Reports have been swirling over the past couple of weeks that China plans to set up a futures market for buying oil with yuan, which would have the speculative petroyuan pose a direct challenge to one of the US' main instruments of global control, the petrodollar. China is already among the top oil consumers in the world, and the People's Republic has the second-largest economy, so Beijing has a real chance to turn the petroyuan into a formidable force in the energy industry.
Not only that, but China's One Belt One Road global vision of New Silk Road connectivity suggests that the country intends to exert economic influence in every corner of the world, and it's likely that Beijing will also encourage its partners to follow suit in using the yuan in both the commercial and energy trades. This could make its currency one of the most important in the world and thereby solidify the emerging Multipolar World Order, but the primary obstacle to this plan is the petrodollar.
The American currency has been used as the main one for conducting oil transactions ever since the 1970s, and it's since become one of the pillars of US power across the world in the decades since. The global use of the petrodollar boosts demand in the American currency and makes the rest of the world a stakeholder in its success, which undergirds the Washington-led international order. Saudi Arabia and the other energy-rich Gulf Kingdoms are the keys to this strategy because they agreed to only use the dollar for their oil transactions, which thus made the rest of the world dependent on this currency.
In exchange, they received security guarantees and other benefits from the US, but the geopolitical situation appears to have been shifting in recent years to the point where Saudi Arabia might no longer be interested in this arrangement. After all, the Kingdom has decisively moved closer to China over the past year, signing over $130 billion worth of deals this year alone, so Beijing certainly has the potential to leverage Riyadh in getting it to at the very least seriously consider using the petroyuan in the future.
That is easier said than done, however, because the US won't surrender the petrodollar's global standing so easily, and is sure to confront China in one way or another in order to derail its petroyuan plans.
Tate Ulsaker, political commentator from New Zealand, and Adam Garrie, managing editor at The Duran, joined the discussion.
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