insider.
A quote from Alex Stanczyk in our April Edition:
“We have entered a new era of economic warfare. Make no mistake, this is warfare being conducted on a global scale, and it is no less deadly than a kinetic war. After using the tool of being severed from the international payments system as leverage, the US and European nations are all but guaranteeing that the current system will be called into question. By removing a country’s ability to conduct international bank transfers over the SWIFT system, the USA is essentially forcing nations to take a good hard look at if they want to be next. This is not an idle concern, as the US has already made threats intimating this to several other countries.² This policy is nothing more than the equivalent of the USA shooting itself in its own foot. Instead of compliance, the USA is incurring a massive move away from the USD. What happens when countries all unofficially start settling oil purchases with gold? By using these new weapons of Economic Warfare, Western Central banks run the risk of encouraging other nations to resort to alternate payment methods and systems. The move towards alternative methods is already underway.”
From the Washington Free Beacon:
GOLD FOR OIL
Turkey has exchanged nearly 60 tons of gold for several million tons of Iranian crude oil, despite its promises to uphold Western sanctions on Iran’s energy sector, according to recent Turkish reports.
By using gold instead of money, Turkey is able to skirt Western sanctions on Iran’s oil trade, particularly those pertaining to SWIFT, the global money transfer service that until recently assisted the Central Bank of Iran and other Iranian financial institutions.
Over the past several months, Turkey has given Iran 60 tons of gold, or more than $3 billion, according to a July 8 report on the Turkish news site Vatan Online. The report was translated by the Open Source Center, a translation service used by the CIA.
The exchanges raise questions about the Obama administration’s decision to grant Turkey a temporary waiver exempting it from U.S. sanctions to Iran, according to foreign policy experts and those on Capitol Hill who speculated that the revelation could spur Congress to pass a new round of Iran sanctions to prevent such trades.
“The idea that Turkey needs a waiver for more time to disconnect itself from the Iran oil trade is ludicrous,” said Michael Rubin, a former Pentagon adviser on Iran and Iraq. “Turkey is playing Obama for a fool.”
“Like a loose school girl, Obama may think he can become popular by giving away the goods to whomever tells him he is the apple of their eye,” said Rubin, a resident scholar at the American Enterprise Institute. “Obama doesn’t understand that for regional rulers like [Turkish Prime Minister] Erdogan and [Russian President Vladimir] Putin, he has gained not respect, but disdain.”
Turkey’s attempts to skirt Iranian sanctions could lead lawmakers to shape a new round of sanctions, said one Iran policy expert on Capitol Hill who is familiar with the sanctions process.
“The good news is that sanctions are now so powerful that Iran has been forced to follow Ron Paul’s advice and move back to the gold standard from the dollar. The bad news is that Iran is rapidly accumulating large amounts gold and other minerals with which to barter for goods and services,” said the source. “This is a hole Congress should plug in the next sanctions bill.”
Gold payments to Iran have been taking place “for some time,” state the Turkish reports, but have peaked in the past few months as global sanctions against Iran continue to choke its economy. In May, Turkish trade with Iran hit an unprecedented high at $1.7 billion, a leap of 513 percent, according to Turkish statistics and various reports.
Turkey, which is the fifth largest importer of Iranian oil, exported more than $3 billion worth of gold to Iran in the first five months of this year, according to data compiled by the Turkish Statistical Institute and reported on by Today’s Zaman Online, an Istanbul-based news organization; others estimated that the price could be even higher.
Turkey imports around 8 million tons of crude oil annually from Iran on average.
“The mass purchase of Turkey’s gold is being undertaken by rich Iranian families living in Turkey,” Today’s Zaman reported on Tuesday. “There are rumors that they purchase Turkish gold via third persons in order not to be noticed, and that they entrust the purchased gold to the Central Bank of the Islamic Republic of Iran, again via third persons.”
Transfers to Iran account for the majority of Turkey’s gold exports during 2012 and have come at the Iranian regime’s request, the reports show.
The Vatan Online report also revealed that Turkey’s Halkbank “converts [Turkish] money into gold and either delivers it to the officials of the Central Bank of Iran in an armored vehicle at the border, or sends it to Iran through cargo mail.”
The payments for both oil and natural gas are a sign that Turkey is cozying up to Iran and moving further from its Western allies.
“It would be laughable if it weren’t so tragic: Everyone but Obama knows that Turkey and Iran are cheating,” said AEI’s Rubin. “Heck, if precedent informs, than Erdogan himself—or at least the son-in-law to whom he often directs contracts—is probably making a handsome profit on trade.”
The underlying problem, Rubin said, “is that while Obama claims his sanctions policy is a success, Iran is moving closer to a nuclear bomb. While Obama admires himself in the mirror and tells himself how smart and popular he is, the region may very well slide into war.”
Turkish officials have denied the charges that the government trades gold for oil.
“The whole payment is made in the form corresponding agreements signed between the two parties,” Taner Yildiz, Turkey’s Energy and Natural Resources Minister, told Iran’s Fars News Agency this week.
Yildiz maintained that only cash is used to pay Iran.