The Time of Petroyuan Has Come

By William Serafino  –  Mar 27, 2026

In the context of the increasingly distressing war between the US-Israel duo and Iran, it is not only the balance of power in Western Asia or the governance of the Strait of Hormuz at stake, but also the future of the international monetary system as we have known it since the 1970s: anchored in the petrodollar, serving US imperial hegemony, and weaponized against Washington’s rivals.

Brief historical overview
Recent unofficial reports have indicated that Tehran is conditioning the passage of oil tankers through the critical maritime route connecting the Persian Gulf with the Gulf of Oman and the Arabian Sea on the payment of hydrocarbons in yuan. The measure represents an explicit geopolitical challenge to the petrodollar, with which the US, since the agreement reached between Richard Nixon and King Faisal of Saudi Arabia in 1974, has safeguarded and defended its global financial power.

For Washington, it was a win-win deal: in exchange for security guarantees, the Gulf producers would sell their oil exclusively in dollars, which would help sustain the demand for the currency (strengthening its international weight) and its subsequent recycling into US Treasury bonds and US financial assets (covering the internal deficit.)

Thus, with petrodollars pouring into the bloodstream of the economy, the US could raise debt without restrictions and increase military spending without weakening its monetary position, while preserving a dominant relationship over the Gulf monarchies to prevent possible associations with rival powers.

No need of fact-checking, the trends are sufficient
It is precisely this petrodollar scheme tailored to the US that is suffering a structural short circuit with Iran’s response to the war by Washington and Tel Aviv. The continuous waves of Iranian drones and missiles have strategically undermined the defensive guarantees promised by Nixon, while Iran’s control over the Strait of Hormuz highlights its asymmetric ability to inflict deep damage on the US economy, shifting the burden of its delirious and unsustainable debt levels back onto itself. Basically, a blowback from the same petrodollar.

The information circulating around the world about the Hormuz oil yuanization plan does not require fact-checking, as it falls within a trend of monetary reconfiguration that has been gaining strength in recent years. Between 2015 and 2018, China institutionalized its bid to become an international financial player, as a practical corollary of its undisputed status as a global economic power.

First, it launched the Cross-Border Interbank Payment System (CIPS), a platform from the People’s Bank of China independent of the US-controlled SWIFT, widely used for the operational implementation of punitive sanctions. A few years later, it announced the first contracts for oil operations on the Shanghai International Energy Exchange, as part of a solid agenda for the digitalization and internationalization of the yuan, aimed at reducing Beijing’s dependence on the dollar.

By the end of 2023, marking the entry of the petroyuan into the monetary landscape, the Chinese energy titan CNPC conducted its first oil transaction in digital yuan through the Shanghai Petroleum and Natural Gas Exchange. Although US sanctions against Iran and Russia have tried to sink their respective oil industries by employing the silver bullet of the petrodollar (control over the SWIFT system), both found in the financial architecture of the People’s Republic a reliable alternative for trading crude oil.

Currently, Iran and Russia’s oil trade with Beijing is mostly settled in Chinese currency through the CIPS, which has minimized the dollar’s participation in the energy exchange between two major oil producers and the world’s leading crude consumer.

Given the progressive growth of the petroyuan, economist Diana Choyleva suggests that “the decline of the petrodollar in the Gulf is not a matter of if it will happen, but when, and that when is approaching faster than most believe.” According to the chief economist of the consulting firm Enodo Economics, the financial innovations promoted by China “offer oil producers alternatives that are not only viable but also potentially superior to dollar-based settlement channels, which are particularly vulnerable to disruptions caused by technological advances.”

Now that the core of the deal offered by Nixon is deeply questioned, the advantages of the petroyuan mentioned by Choyleva could be strengthened. In this regard, the Iranian maneuver in Hormuz would aim to create an extra incentive for its adoption, in an attempt that combines “military geography with monetary strategy,” according to economics professor Kashif Hasan Khan.

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Strategic implications
The signs of decline of the crown jewel of the US empire do not necessarily imply that we are on the brink of a strategic assault by the petroyuan, in the form of a complete replacement of one system by another. Rather, the military tension in Hormuz is catalyzing the gradual erosion of the petrodollar, while new windows open for Beijing to strengthen its integration with the Gulf economy, based on large infrastructure projects and investments exceeding $70 billion, for which it requires an autonomous platform to reduce vulnerabilities.

What the growth of the petroyuan is reflecting is not just China’s will to shield itself with de-dollarization, but a natural adjustment process of financial multipolarity based on the reorganization of the global economy: China receives 37% of all the crude oil that passes through Hormuz, while the US only 2.5%, which invalidates the petrodollar in the region’s own economic dialectic. Although in the short term the massive adoption of the petroyuan is not guaranteed in the Gulf, the incentives for geoeconomic convergence between producers and buyers continue to grow. Saudi Arabia’s continuous hints to yuanize its oil sales should be considered from this structural perspective.

In geopolitical terms, a lot is at stake for Washington. The petrodollar is the fundamental condition for its expansive military spending, its chronic indebtedness, and the optimal implementation of economic wars under the modality of punitive sanctions, whose objective is to weaken rival powers. Therefore, White House’s fear does not lie in the possibility of its immediate collapse, but in the fact that the expansion of the petroyuan would strategically limit the empire’s power capabilities to the point of severely degrading them.

What Nixon surely did not foresee 52 years ago was that the scheme he had created would end up facing an existential dilemma: using war and sanctions to protect a dollar-centric system generates the conditions for its weakening, which is what we are currently seeing in a granular way in Hormuz.

 

(Diario Red)

Translation: Orinoco Tribune

OT/SC/DZ