China-Thailand rice-for-trains barter deal

Upon reading the news about a proposed barter deal where Thailand would trade rice and other agricultural products for high speed train components for its high speed rail megaproject, it occurred to me that this is another example of bypassing the petro-dollar. There are already a bunch of China currency swap deals aimed at bypassing the US dollar in international trade. Barter deals are another way to achieve that end.

Instead of buying agricultural products in the traditional way, which involves currency transactions that end up passing through the USD, they would barter agicultural goods directly for train components. The amounts involved are fairly significant. They are talking about more than one million tons of rice and 200,000 tons of rubber per year for the next five years. Price per ton for rice varies quite a bit depending on the type and quality (see the Thai Rice Exporters’ pricing page here), ranging from USD400 to nearly USD1200 per ton currently. Let’s just take the average as USD800 for arguments sake. That would be USD800 million per year for rice. Maybe they will hit a billion USD or more per year with the combined agricultural products. Not bad.

A couple years ago China and Iran were talking about a barter deal so Iran could sell oil without being hamstrung by U.S. sanctions. There are also deals or proposed deals between Iran and India and South Korea. These bartering deals, especially involving big ticket items like oil, could add to the erosion of the petro-dollar’s strength.