By Nikola Mikovic
Editor’s note: The opinions expressed here are those of the authors. View more opinions on ScoonTV
The ongoing war in the Middle East threatens to fundamentally reshape global energy flows. As the strategically important Strait of Hormuz remains de facto closed, nations around the world are struggling to secure oil imports, with disruptions potentially affecting prices, supply chains, and economic stability across multiple continents. But another pressing question is: will the current model of international trade – where energy transactions are largely conducted in US dollars – soon become a thing of the past?
Until the early 1970s, oil was often traded in various currencies. But after the 1973 oil crisis, and following the end of the Bretton Woods system in 1971 – which ended the dollar’s tie to gold – the United States and Saudi Arabia made agreements to price Saudi oil in US currency and recycle surplus earnings into American assets. This led to the creation of the petrodollar system in 1974.
As a result, the United States emerged as the main beneficiary, with the dollar becoming the world’s primary reserve currency and the dominant medium for international trade, giving Washington far-reaching influence over global finance, sanctions, and economic decisions. However, following the US and Israeli strikes on Iran on February 28 and Tehran’s suggestion that oil shipments through the Strait of Hormuz be paid in Chinese yuan rather than US dollars, the fate of the petrodollar became uncertain. But is there a sustainable alternative that could challenge its dominance?
For Andrew Korybko, a Moscow-based American political analyst, the petrodollar is one of the pillars of US global power alongside its armed forces, cultural appeal, media, and economy. As such, it is unlikely to collapse in the near future.
“Critics use talk of the end of the petrodollar to demoralize average Americans, bolster their own side, and shape perceptions of US decline and its role in global affairs, which is a form of cognitive warfare, whether intentional or not. By contrast, supporters aim to highlight threats to the system – real or perceived – to inspire action, although such claims can sometimes be used to justify their proposed solutions,”
Korybko told Scoon TV in an interview, emphasizing that if a serious challenge emerged to the petrodollar, the US would most definitely have to thwart it to avoid the potential decline of its global power.
A natural question then arises: who could pose the greatest threat to the petrodollar?
Petroyuan or Petroruble?
“The longer the Iran war lasts, the sooner the petrodollar system collapses,”
Brandon J. Weichert, Senior National Security Editor and defense consultant, commented to Scoon TV, pointing out that whenever the conflict ends, it is unlikely that the dollar will be in the same vaunted position it was before.
In spite of that, he does not see any single currency replacing the US dollar.
“What might happen for now is that many different currencies, among them the Chinese yuan, are used until the BRICS dollar can be established at a later date,” Weichert stressed.
Politically, however, he sees Russia, rather than China, as the major beneficiary of the US-Israel war on Iran.
“In my opinion, the three big winners of this fight are Russia, China, and obviously Iran. In that order. Russia is enjoying higher oil prices, as US President Donald Trump was forced to reduce sanctions on the sale of Russian energy to the world. Regardless of what Kyiv is doing right now – targeting Russian energy sources – the fact remains that Moscow holds the strategic leverage in Ukraine and will dictate terms now that the Americans are totally bogged down in the Middle East,” Weichert said.
According to the Virginia-based author, China is benefiting significantly from the ongoing conflict in the Middle East, not only because certain countries are paying in Chinese’s yuan to move goods through the Strait of Hormuz, but also because Beijing is “actively reorienting world trade flows away from US-dominated sea lanes to land-based routes controlled by China, namely Belt and Road Initiative (BRI).”
“China’s government is in no way going to collapse from the Iran war. If anything, it looks like regime change might be coming this November in America as a result of this conflict,” Weichert remarked.
Still, at least in terms of monetary policy, Korybko – who specializes in the global systemic transition to multipolarity – sees China, rather than Russia, as the major challenger to the US-dominated system.
“The petroyuan proposal is the only realistic challenge to the petrodollar, unlike the petroruble, because China exports much more than resources and arms like Russia does, and therefore a much greater share of the global economy could make use of its currency for more than just buying energy,”
Korybko explains, emphasizing that the ongoing war in the Middle East creates opportunities for the petroyuan only if the Islamic Republic survives.
Since, in his view, the petroruble is not a threat to the petrodollar, it is only the petroyuan that the US would push back against with gusto – arguably one of the undeclared war aims against Iran now that Tehran has flirted with precisely this scenario.
“Thus, if the United States can’t prevent it, then Washington wouldn’t have only lost the war, but it might eventually lose the petrodollar and all that entails too,” Korybko warned.
Petrodollar and the Gulf States
But for Giorgio Cafiero, CEO of Gulf State Analytics, a Washington, DC-based geopolitical risk consultancy, the “end” of the petrodollar is perhaps overstated in the near term.
“Nonetheless, its dominance is under growing structural pressure. With Washington’s security guarantees to the Gulf states serving in no small part as a basis for the petrodollar, this escalating conflict in the Middle East has done much to expose the US’s lack of credibility when it comes to such guarantees, mindful of the missile and drone attacks that Iran has waged against high-revenue-generating targets across the Gulf since February 28. Ultimately, if the Gulf Arab monarchies continue losing confidence in Washington’s ability to serve as an effective and reliable security guarantor, we can expect a weakening of the fundamental bargain that underpins dollar-based oil trade,” Cafiero remarked in an interview with Scoon TV, noting that the regional actors are, for now, not outright abandoning the dollar.
However, as he explains, they are joining many other countries around the world in exploring alternatives to the petrodollar. Cafiero concluded,
“With global trade patterns becoming more Asia-centered, it is reasonable to expect moves toward non-dollar oil sales to pick up with gradual movement toward a currency system that is more multipolar. Yet, that is not to say that an immediate collapse of the petrodollar order is likely.”
One thing is for sure: the petrodollar’s dominance faces growing challenges, despite the fact that the United States remains the only global superpower. The outcome of Trump’s “special military operation” in Iran will almost certainly shape the future not only of the dollar’s role in energy trade and international finance but also of broader economic flows worldwide.
Curtis Scoon is the founder of ScoonTv.com Download the ScoonTv App to join our weekly livestream every Tuesday @ 8pm EST! Support true independent media. Become a VIP member www.scoontv.com/vip-signup/ and download the ScoonTv App from your App Store.
Support Independent Media Donate to ScoonTV https://www.paypal.com/paypalme/donatescoontv
