Impact of the Petroyuan

Executive summary: It’s not good for us

One of the core staples of the past 40 years, and an anchor propping up the dollar’s reserve status, was a global financial system based on the petrodollar – this was a world in which oil producers would sell their product to the US (and the rest of the world) for dollars, which they would then recycle the proceeds in dollar-denominated assets and while investing in dollar-denominated markets, explicitly prop up the USD as the world reserve currency, and in the process backstop the standing of the US as the world’s undisputed financial superpower.

Trump did not face this challenge because his foreign policy was pro-Saudi and anti-Iran. Let’s face fact:

The Saudis hate the Iranians and the Iranians hate the Saudis.

Biden has returned to the Obama era, placate Iran by any means necessary, approach. This pisses off the Saudis, especially when Biden is considering sending Iran billions of dollars just like Obama did. So what’s a Saudi to do? Well, they have options:

In another blow for dollar dominance, Saudi Arabia is reportedly considering pricing at least some of its Chinese oil sales in yuan.

According to the Wall Street Journal , the move would “dent the US dollar’s dominance of the global petroleum market and mark another shift by the world’s top crude exporter toward Asia.”

The “petrodollar” serves as a crucial support for the US dollar.

The majority of global oil sales are priced in dollars. This ensures a constant demand for the greenback. Every country needs dollars to buy oil. This helps support the US government’s borrow and spend policy with its massive deficits. As long as the world needs dollars for oil, the Federal Reserve can keep printing dollars to monetize the debt.

Saudi Arabia has sold oil exclusively for dollars since 1974 under a deal with the Nixon administration. If the Saudis shift away from the dollar and sell oil for yuan, it would be bad news for dollar dominance. And good news for the Chinese currency.

According to the WSJ , China buys more than 25% of Saudi oil exports.

China and Saudi Arabia have been talking about yuan-based oil contracts for six years. But Saudi Arabia’s frustration with the US has apparently accelerated those talks. According to the WSJ , the Saudi government is increasingly unhappy with decades-old US security commitments to defend the kingdom along with the Biden administration’s attempt to reinstitute the Iran nuclear deal.

If Saudi Arabia begins doing business in yuan, it would be a kick in the gut for the dollar.

A drop in the demand for dollars would be bad news for a US government that depends on dollar demand to fund its out-of-control spending. Imagine a world in which the Chinese didn’t need dollars.

China ranks as the biggest foreign holder of US debt. If it continues to divest itself of dollars, who will pick up the slack? The Federal Reserve has been buying Treasuries hand over fist for the last two years, keeping its big fat thumb on the bond market. But it’s tapering purchases and supposedly planning on shrinking its balance sheet. If global demand for Treasuries drop precipitously — and it would in a world without the petrodollar — the US government would either have to drastically cut spending or the Fed would have to continue printing money to monetize the debt.

A Petroyuan Would Be a Kick in the Gut for the Dollar


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One question is whether the Congress can derail the abominable Iran agreement. Here’s the history of legislation on it from Wikipedia. Wikipedia is far left but their descriprion seems straightforward. If the Congress wants to stop it they have to pass a Measure indicating it over Biden’s veto. with the current Congress, it is not going to happen. I doubt if Pelosi or Schumer will even bring it up. So buckle your seatbelt

On 22 May 2015, President Obama signed the Iran Nuclear Agreement Review Act of 2015 into law;[g] this legislation passed the Senate by a 98–1 vote and the House by a 400–25 vote, and was approved by Obama on 22 May 2015.[179] Under the Act, once a nuclear agreement was negotiated with Iran, Congress had 60 days in which to pass a resolution of approval, a resolution of disapproval, or do nothing.[180] The Act also included additional time beyond the 60 days for the president to veto a resolution and for Congress to vote on whether to override or sustain the veto.[181] Congress could defeat the deal only if it mustered the two-thirds of both houses needed to override an expected veto by Obama of any resolution of disapproval.[180][182]

On 19 July 2015, the State Department officially transmitted to Congress the JCPOA, its annexes, and related materials.[183] These documents included the Unclassified Verification Assessment Report on the JCPOA and the Intelligence Community’s Classified Annex to the Verification Assessment Report.[183] The 60-day review period began the next day, 20 July,[183][184][180] and ended on 17 September.[185] Senator Ted Cruz introduced a resolution seeking a delay in the review period, arguing that the 60-day congressional review under the Act should not begin until the Senate obtained a copy of all bilateral Iran–IAEA documents. This resolution did not pass.[186][187] Ultimately a resolution of disapproval was brought to the Senate floor but failed. A resolution of approval was brought to the House floor, but it too failed. As a result, the agreement went into effect following the congressional review period.[188]


This will be interesting. Biden’s hoped-for Iran deal requires the cooperation of Russia. Good luck with that, Joe.

Could it be the Russkies will actually help America avoid the deal, thereby doing the right thing? :wink:

not a chance. I think the shit is about to hit the fan. We thought we had dodged a bullet because Manchin and Sinema were able to stop the most extreme moves by the left: packing the supreme court, statehood for DC and Puerto Rico, HR1. But what we have seen in Afghanistan and Ukraine and Iran and the out of control spending and the open border and etc. indicates the damage that they can do until 2025.z

Loony left wing, Liberal, Commie, Vlad the Progressive, will definitely do the right thing … for his version of Russian Progessivism. All hail the Liberalatti. :slight_smile:

here’s an analysis by a poster at the “permanent portfolio” website, Somewhat garbled language but it makes sense to me. The Swift’s sanctions are causing a move away from the US dollar

My understanding is that SWIFT clearance involves upward through US and back down again ‘transfers’ such that the US can block Russia banks usage of USD’s, but
Add Africa to those and 60% of the global population directing to dropping the USD for inter-trade between them. Rising to possibly north of 75% if you factor in other possible future trade treaties/deals with others (Europe, other S. American countries, Australia …etc.).

Somewhat seems like a case of US self-harm. Block Russia out of SWIFT to induce a even more rapid move away from the USD. Striving to reduce Petro-Dollars in favor of ‘green’ alternatives, FATCA …etc and next thing you know is that the USD is no longer the primary reserve/trading currency.